10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to          .

Commission file number 0-26825

Northwest Biotherapeutics, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	94-3306718
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
18701 120th Avenue N.E., Suite 101 Bothell, WA	98011 (Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, Including Area Code:

(425) 608-3000

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value

      Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes o          No þ

      Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o          No þ

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o          Accelerated filer o          Non-accelerated filer þ

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the closing price on the consolidated transaction reporting system on June 30, 2005 was approximately $3.4 million.

      As of April 14, 2006, the Registrant had an aggregate of 58,545,939 shares of common stock issued and outstanding.

      Documents Incorporated by Reference: Portions of the Registrant’s Information Statement relating to the Registrant’s 2006 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business.		1
	Item 1A.	Risk Factors.		16
	Item 1B.	Unresolved Staff Comments		24
	Item 2.	Properties.		24
	Item 3.	Legal Proceedings.		24
	Item 4.	Submission of Matters to a Vote of Security Holders.		25
PART II				25
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer   Purchases of Equity Securities.		25
	Item 6.	Selected Financial Data.		26
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Result of   Operations.		27
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.		43
	Item 8.	Financial Statements and Supplementary Data.		44
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial   Disclosure.		44
	Item 9A.	Controls and Procedures.		44
	Item 9B.	Other Information.		44
PART III				47
	Item 10.	Directors and Executive Officers of the Registrant.		47
	Item 11.	Executive Compensation.		47
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related   Stockholder Matters		47
	Item 13.	Certain Relationships and Related Transactions.		47
	Item 14.	Principal Accountant Fees and Services.		48
PART IV
	Item 15.	Exhibits and Financial Statement Schedules.		48
	Signatures			83
	Exhibit Index			84
EXHIBIT 3.1
EXHIBIT 3.3
EXHIBIT 3.4
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 10.23
EXHIBIT 10.24
EXHIBIT 10.27
EXHIBIT 10.34
EXHIBIT 10.35
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 31.1
EXHIBIT 32.1

PART I

Forward-Looking Statements

      The following description of our business, discussion and analysis of our financial condition and results of operations should be read in conjunction with the information included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this report contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those projected. The words “believe,” “expect,” “intend,” “anticipate,” and similar expressions are used to identify forward-looking statements, but their absence does not mean that such statement is not forward-looking. You are encouraged to carefully review the various disclosures made by us in this report and in the documents incorporated herein by reference, in our previous SEC filings, and those factors described under “Risk Factors”, beginning on page 15 of this Annual Report on Form 10-K. These factors, among others, could cause results to differ materially from those presently anticipated by us. Readers are cautioned not to place undue reliance on these forward-looking statements. In this Annual Report on Form 10-K, references to “Northwest Biotherapeutics,” the “Company,” “we,” “us,” and “our” refer to Northwest Biotherapeutics, Inc.

Item 1. Business

Overview

      Northwest Biotherapeutics, Inc. was incorporated in Delaware in July 1998. We are a development stage biotechnology company focused on discovering, developing, and commercializing immunotherapy products that safely generate and enhance immune system responses to effectively treat cancer. Currently approved cancer treatments are frequently ineffective and can cause undesirable side effects. Our approach in developing cancer therapies utilizes our expertise in the biology of dendritic cells, which are a type of white blood cells that activate the immune system. Our primary activities since incorporation have been focused on advancing a proprietary dendritic cell immunotherapy for prostate and brain cancer together with strategic and financial planning, and raising capital to fund our operations. We completed an initial public offering of our common stock in December 2001.

      We have two basic technology platforms applicable to cancer therapeutics; dendritic cell-based cancer vaccines, which we call DCVax,^® and monoclonal antibodies for cancer therapeutics. DCVax^® is our registered trademark. Our DCVax^® dendritic cell-based cancer vaccine program is our main technology platform.

Recapitalization

      Since the beginning of 2002, we recognized that we did not have sufficient working capital to fund our operations beyond 12 months and needed to raise additional capital from third parties in order to continue our clinical and research programs. In April 2002, we retained an investment bank to assist us in raising capital. Due to the economic climate in 2002 and declining stock prices of biotechnology companies in general, as well as our own stock price, we were unable to raise additional capital. In July 2002 we retained an additional investment banking firm to assist us in exploring various strategic options including raising additional capital, licensing our technology to a third party, or merging with another company. We contacted over 50 biotechnology companies and over 20 large pharmaceutical companies in an attempt to explore these options without success.

      From September 2002 through approximately September 2004, we reduced our staff from 67 to 8 employees, withdrew our investigational new drug application, or IND, for our Phase III clinical trial for hormone refractory prostate cancer and our IND for our Phase I trial for non-small cell lung cancer from the U.S. Food and Drug Administration, or FDA, and inactivated our Phase II clinical trial for brain cancer, which remained open with the FDA. In addition, we moved our corporate headquarters several

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times, each time to smaller facilities in order to reduce our monthly rent expense. During this time, we attempted to obtain capital from various sources, but were not successful. On November 13, 2003, we borrowed $335,000 from members of our management, pursuant to a series of convertible promissory notes (and associated warrants to purchase an aggregate of 3.7 million shares of our stock).

      Beginning in 2004, we undertook a significant recapitalization whereby we have raised an aggregate of approximately $14.5 million in gross proceeds from issuances of debt and equity through a series of private placements. These financings included:

•  the issuance of a series of convertible promissory notes to Toucan Capital Fund II, L.P. (“Toucan Capital”), a venture capital fund, in aggregate principal amount of approximately $6.75 million (and associated warrants to purchase an aggregate of 122.5 million shares of capital stock at exercise prices ranging from 0.01 to $0.04 per share) from February 2004 through September 2005. The notes accrued interest at 10% per annum from the respective original issuance dates of the notes;

•  the issuance of a convertible promissory note to Toucan Partners, LLC (“Toucan Partners”), an affiliate of Toucan Capital, in principal amount of $400,000 (and associated warrants to purchase an aggregate of 4 million shares of capital stock at an exercise price of $0.04 per share) in November 2005. This note accrues interest at 10% per annum from its original issuance dates

•  the issuance of a series of non-convertible promissory notes to Toucan Partners, in an aggregate principal amount of approximately $550,000 from December 2005 through March 2006. These notes accrue interest at 10% per annum from the respective original issuance dates of the notes;

•  the sale of Series A Preferred Stock to Toucan Capital for aggregate gross proceeds of approximately $1.3 million (and associated warrants to purchase an aggregate of 13 million shares of Series A Preferred Stock at an exercise price of $0.04 per share) in January 2005; and

•  the sale of 39.5 million shares of common stock (and accompanying warrants to purchase an aggregate of 19.7 million shares of common stock at an exercise price of $0.14 per share) to certain accredited investors (the “PIPE Financing”) for aggregate proceeds of approximately $5.5 million in April 2006.

      Subsequently, the non-convertible notes held by Toucan Partners were amended and restated in order to make them convertible on the same terms and conditions as the convertible notes previously issued to Toucan Capital and Toucan Partners, and warrants were issued to Toucan Partners on the same terms and conditions as warrants were previously issued to Toucan Capital and Toucan Partners. In April 2006, Toucan Capital elected to convert all of its promissory notes, including all accrued interest thereon, into a newly designated series of preferred stock, Series A-1 Preferred Stock, in accordance with the terms of the notes at a conversion price of $1.60 per share. The Series A-1 Preferred Stock is substantially identical to Series A Preferred Stock with the exception of the issuance price per share and liquidation preference per share (which are $1.60 per share, rather than $0.04 per share in the case of Series A) and the ratio at which the shares are convertible into common stock (which is 1-for- 40, or 1 share of Series A-1 Preferred Stock for 40 shares of common stock, rather than 1-for-1 in the case of Series A).

      Simultaneously with Toucan Capital’s loan conversion, Alton Boynton, the Company’s President and Marnix Bosch, the Company’s Vice President, Vaccine Research and Development, each elected to convert the principal and accrued interest on their respective loans into 2,195,771 and 491,948 shares, respectively of the Company’s common stock, and in conjunction with the PIPE Financing, exercised their warrants on a net exercise basis for 1,895,479 and 424,669 shares of the company’s common stock respectively.

      As a result of the financings described above, Toucan Capital holds:

•  an aggregate of 32.5 million shares of Series A Preferred Stock (convertible into an aggregate of 32.5 million shares of common stock as of April 17, 2006);

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•  an aggregate of 4.82 million shares of Series A-1 Preferred Stock (convertible into an aggregate of 192.7 million shares of common stock as of April 17, 2006);

•  warrants to purchase an aggregate of 66 million shares of capital stock at an exercise price of $0.01 per share;

•  warrants to purchase an aggregate of 56.5 million shares of capital stock at an exercise price of $0.04 per share; and

•  warrants to purchase an aggregate of 13 million shares of Series A Preferred Stock at an exercise price of $0.04 per share.

      As a result of the financings described above, Toucan Partners holds:

•  convertible promissory notes in aggregate principal amount of $950,000, with accrued interest thereon of $26,300 as of April 17, 2006 (with such notes convertible as of April 17, 2006 into an aggregate of 24.4 million shares of capital stock at a conversion price of $0.04 per share); and

•  warrants to purchase an aggregate of 9.5 million shares of capital stock at an exercise price of $0.04 per share.

      The warrants held by Toucan Capital and Toucan Partners described above are fully vested and exercisable and generally have an exercise period of seven years from their respective dates of issuance.

      As a result of the PIPE Financing, the investors in the PIPE Financing hold:

•  an aggregate of 39.5 million shares of common stock; and

•  warrants to purchase an aggregate of 19.7 million shares of common stock at an exercise price of $0.14 per share.

      The investments made by Toucan Capital and Toucan Partners were made pursuant to the terms and conditions of a recapitalization agreement originally entered into on April 26, 2004, (which was subsequently amended and restated, and further amended) with Toucan Capital (as amended to date, the “Recapitalization Agreement”), which contemplated the possible recapitalization of the Company. As amended, the Recapitalization Agreement contemplates a bridge financing period and an equity financing period, with such equity financing period extending through December 31, 2006, or such later date as is mutually agreed by the Company and Toucan Capital. The Recapitalization Agreement includes a binding term sheet that outlines the terms of a potential equity financing, at Toucan Capital’s election, of up to $40 million through the issuance of new securities to Toucan Capital, Toucan Partners and a syndicate of other investors to be determined. However, neither Toucan Capital, Toucan Partners, nor any entity affiliated with either of them are obligated to invest any additional funds in the company.

      As of April 17, 2006, Toucan Capital and Toucan Partners collectively have beneficial ownership of approximately 394.6 million shares of our capital stock, representing a beneficial ownership of approximately 86% of our outstanding common stock on an as converted to common basis. Toucan Capital and Toucan Partners each has a right of first refusal to participate in our future issuances of debt or equity securities. For additional information concerning Toucan Capital, Toucan Partners, and our recapitalization, see the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Plan of Operations.”

Board Composition

      On December 17, 2004, Dr. Randall L.W. Caudill and Mr. Wayne L. Pines resigned as members of our board of directors. Since their resignations we have had a sole director, Alton L. Boynton, Ph.D., who is also our President. These board resignations and the subsequent restructuring were anticipated based on the April 26, 2004 recapitalization agreement.

      In connection with our January 26, 2005 issuance of Series A Preferred Stock to Toucan Capital we amended the Recapitalization Agreement and the term sheet included therein to provide that: (i) as of January 26, 2005, the authorized number of our directors shall be one; (ii) the authorized number of

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directors may not be increased or decreased without the consent of the holders of a majority of the shares of convertible preferred stock; (iii) the holders of a majority of the shares of convertible preferred stock, acting in their sole discretion, may require us to increase the total number of authorized directors up to a maximum of seven directors; and (iv) any newly created directorships shall be designated by the holders of a majority of the shares of convertible preferred stock, acting in their sole discretion, to be filled by either: (A) an outside director with significant industry experience, who is reasonably acceptable to the holders of a majority of the convertible preferred stock, to be elected by the holders of our common stock (an “Independent Industry Expert Directorship”); or (B) a director to be designated by the holders of a majority of the convertible preferred stock (a “Preferred Directorship”). Up to four directorships shall be designated as Preferred Directorships, up to two directorships shall be designated as Independent Industry Expert Directorships, and one director shall be our chief executive officer. We currently have only one director, Dr. Boynton.

Going Concern

      Our financial statements for the year ended December 31, 2005 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. Nevertheless, we have experienced recurring losses from operations and have a deficit accumulated during the development stage of approximately $82.7 million. Our independent auditors indicated in their report on our December 31, 2005 financial statements included in this Annual Report on Form 10-K that there is substantial doubt about our ability to continue as a going concern.

Cognate Therapeutics

      On July 30, 2004, we entered into a service agreement with Cognate Therapeutics, Inc. Cognate is a contract manufacturing and services organization, the majority of which is owned by Toucan Capital. In addition, two of the principals of Toucan Capital are members of Cognate’s board of directors. Under the agreement we agreed to utilize Cognate’s services for a two-year period, related primarily to manufacturing DCVax^® product candidates, regulatory advice, research and development preclinical activities and managing clinical trials. We recognized approximately $2.9 million of research and development costs relative to this agreement in 2004 and approximately $3.5 million of research and development costs in 2005 relative to this agreement. As of December 31, 2005 we owed Cognate $3.4 million for services rendered pursuant to this agreement. On April 11, 2006 we paid $1.5 million to Cognate toward the amount due.

Website Access to Reports

      Our website is located at: http://www.nwbio.com. Our periodic filings with the Securities and Exchange Commission, or SEC, are available on our website by clicking on “News and Investor” to “Stock Quote” to “Real-Time SEC Filings.” Additionally, our press releases can be accessed on our website through clicking on “News and Investor” to “Stock Quote” to “Press Releases.” The “Archive” button will display our historical press releases. The SEC also maintains an Internet site that contains reports that we have filed with it at http://www.sec.gov. The information contained on, or accessible through, our website is not incorporated into nor a part of this Annual Report on Form 10-K.

Industry Background

Incidence of Cancer in the United States

      The American Cancer Society estimates that in the United States, men have a 1 in 2 lifetime risk of developing cancer, while women have a risk of 1 in 3. Doctors were expected to diagnose approximately 1.37 million new cases of cancer in the United States during 2005. Cancer is the second leading cause of death in the United States after heart disease and was estimated to result in approximately 570,280 deaths, or 1,562 per day, in 2005. The direct medical costs related to treating cancer in the United States were estimated to be $56 billion in 2002. Our initial therapeutic targets, prostate, brain and lung cancers, cause

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approximately 36% of the cancer deaths in the United States each year. The American Cancer Society estimated that the incidence of new diagnosis and deaths resulting from several common cancers during 2005 would be as follows:

Type of Cancer	New Cases		Deaths
Breast		211,240		40,410
Prostate		232,090		30,350
Colorectal		145,290		56,290
Lung		172,570		163,510
Kidney		36,160		12,660
Melanoma		59,580		7,770
Brain		17,000		12,760

Cancer

      Cancer is characterized by aberrant cells that multiply uncontrollably. As cancer progresses, the cancer cells may invade other tissues throughout the body producing additional cancers, called metastases. Cancer growth can cause tissue damage, organ failure and, ultimately, death. Many immunologists believe that cancer cells occur frequently in the human body, yet are effectively controlled by the immune system because these cells are recognized as aberrant. Cancer growth occurs if this natural process fails.

      Cancer cells produce abnormal kinds and amounts of substances called antigens, which may be distinguishable from those produced by healthy cells. The use of these cancer-associated antigens is essential to the successful development of products capable of stimulating the immune system to seek and destroy cancer cells marked by these antigens.

The Human Immune System

      The immune system is the body’s defense mechanism responsible for recognizing and eliminating cancer cells, viruses, bacteria and other disease-causing organisms. This system consists of populations of white blood cells whose components are responsible for initiating the cellular immune response, and the humoral, or antibody-based, immune response.

      Dendritic cells, a component of white blood cells, initiate the cellular immune response by processing and displaying disease-associated antigen fragments on their outer cell surface, where they are recognized by white blood cells, known as naive T cells, that have not yet been exposed to antigens. Upon exposure to these antigen fragments, naive T cells become disease-specific Helper T cells or Killer T cells. Helper T cells then induce Killer T cells to seek and destroy the cells marked by the disease-associated antigen.

      B cells direct the humoral immune response by binding to disease-associated antigens on the surface of various cell types, producing disease-specific antibodies. Helper T cells also enhance B cell production of disease-specific antibodies. These antibodies bind to and initiate the destruction of cells marked by the associated disease-specific antigens.

      A small population of activated Helper T cells, Killer T cells, and antibody-producing B cells survive for long periods of time, retaining the memory of what the disease fragment looks like. These cells can respond very rapidly to subsequent exposure to disease-specific antigens and fragments. The most effective natural immune response is one in which both Killer T cells and antibody-producing B cells are activated.

      The immune system response to cancer is generally characterized by the following sequence:

•  Step 1. Dendritic cells ingest cancer antigens, break them into small fragments and display them on their outer cell surfaces.

•  Step 2. Dendritic cells bearing these cancer antigen fragments bind to and activate naive T cells, which become disease-specific Helper T and Killer T cells.

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•  Step 3. The activated Helper T cells produce factors that greatly enhance the cell division of Killer T cells and mature their cancer-killing properties.

•  Step 4. Cancer cells and their cancer-associated antigens are also recognized by antibody-producing B cells.

•  Step 5. The activated Helper T cells produce factors that greatly enhance antibody production by B cells that in turn are specific for the cancer-associated antigens.

•  Step 6. The Killer T cells and antibodies, acting alone or in combination, destroy cancer cells.

Limitations of Current Cancer Therapies

Traditional Cancer Therapy Approaches

      Cancer is characterized by aberrant cells that multiply uncontrollably. As cancer progresses, the cancer cells may invade other tissues throughout the body producing additional cancers, called metastases. Effective therapies must attack the cancer both at its site of origin and at sites of metastases. Traditional treatments for cancer include:

•  Surgery. Surgery may be used to remove cancer cells, but not all cancer cells can be removed surgically. Surgery may also result in significant adverse side effects such as collateral damage to healthy tissue, bleeding and infection.

•  Radiation Therapy. Radiation therapy may be used to treat cancers but it can cause significant damage to healthy tissue surrounding the targeted cancer cells. Recurrent cancers may not be treatable with further radiation therapy. Radiation therapy may also cause additional significant adverse side effects such as burns to treated skin, organ damage and hair loss.

•  Chemotherapy. Chemotherapy may be used to treat cancer, but involves the use of toxic chemical agents. These toxic chemical agents affect both healthy and diseased cells and may cause additional significant adverse side effects such as hair loss, immune suppression, nausea and diarrhea.

•  Hormone Therapy. Hormone therapy may be used to treat cancer, but involves the use of substances that chemically inhibit the production of growth and reproductive hormones and is also limited in effectiveness. Hormone therapy may cause significant adverse side effects such as bone loss, hot flashes, impotence and blood clots.

Current Cancer Immunotherapy Approaches

      Immunotherapy can stimulate and enhance the body’s natural mechanism for destroying pathogens, such as cancer cells, and may overcome many of the limitations of traditional cancer therapies. Immunotherapy may be particularly useful to augment traditional cancer therapies. In recent years, two cancer immunotherapy approaches have emerged, with FDA approved products to address the limitations of traditional therapies:

•  Antibody-Based Therapies. Currently approved antibody-based cancer therapies have improved survival rates with reduced side effects when compared with traditional therapies. However, these antibody-based therapies can elicit an immune response against themselves because they contain mouse proteins or fragments of such proteins. This can limit their effectiveness and potentially cause toxic side effects.

•  Immune-Modulating Agents. Currently approved immune-modulating agents, such as IL-2, GM-CSF and alpha-interferon, are known to have some ability to enhance the immune system and control cancer growth. However, these therapies involve delivery of the immune modulating agent through the blood system and therefore cannot be directed exclusively to cancer cells. This lack of selectivity may result in significant toxicity to healthy tissue.

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Our Approaches

      We have developed two proprietary approaches, DCVax^® and therapeutic antibodies, for stimulating and enhancing a patient’s natural cellular, humoral (i.e. antibody) immune response to cancer. Given appropriate funding for future development, we believe that DCVax^® and therapeutic antibody products may overcome certain limitations of current cancer therapies and offer cancer patients safe and effective treatment alternatives, alone or in combination with other therapies.

DCVax^®

      Our DCVax^® platform combines our expertise in dendritic cell biology, immunology and antigen discovery with our proprietary process of producing and activating dendritic cells outside a patient’s body to develop therapeutic products that stimulate beneficial immune responses to treat cancer. We believe that DCVax^® has the following significant characteristics, the combination of which we believe makes it a potentially attractive alternative to current therapies.

•  Activates The Natural Immune System. Our DCVax^® product candidates are designed to elicit a natural immune response. We believe that our pre-clinical and clinical trials have demonstrated that our DCVax^® product candidates can train a patient’s own Killer T cells to seek and destroy specifically targeted cancer cells. Our clinical trials have also shown that DCVax^®-Prostate stimulates the body to produce antibodies and T cells that bind to cancer-associated antigens and potentially destroy cancer cells marked by these antigens.

•  Multiple Cancer Targets. If we secure the necessary funding, we intend to apply our DCVax^® platform to treat a wide variety of cancers. The DCVax^® platform affords the flexibility to target many different forms of cancer through the pairing of dendritic cells with cancer-associated antigens, fragments of cancer-associated antigens or deactivated whole cancer cells as well as possible direct intra-tumoral injection of partially mature dendritic cells.

•  No Significant Adverse Side Effects Or Toxicity. Our initial DCVax^®-Prostate Phase I/ II clinical trial has shown mild injection site reactions, which were typical and fully anticipated, but no significant adverse side effects in over 110 clinically administered injections. We believe that we minimize the potential for toxicity by using the patient’s own cells to create our DCVax^® product candidates. Additionally, because our DCVax^® products are designed to target the cancer-associated antigens in the patient, we believe they minimize collateral damage to healthy cells.

•  Rapid Pre-Clinical Development. We believe that our DCVax^® technology, which was observed to be well tolerated in a Phase I/ II clinical trial for prostate cancer, and two Phase I clinical trials for brain cancer, will enable us to rapidly move new potential products into clinical trials within six to nine months of concept, subject to FDA approval and the availability of adequate resources. New DCVax^® product candidates simply require the identification of cancer-associated antigens, fragments of cancer-associated antigens or whole cancer cells added to partially mature dendritic cells prior to injection into patients or potentially the direct injection of partially mature dendritic cells into solid tumors.

•  Ease Of Administration. We initially collect a sample of a patient’s white blood cells in a single standard outpatient procedure called leukapheresis. After patient-specific manufacturing and quality control testing, each small dose of a DCVax^® product candidate is administered by a simple intradermal injection in an outpatient setting, or by a direct injection of partially mature dendritic cell into a solid tumor.

•  Complementary With Other Treatments. Our DCVax^® product candidates are designed to stimulate the patient’s own immune system to safely target cancer cells. Consequently, we believe these products may be used as an adjuvant to traditional therapies such as chemotherapy, radiation therapy, hormone therapy and surgery.

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Therapeutic Antibody

      Our therapeutic antibody program is based on combining our expertise in monoclonal antibodies, immunology and antigen discovery. We co-developed an initial therapeutic antibody product candidate with Medarex, Inc. This collaboration enabled us to create a proprietary fully human monoclonal antibody-based prostate cancer product candidate. Our interest in that product candidate now has been acquired by Medarex and is in a FDA Phase II clinical trial; we have no continuing right in such product candidate.

      Products derived from our therapeutic antibody efforts are intended to have the following characteristics, the combination of which will make them potentially attractive alternatives to current therapies:

•  Fully Human Antibodies. Current monoclonal antibody-based therapies contain mouse proteins or fragments of such proteins. Consequently, these therapies have the potential to elicit unwanted immune responses against the mouse proteins or protein fragments. Our first therapeutic antibody product candidate, which was co-developed with and acquired by Medarex, is based on monoclonal antibodies that are fully human, and thus do not contain any mouse proteins. As a result, we expect these products to exhibit a favorable safety profile and minimal, if any, unwanted immune response against the antibody-based therapy itself.

•  Rapid Pre-Clinical Development. We believe that, subject to FDA approval and the availability of adequate resources, we could progress from antigen discovery to clinical trials for each new therapeutic antibody product candidate in less than two years.

•  Cancer Specificity. Our proprietary antigens are significantly over-expressed in cancer cells. Our antibodies bind to these targeted cancer-associated antigens and potentially destroy cancer cells marked by these antigens. To date, we have identified three clinically validated antigens associated with twelve different cancers. Certain rights to three of our antigen targets have been acquired by Medarex.

•  Multiple Therapeutic Applications. We believe that therapeutic antibodies may be used as stand-alone products that bind to cancer-associated antigens and potentially destroy cancer cells marked by these antigens. Therapeutic antibodies may also enable the targeted delivery of existing therapies such as radiation and cytotoxic agents. The inherent toxic effects of cytotoxic agents and radioactive materials on normal tissue could be minimized by coupling these agents to antibodies that have a high degree of specificity to cancer cells.

•  Commercialization. Based on our experience with the manufacturing of therapeutic antibodies, we believe the manufacturing of these antibodies can be scaled to meet market demand. Antibody-based products are typically characterized by an inherent stability, resulting in a commercially acceptable shelf-life.

•  Complementary With Other Treatments. We believe that our therapeutic antibody product candidates may be suitable for use alone or in combination with currently approved therapies due to their complementary cell-killing properties.

      In addition, we believe that therapeutic antibodies may be useful for the development of cancer diagnostic imaging products.

Our Clinical and Preclinical Development Programs

      We submitted an investigational new drug application, or IND, with the FDA on December 8, 2004 for restarting our Phase III clinical trial for prostate cancer, DCVax^®-Prostate. The IND cleared the FDA on January 8, 2005. This Phase III clinical trial is based on promising clinical data from a previously conducted Phase I/ II clinical trial. That double blinded, placebo controlled Phase III clinical trial was planned for 600 patients at 30-50 sites throughout the United States; however, we are considering other trial designs that may enable us to reduce the number of patients required. In any case, the trial will focus on non-metastatic hormone-independent prostate cancer patients.

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      We have also cleared with the FDA a Phase II clinical trial for DCVax^®-Brain for patients with Glioblastoma multiforme, the most lethal form of brain cancer. Subject to our ability to secure sufficient future funding, preparations are underway to commence the trial.

      We have completed substantial research and pre-clinical testing phases for four additional product candidates. Significantly, we have recently been issued broad patent coverage by the United States Patent Office which gives us antibody therapeutic rights to a cancer protein that plays a key role in the progression of primary cancers and in the metastatic process. The protein is known as CXCR4, and is over-expressed in more than 75% of cancers and involved in all three critical functions of primary tumors and metastatic tumors: proliferation of the primary tumor, migration of cancer cells out of the primary tumor, and establishment of distant metastatic sites.

      The following table summarizes the targeted indications and status of our product candidates:

Product Candidate	Target Indications	Status(1)
DCVax® Platform
DCVax®-Prostate	Prostate Cancer	Phase III Clinical Trial cleared FDA For non-metastatic hormone independent prostate cancer
DCVax®-Brain	Glioblastoma multiforme	Phase II Clinical Trial cleared FDA For Glioblastoma multiforme Orphan Drug designation granted 12/02
DCVax®-Lung	Non-small cell lung cancer	Phase I — suspended and IND withdrawn in 2002 due to lack of Funding; resubmitted to FDA in March 2006
DCVax®-Direct	Head and Neck Cancer, Non-small cell lung, brain cancers	Pre-clinical
Therapeutic Antibody Platform
CXCR4 Antibody	Breast cancer	Pre-clinical
	Glioblastoma	Pre-clinical
	Colon cancer	Pre-clinical
	Melanoma	Pre-clinical

(1)  Pre-clinical means that a product candidate is undergoing efficacy and safety evaluation in disease models in preparation for human clinical trials. Phase I-III clinical trials denote safety and efficacy tests in humans as follows:

      Phase I: Evaluation of safety and dosing.

      Phase II: Evaluation of safety and efficacy.

      Phase III: Larger scale evaluation of safety and efficacy.

Our DCVax^® Platform

      The DCVax^® platform uses our proprietary process to efficiently produce and activate dendritic cells outside of a patient’s body. Our Phase I/II clinical trial for DCVax^®-Prostate demonstrated that these cells can generate an effective immune system response when administered therapeutically. Manufacture of a DCVax^® product takes approximately 30 days to complete for DCVax^®-Prostate and approximately 10 days for DCVax^®-Brain, and is characterized by the following sequence:

•  Collection. A sample of a patient’s white blood cells is collected in a single and simple outpatient procedure called leukapheresis.

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•  Isolation of Precursors. These cells are sent to our manufacturing facility, where dendritic cell precursors are isolated from the patient’s white blood cells.

•  Transformation by Growth Factors. Dendritic cell precursors are transformed in a manner that mimics the natural process in a healthy person’s body, through the application of specific growth factors, into highly pure populations of immature dendritic cells during a six-day culture period.

•  Maturation. Immature dendritic cells are exposed to a proprietary maturation factor or maturation method in order to maximize Helper T cell, Killer T cell, and B cell activation.

•  Harvest for DCVax^®-Direct. These dendritic cells can be harvested for DCVax^®-Direct and separated into single-use DCVax^® administration vials, frozen and stored for the quality control sequence without the antigen display step.

•  Antigen Display. Cancer-associated antigens, fragments of cancer-associated antigens or deactivated whole cancer cells are added to, ingested, and processed by the maturing dendritic cells, causing the dendritic cells to display fragments of cancer-associated antigens on their outer cell surfaces.

•  Harvest. These dendritic cells are harvested and separated into single-use DCVax^® administration vials, frozen and stored.

•  Quality Control. Each DCVax^® product lot undergoes rigorous quality control testing, including 14-day sterility testing for bacterial and mycoplasma contamination, and potency testing prior to shipment to the administration site for injection.

      We believe that our DCVax^® platform affords us the flexibility to target many different forms of cancer through pairing of dendritic cells with cancer-associated antigens, pieces of cancer-associated antigens or deactivated whole cancer cells. We have either patented or licensed critical intellectual property regarding this technology.

DCVax^® Product Candidates

DCVax^®-Prostate

      DCVax^®-Prostate, our initial dendritic cell-based product candidate, resulted from combining our DCVax^® platform with the cancer-associated antigen prostate specific membrane antigen, or PSMA. Prostate specific membrane antigen is located on the surface of prostate cells. It is expressed at very low levels on benign or healthy prostate cells, and at much higher levels on prostate cancer cells. Because PSMA is over-expressed in virtually all prostate cancers, it represents an effective target for prostate cancer therapeutics. The results from our Phase I/ II clinical trial provided us with important results supporting the potential value of our DCVax^® platform as the basis for new cancer immunotherapies.

      In September 1999, we filed an application to conduct a Phase I/ II clinical trial for DCVax^®-Prostate to treat late-stage prostate cancer patients for whom hormone therapy was no longer effective. This trial was carried out at M.D. Anderson Cancer Center and at UCLA, involved the administration of DCVax^®-Prostate to thirty-two evaluable patients in order to establish the safety and efficacy of three different dosage levels of DCVax^®-Prostate.

      We observed stabilization of disease at 26 weeks in 52% (16 of 31) of the patients in our Phase I/ II clinical trial. Twelve of these stable patients did not have measurable metastatic disease at the time of treatment and all twelve were stable, as measured by radiographic criteria, at weeks 26 to 28 with a median time to progression of 59 weeks. These results can be compared to results for another company’s experimental therapy given to similar patients without metastatic disease that had a median time to progression of 29 weeks. Patients with measurable metastatic disease in our Phase I/ II clinical trial had a median time to progression of 20 weeks. These results can be compared to results for another company’s experimental therapy given to patients with metastatic disease that had a median time to progression of 16 weeks with control or placebo progression occurring at 9 weeks. Eighty-three percent (83%) of patients

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had an immune response following treatment with DCVax^®-Prostate, as measured by the amount of immune-reactive substances found in the blood of patients, which formed specifically in response to PSMA.

      Target Market. The American Cancer Society estimated that 232,090 new cases of prostate cancer would be diagnosed in the United States during 2005. Deaths from prostate cancer are estimated at 30,350 per year. We estimate that there is an initial DCVax^®-Prostate target population consisting of approximately 100,000 patients with late stage, or hormone refractory, prostate cancer.

      Current Treatments. Existing treatments for localized prostate cancer include surgery and various forms of radiation therapy. The current standard-of-care for treating metastatic prostate cancer is hormone therapy. Although this therapy achieves temporary tumor control, the National Cancer Institute’s 1989-1996 five-year survival rate for metastatic prostate cancer is only 33%. Moreover, hormone therapy may cause significant adverse side effects, including bone loss, hot flashes, impotence and blood clots. Disease progression in the presence of hormone therapy occurs on average in two years, and is then classified as hormone refractory prostate cancer. Approximately 50% of patients with hormone refractory prostate cancer will die within two years of its onset. Currently, the only FDA approved treatment for hormone refractory prostate cancer are chemotherapy and radioactive pharmaceuticals, which can alleviate cancer-related symptoms but may cause significant adverse side effects and do not prolong survival. A large fraction of hormone refractory patients do not have objective metatstatic disease as measured by bone and CT scans. We believe that DCVax^®-Prostate addresses this critical unmet medical need.

DCVax^®-Brain

      DCVax^®-Brain uses our DCVax^® platform in combination with glioblastoma tumor cell lysate antigens. Our clinical collaborators at the University of California at Los Angeles, or UCLA, conducted two Phase I clinical trials to assess the safety and efficacy of dendritic cell-based immunotherapy for glioblastoma. They have informed us that in the first Phase I trial that DCVax^®-Brain had been administered to 12 patients and they provided us with preliminary data. Six of these patients were newly diagnosed and had a mean time to progression of 21 months compared to 8 months for historical controls. Median survival was 32 months compared to 15 months of survival for historical controls. One patient remains alive after more than 5 years without recurrence. The six patients with recurrent disease all progressed with a mean of 13 months compared to 5 months for historical controls. Average survival was 17 months compared to 10 months for historical controls.

      The second Phase I clinical trial at UCLA for patients with glioblastoma multiforme (GBM) further supports the ability of DC loaded with tumor lysate to induce immune responses, slow disease progression, and prolong survival. These patients continue to be treated with DCVax^®-Brain in a booster program with our financial support. These patients were treated with standard of care which included surgery followed by 6 weeks of radiation therapy and concomitant daily Temodar chemotherapy. Ten patients with newly diagnosed GBM were enrolled. As of March 31, 2006, five patients had progressed, two patients have died, and the remaining eight patients are alive with survival times (from initial surgery) ranging from 12.2 to 40 months and a median survival of > 22 months and continuing. Five of the eight surviving patients have no evidence of progression to date with a median time to progression of > 15 months and continuing. Historically at UCLA, patients similar to those enrolled in the trial (R.P.A. classes III and IV) have median times to disease progression of 8.9 months (± 7.3 months), and median survival times of 15 months (±  13.9 months). In a recent multicenter trial, 287 patients treated post surgery with radiotherapy plus concomitant Temodar achieved median progression free survival (PFS) of 6.9 months (95% confidence interval, 5.8 to 8.2) and median survival of 14.6 months (95% confidence interval, 13.3 to 16.8). (Stupp et. al., New England J. Med. 352: 987-96; 2005.). The Stupp results are currently considered standard of care.

      Target Market. The American Cancer Society estimated that about 18,500 new cases of brain cancer would be diagnosed in the United States during 2005. Deaths from brain cancer are estimated at about 12,760 per year. The most common and lethal form of brain cancer is glioblastoma, the indication

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we are targeting with DCVax^®-Brain. We estimate that our DCVax^®-Brain could address a population consisting of approximately 12,500 new patients per year.

      Current Treatments. Existing treatments for glioblastoma include surgery, radiation and chemotherapy. These existing treatments are often used in various combinations and/or sequences and have significant adverse side effects. In its most recent study, The National Institutes of Health reported that the 1989-1996 five-year survival rate for all brain cancer patients was only 31%. Following initial treatment, virtually all cases of this cancer recur, with a life expectancy of approximately one year following recurrence. Few effective therapies exist for these patients. We believe that DCVax^®-Brain may address this critical unmet medical need.

DCVax^®-Lung

      DCVax^®-Lung was designed to use our DCVax^® platform in combination with isolated and deactivated lung cancer cells as antigens. Although we received clearance from the FDA to conduct a Phase I clinical trial to assess the safety of DCVax^®-Lung, due to lack of financial resources, we suspended the initiation of this trial.

      Target Market. The American Cancer Society estimated that 172,570 new cases of lung cancer would be diagnosed in the United States during 2005. Approximately 80% of these cases are expected to be attributable to non-small cell lung cancer, the indication we were targeting with DCVax^®-Lung and are now targeting with DCVax^®-Direct. Deaths from all forms of lung cancer are estimated at 163,510 per year for 2005.

      Current Treatments. Existing treatments for non-small cell lung cancer include surgery and radiation therapy, which are used in various combinations. These treatments have significant adverse side effects. In its most recent study, the National Institutes of Health reported that the 1989-1996 five-year survival rate for non-small cell lung cancer patients was only 6.2%. Following initial treatment, virtually all cases of this cancer recur, with a life expectancy of approximately one year following recurrence. No effective therapy exists for these patients.

DCVax^®-Direct

      DCVax^®-Direct uses our DCVax^® platform to produce dendritic cells suitable for direct injection into solid tumors. Several scientific studies have shown that dendritic cells injected into solid tumors in animal models can result in tumor regression. We have continued pre-clinical development of this application with positive preclinical animal data.

Our Therapeutic Antibody Platform

      Our therapeutic antibody platform is based on combining our expertise in monoclonal antibodies, immunology and antigen discovery with potential collaborators who have expertise in humanized and fully human monoclonal antibody development. We develop our therapeutic antibody products candidate in the following sequence:

•  Identification. We identify, validate and select a potentially useful cancer-associated antigen for our therapeutic antibody platform.

•  Immunization. This cancer-associated antigen is used to immunize non-transgenic or transgenic mice. These mice create B cells, which produce non-human or fully human cancer-associated antigen-specific antibodies.

•  Selection And Culturing. From the B cells created during immunization, we select single antibody-producing cells, which we then culture to large quantities. These cells produce identical antibodies with high specificity to the targeted cancer-associated antigen.

•  Analysis And Evaluation. These non-human or fully human monoclonal antibodies are analyzed for specificity to the cancer-associated antigen, ability to bind to live cancer cells with high affinity

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	and ability to kill those cells. In addition, the antibody-producing cells are evaluated for their ability to generate high quantities of the selected antibodies.
•	Humanization. The non-human antibody with the most favorable properties can then be humanized, or stripped of its mouse characteristics.
•	Manufacturing. Our therapeutic humanized or fully human monoclonal antibodies are then manufactured for clinical trials under FDA guidelines.

      We believe that, given additional funding, our antigen discovery program may enable us to identify and develop cancer-associated antigens for the therapeutic antibody platform, potentially expanding our portfolio of potential therapeutic products. We expect that the antibodies generated by the therapeutic antibody platform may be useful as potential products or as products coupled with cytotoxins or radioactive agents.

Therapeutic Antibody Product Candidates

Lung, Breast, Brain, Colon, Melanoma, and Prostate, and Other Cancers

      We have selected a cancer-associated antigen, CXCR4, for non-small cell lung cancer, breast cancer, glioblastoma, colon cancer, melanoma, prostate, pancreas, kidney, ovarian, and certain blood cancers. We were recently issued a United States patent to the use of antibodies to CXCR4, a protein found to be over expressed in greater than 75% of cancers and involved in three critical functions of cancer cells that include cell proliferation, cell migration and establishment of metastatic sites in distant organs and tissues.

Manufacturing

      We currently rely, and expect to continue to rely, upon specialized third-party manufacturers to produce our product candidates for pre-clinical, clinical and commercial purposes. Furthermore, the product candidates under development by us have never been manufactured on a commercial scale and may not be able to be manufactured at a cost or in sufficient quantities to make commercially viable products.

Marketing

      In the event that we secure funding and develop an approved product, we plan to market that product in partnership with one or more established pharmaceutical companies. Our collaboration with these companies may take the form of royalty agreements, licensing agreements or other co-marketing arrangements. The oncology market in the United States is characterized by highly concentrated distribution channels. To be successful in producing a commercially viable product, we may need to develop a direct sales force to market that product in the United States.

Intellectual Property

      We seek to protect our commercially relevant proprietary technologies through patents both in the United States and abroad. We have fourteen issued and licensed patents (seven in the United States and seven in foreign jurisdictions) and 118 patent applications pending (16 in the United States and 102 in foreign jurisdictions) which cover the use of dendritic cells in DCVax^®as well as targets for either our dendritic cell or fully human monoclonal antibody therapy candidates. The issued patents expire at dates from 2015 to 2018. We intend to continue using our scientific expertise to pursue and patent new developments with respect to uses, methods, and compositions to enhance our position in the field of cancer treatment.

      Any patents that we obtain may be circumvented, challenged or invalidated by our competitors. Our patent applications may not result in the issuance of any patents, and any patents that may issue may not offer any protection against others who seek to practice the claimed inventions. We have obtained licenses for certain technologies that we use, but we may be unable to maintain those licenses and may be unable

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to secure additional licenses in the future. Thus, we may be forced to abandon certain product areas or develop alternative methods for operating in those areas.

      In addition to patents, we rely on copyright protection, trade secrets, proprietary know-how and trademarks to maintain our competitive position. Our future success will depend in part on our ability to preserve our copyrights and trade secrets. Although our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators, sponsored researchers and other advisors are required to sign agreements obligating them not to disclose our confidential information, these parties may nevertheless disclose such information and compromise our confidential data. We may not have adequate remedies for any such breach. It is also possible that our trade secrets or proprietary know-how will otherwise become known or be independently replicated or otherwise circumvented by competitors.

      Our technologies may infringe the patents or violate other proprietary rights of third parties. In the event of infringement or violation, we may be prevented from pursuing further licensing, product development or commercialization. Such a result would materially adversely affect our business, financial condition and results of operations.

      If we become involved in any litigation, interference or other administrative proceedings, we will incur substantial expenses and the efforts of our technical and management personnel will be significantly diverted. An adverse determination may subject us to significant liabilities or require us to seek licenses, which may not be available. We may also be restricted or prevented from manufacturing and selling our products, if any, in the event of an adverse determination in a judicial or administrative proceeding, or if we fail to obtain necessary licenses. In addition, any potential litigation or dispute may, as a result of our lack of funding, require us to further reduce or even curtail our operations entirely.

Competition

      The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Several companies, such as Cell Genesys, Inc., Dendreon Corporation, CancerVax, Immuno-Designed Molecules, Inc. and Argos Therapeutics, Inc., are actively involved in research and development of cell-based cancer therapeutics. Of these companies, we believe that only Dendreon, and Cell Genesys are carrying-out Phase III clinical trials with a cell-based therapy and they are doing so in a patient population that does not compete with our Phase III DCVax^® – Prostate product candidate. No cell-based therapeutic product is currently available for commercial sale. Additionally, several companies, such as Medarex, Inc., Amgen, Inc., Agensys, Inc., and Genentech, Inc. are actively involved in research and development of monoclonal antibody-based cancer therapies. Currently, at least seven antibody-based products are approved for commercial sale for cancer therapy. Genentech is also engaged in several Phase III clinical trials for additional antibody-based therapeutic products for a variety of cancers, and several other companies are in early stage clinical trials for such products. Many other third parties compete with us in developing alternative therapies to treat cancer, including:

•  biopharmaceutical companies;

•  biotechnology companies;

•  pharmaceutical companies;

•  academic institutions; and

•  other research organizations.

      Most of our competitors have significantly greater resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing. In addition, many of these competitors have become more active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of technology they have developed. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors may prevent

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us from recruiting and retaining qualified scientific and management personnel, or from acquiring technologies complementary to our programs.

      We expect that our ability to compete effectively will be dependent upon our ability to:

•  secure the necessary funding to continue our development efforts with respect to our product candidates;

•  successfully complete clinical trials and obtain all requisite regulatory approvals;

•  maintain a proprietary position in our technologies and products;

•  attract and retain key personnel; and

•  maintain existing or enter into new partnerships.

Governmental Regulation

      Governmental authorities in the United States and other countries extensively regulate the pre-clinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution, among other things, of immunotherapeutics. In the United States, the FDA subjects pharmaceutical and biologic products to rigorous review. Even if we ultimately receive FDA approval for one or more of our products, if we or our partners do not comply with applicable requirements, we may be fined, our products may be recalled or seized, our production may be totally or partially suspended, the government may refuse to approve our marketing applications or allow us to distribute our products, and we may be criminally prosecuted. The FDA also has the authority to revoke previously granted marketing authorizations.

      In order to obtain approval of a new product from the FDA, we must, among other requirements, submit proof of safety and efficacy as well as detailed information on the manufacture and composition of the product. In most cases, this proof requires documentation of extensive laboratory tests, and pre-clinical and clinical trials. This testing, and the preparation of necessary applications and processing of those applications by the FDA are expensive and typically take several years to complete. The FDA may not act quickly or favorably in reviewing these applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing any products we may develop. The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any approvals that could restrict the commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we encounter problems following initial marketing. With respect to patented products or technologies, delays imposed by the governmental approval process may materially reduce the period we might have the exclusive right to exploit the products or technologies.

      After an investigational new drug application becomes effective, a sponsor may commence human clinical trials, in the United States. The sponsor typically conducts human clinical trials in three sequential phases, but these phases may overlap. In Phase I clinical trials, the product is tested in a small number of patients or healthy volunteers, primarily for safety at one or more doses. In Phase II, in addition to safety, the sponsor evaluates the efficacy of the product in a patient population somewhat larger than Phase I clinical trials. Phase III clinical trials typically involve additional testing for safety and clinical efficacy in an expanded population at geographically dispersed test sites. The sponsor must submit to the FDA a clinical plan, or protocol, accompanied by the approval of a clinical site responsible for ongoing review of the investigation, prior to commencement of each clinical trial. The FDA or a clinical site may order the temporary or permanent discontinuation of a clinical trial at any time, if the trial is not being conducted in accordance with FDA or clinical site requirements or presents a danger to its subjects.

      The sponsor must submit to the FDA the results of the pre-clinical and clinical trials, together with, among other things, detailed information on the manufacture and composition of the product, in the form of a new drug application or, in the case of a biologic, a biologics license application. The FDA is regulating our therapeutic vaccine product candidates as biologics and, therefore, we must submit biologics

15

license applications (BLA) to the FDA to obtain approval of our products. The clinical trial process generally takes several years, and the FDA reviews the BLA application and, when and if it decides that adequate data is available to show that the new compound is both safe and effective and that all other applicable requirements have been met, the FDA approves the drug or biologic for marketing. The amount of time taken for this approval process is a function of a number of variables, including the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question, and the workload at the FDA. It is possible that our product candidates will not successfully proceed through this approval process or that the FDA will not approve them in any specific period of time.

      The FDA may, during its review of a new drug application or biologics license application, ask for additional test data. If the FDA does ultimately approve a product, it may require post-marketing testing, including potentially expensive Phase IV studies, and surveillance to monitor the safety and effectiveness of the drug. In addition, the FDA may in some circumstances impose restrictions on the use of an approved drug, which may be difficult and expensive to administer, and may require prior approval of promotional materials.

      Before approving a new drug application or biologics license application, the FDA also will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in compliance with guidelines for the manufacture, holding, and distribution of a product. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with manufacturing guidelines. Manufacturers must continue to expend time, money and effort in the areas of production, quality control, record keeping and reporting to ensure full compliance with those requirements. The labeling, advertising, promotion, marketing and distribution of a drug or biologic product must also be in compliance with FDA regulatory requirements. Failure to comply with applicable requirements can lead to the FDA demanding that production and shipment cease, and, in some cases, that the manufacturer recall products, or to FDA enforcement actions that can include seizures, injunctions and criminal prosecution. These failures can also lead to FDA withdrawal of approval to market the product.

      We, and our partners, are also subject to regulation by the Occupational Safety and Health Administration, the Environmental Protection Agency, the Nuclear Regulatory Commission and other foreign, federal, state and local agencies under various regulatory statutes, and may in the future be subject to other environmental, health and safety regulations that may affect our research, development and manufacturing programs. We are unable to predict whether any agency will adopt any regulation, which could limit or impede on our operations.

      Sales of pharmaceutical products outside the United States are subject to foreign regulatory requirements that vary widely from country to country. Whether or not we have obtained FDA approval, we must obtain approval of a product by comparable regulatory authorities in foreign countries prior to the commencement of marketing the product in those countries. The time required to obtain this approval may be longer or shorter than that required for FDA approval. The foreign regulatory approval process includes all the risks associated with FDA regulation set forth above, as well as country-specific regulations.

Employees

      Beginning in September 2002, we reduced our research and administrative staff approximately 94%, from 67 employees to a remaining staff of five full-time employees, as of December 31, 2005. Each of our employees has signed a confidentiality and invention assignment agreement, and none are covered by a collective bargaining agreement. We have never experienced employment-related work stoppages and consider our employee relations to be positive.

Item 1A. Risk Factors

      This section briefly discusses certain risks that should be considered by our stockholders and prospective investors. You should carefully consider the risks described below, together with all other

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information included in this Annual Report on Form 10-K and the information incorporated by reference. If any of the following risks actually occur, our business, financial condition or operating results could be harmed. In such case, you could lose all of your investment.

     We will need to raise additional capital, which may not be available.

      As of April 12, 2006, we have approximately $3.5 million in cash. We believe, based on recurring and planned operating and associated financing costs, our cash will be sufficient to fund our operations for the next twelve months. For operating capital after that date we intend to seek additional funds from Toucan Capital, Toucan Partners, or other third parties. Toucan Capital, Toucan Partners or other third parties are not obligated to provide us any additional funds. Any additional financing with Toucan Capital, Toucan Partners or any other third party is likely to be dilutive to stockholders, and any debt financing, if available, may include additional restrictive covenants. If we are unable to obtain significant additional capital in the near-term, we may cease operations at anytime. We do not believe that our assets would be sufficient to satisfy the claims of all of our creditors in full and to satisfy aggregate liquidation preferences of our preferred stock. Therefore, if we were to pursue a liquidation it is highly unlikely that any proceeds would be received by our common stockholders.

     Our auditors have issued a “going concern” audit opinion.

      Our independent auditors have indicated in their report on our December 31, 2005 financial statements included in this report that there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to stockholders, in the event of a liquidation.

We have reduced business umbrella, auto, crime and fiduciary, and directors and officers liability insurance coverage.

      Due to rising insurance premiums for most business insurance coverage, our reduced level of operating activity, and reduced liability exposure through the cessation of all clinical trials, we lowered the levels of all of our insurance coverage. When our finances permit and when our level of operating activities rise, our insurance needs will be reassessed. Making a material reduction in our insurance coverage may make it difficult for us to acquire new directors and officers, and will also result in increased exposure to potential liabilities arising from any future litigation, either of which may materially harm our business and results of operations.

We expect to continue to incur substantial losses, and we may never achieve profitability.

      We have incurred net losses every year since our incorporation in July 1998 and, as of December 31, 2005, we had a deficit accumulated during the development stage of approximately $82.7 million. We have had net losses applicable to common stockholders as follows:

•  $5.8 million in 2003;

•  $8.5 million in 2004; and

•  $9.9 million in 2005.

      We expect that these losses will continue and anticipate negative cash flows from operations for the foreseeable future. Because of our current cash position, we will need to secure additional funding to continue operations. In addition, we will need to generate revenue sufficient to cover operating expenses and research and development costs to achieve profitability. We may never achieve or sustain profitability.

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As a company in the early stage of development with an unproven business strategy, our limited history of operations makes an evaluation of our business and prospects difficult.

      We have had a limited operating history and are at an early stage of development. We may not be able to achieve revenue growth in the future. We have generated the following limited revenues:

•  $529,000 in 2003;

•  $390,000 in 2004; and

•  $124,000 in 2005.

      We have derived most of these limited revenues from:

•  the sale of research products to a single customer;

•  contract research and development from related parties; and

•  research grants.

      In the future, we anticipate that revenues, if any, will be derived through grants, partnering agreements, and, ultimately, the commercialization of our product candidates.

We may not be able to retain existing personnel.

      Since September 2002, we reduced our research and administrative staff approximately 94%, from 67 employees to a remaining staff of five full-time employees, as of December 31, 2005. The uncertainty of our cash position, workforce reductions, and the volatility in our stock price may create anxiety and uncertainty, which may adversely affect employee morale and cause us to lose employees whom we would prefer to retain. To the extent that we are unable to retain our existing personnel, our business and financial results may suffer.

We have no manufacturing capabilities, which could adversely impact our ability to commercialize our product candidates.

      We have no manufacturing facilities nor expertise to produce our product candidates. We have never manufactured, on a commercial scale, any of our research products. Even if one or more of our product candidates is approved for marketing, we may not be able to enter into agreements with contract manufactures for the manufacture of any of our product candidates at a reasonable cost or in sufficient quantities to be profitable.

Because we lack sales and marketing experience, we may experience significant difficulties commercializing our research product candidates.

      The commercial success of any of our product candidates will depend upon the strength of our sales and marketing efforts. We do not have a sales force and have no experience in the sales, marketing or distribution of products. To fully commercialize our product candidates, we will need to create a substantial marketing staff and sales force with technical expertise and the ability to distribute these products. As an alternative, we could seek assistance from a third party with a large distribution system and a large direct sales force. We may be unable to put either of these plans in place. In addition, if we arrange for others to market and sell our products, our revenues will depend upon the efforts of those parties. Such arrangements may not succeed. Even if one or more of our product candidates is approved for marketing, if we fail to establish adequate sales, marketing and distribution capabilities, independently or with others, our business will be seriously harmed.

Our success partially depends on existing and future collaborators.

      The success of our business strategy may partially depend upon our ability to develop and maintain multiple collaborations and to manage them effectively. The success of our restructured operations will

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depend on our ability to attract collaborators to our research initiatives and to a lesser extent our ability to attract customers to our research products. Due to concerns regarding our ability to continue operations, these third parties may decide not to conduct business with us, or may conduct business with us on terms that are less favorable than those customarily extended by them. If either of these events occurs, our business could suffer significantly.

      Our success also depends partially upon the performance of our partners. We cannot directly control the amount and timing of resources that our existing or future collaborators devote to the research, development or marketing of our product candidates. As a result, those collaborators:

•  may not commit sufficient resources to our programs or product candidates;

•  may not conduct their agreed activities on time, or at all, resulting in delay or termination of the development of our product candidates and technology;

•  may not perform their obligations as expected;

•  may pursue product candidates or alternative technologies in preference to ours; or

•  may dispute the ownership of products or technology developed under our collaborations.

      We may have disputes with our collaborators, which could be costly and time consuming. Our failure to successfully defend our rights could seriously harm our business, financial condition and operating results. We intend to continue to enter into collaborations in the future. However, we may be unable to successfully negotiate any additional collaborations and any of these relationships, if established, may not be scientifically or commercially successful.

      We also work with scientists and medical professionals at academic and other institutions, including the University of California, Los Angeles, M.D. Anderson Cancer Center and the H. Lee Moffitt Cancer Center some of whom have conducted research for us or assist us in developing our research and development strategy. These scientists and medical professionals are not our employees. They may have commitments to, or contracts with, other businesses or institutions that limit the amount of time they have available to work with us. We have little control over these individuals. We can only expect them to devote to our projects the amount of time required by our license, consulting and sponsored research agreements. In addition, these individuals may have arrangements with other companies to assist in developing technologies that may compete with ours. If these individuals do not devote sufficient time and resources to our programs, our business could be seriously harmed.

Competition in our industry is intense and most of our competitors have substantially greater resources than we have.

      The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Several companies, such as Cell Genesys, Inc., Dendreon Corporation, Immuno-Designed Molecules, Inc., and Antigenics, are actively involved in the research and development of cell-based cancer therapeutics. Of these companies, we believe that only Dendreon and Cell Genesys are carrying-out Phase III clinical trials with a cell-based therapy. No dendritic cell-based therapeutic product is currently approved for commercial sale. Additionally, several companies, such as Medarex, Inc., Amgen, Inc., Agensys, Inc., and Genentech, Inc., are actively involved in the research and development of monoclonal antibody-based cancer therapies. Currently, at least seven antibody-based products are approved for commercial sale for cancer therapy. Genentech is also engaged in several Phase III clinical trials for additional antibody-based therapeutics for a variety of cancers, and several other companies are in early stage clinical trials for such products. Many other third parties compete with us in developing alternative therapies to treat cancer, including:

•  biopharmaceutical companies;

•  biotechnology companies;

•  pharmaceutical companies;

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•  academic institutions; and

•  other research organizations.

      Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing than we do. In addition, many of these competitors have become active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of technology they have developed. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologies complementary to our programs.

      We expect that our ability to compete effectively will be dependent upon our ability to:

•  obtain additional funding;

•  successfully complete clinical trials and obtain all requisite regulatory approvals;

•  maintain a proprietary position in our technologies and products;

•  attract and retain key personnel; and

•  maintain existing or enter into new partnerships.

      Our competitors may develop more effective or affordable products, or achieve earlier patent protection or product marketing and sales than we may. As a result, any products we develop may be rendered obsolete and noncompetitive.

Our intellectual property rights may not provide meaningful commercial protection for our research products or product candidates, which could enable third parties to use our technology, or very similar technology, and could reduce our ability to compete in the market.

      We rely on patent, copyright, trade secret and trademark laws to limit the ability of others to compete with us using the same or similar technology in the United States and other countries. However, as described below, these laws afford only limited protection and may not adequately protect our rights to the extent necessary to sustain any competitive advantage we may have. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

      We have fourteen issued and licensed patents (seven in the United States and seven in foreign jurisdictions) and 118 patent applications pending (16 in the United States and 102 in foreign jurisdictions) which cover the use of dendritic cells in DCVax^® as well as targets for either our dendritic cell or fully human monoclonal antibody therapy candidates. The issued patents expire at dates from 2015 to 2018.

      We will only be able to protect our technologies from unauthorized use by third parties to the extent that they are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent positions of companies developing novel cancer treatments, including our patent position, generally are uncertain and involve complex legal and factual questions, particularly concerning the scope and enforceability of claims of such patents against alleged infringement. Recent judicial decisions are prompting a reinterpretation of the limited case law that exists in this area, and historical legal standards surrounding questions of infringement and validity may not apply in future cases. A reinterpretation of existing law in this area may limit or potentially eliminate our patent position and, therefore, our ability to prevent others from using our technologies. The biotechnology patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may therefore diminish the value of our intellectual property.

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      We own, or have rights under licenses to a variety of issued patents and pending patent applications. However, the patents on which we rely may be challenged and invalidated, and our patent applications may not result in issued patents. Moreover, our patents and patent applications may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. We also face the risk that others may independently develop similar or alternative technologies or design around our patented technologies.

      We have taken security measures to protect our proprietary information, especially proprietary information that is not covered by patents or patent applications. These measures, however, may not provide adequate protection of our trade secrets or other proprietary information. We seek to protect our proprietary information by entering into confidentiality agreements with employees, partners and consultants. Nevertheless, employees, collaborators or consultants may still disclose our proprietary information, and we may not be able to protect our trade secrets in a meaningful way. If we lose any employees, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by those former employees despite the existence of nondisclosure and confidentiality agreements and other contractual restrictions to protect our proprietary technology. In addition, others may independently develop substantially equivalent proprietary information or techniques or otherwise gain access to our trade secrets.

Our success will depend partly on our ability to operate without infringing or misappropriating the proprietary rights of others.

      Our success will depend to a substantial degree upon our ability to develop, manufacture, market and sell our research products and product candidates without infringing the proprietary rights of third parties and without breaching any licenses we have entered into regarding our product candidates.

      There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate and can divert management’s attention from our core business. We may be exposed to future litigation by third parties based on claims that our products infringe their intellectual property rights. This risk is exacerbated by the fact that there are numerous issued and pending patents in the biotechnology industry and the fact that the validity and breadth of biotechnology patents involve complex legal and factual questions for which important legal principles remain unresolved.

      Our competitors may assert that our products and the methods we employ are covered by U.S. or foreign patents held by them. In addition, because patents can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our products may infringe. There could also be existing patents of which we are not aware that one or more of our products may inadvertently infringe.

      If we lose a patent infringement lawsuit, we could be prevented from selling our research products or product candidates unless we can obtain a license to use technology or ideas covered by such patent or are able to redesign our products to avoid infringement. A license may not be available at all or on terms acceptable to us, or we may not be able to redesign our products to avoid any infringement. If we are not successful in obtaining a license or redesigning our products, we may be unable to sell our products and our business could suffer.

We use hazardous materials and must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business.

      We store, handle, use and dispose of controlled hazardous, radioactive and biological materials in our business. Our current use of these materials generally is below thresholds giving rise to burdensome regulatory requirements. Our development efforts, however, may result in our becoming subject to additional requirements, and if we fail to comply with applicable requirements we could be subject to substantial fines and other sanctions, delays in research and production, and increased operating costs. In

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addition, if regulated materials were improperly released at our current or former facilities or at locations to which we send materials for disposal, we could be strictly liable for substantial damages and costs, including cleanup costs and personal injury or property damages, and incur delays in research and production and increased operating costs.

      Insurance covering certain types of claims of environmental damage or injury resulting from the use of these materials is available but can be expensive and is limited in its coverage. We have no insurance specifically covering environmental risks or personal injury from the use of these materials and if such use results in liability, our business may be seriously harmed.

Toucan Capital and Toucan Partners beneficially own the vast majority of our stock and, as a result, the trading price for our shares may be depressed and these stockholders can take actions that may be adverse to your interests.

      As of April 17, 2006, Toucan Capital and Toucan Partners collectively beneficially owned an aggregate of approximately 394.6 million shares of our common stock issuable pursuant to conversion of Series A Preferred Stock, Series A-1 Preferred Stock, convertible notes, and warrants, representing beneficial ownership of approximately 86% of our outstanding common stock, on an as-converted to common stock basis. The notes held by Toucan Partners are currently convertible into common stock or Series A Preferred Stock at its election, at the price of $0.04, or Series A-1 Preferred Stock at the price of $1.60 per share. The Series A Preferred Stock and Series A-1 Preferred Stock is similarly convertible into common stock (at the rate of 1-for-1 in the case of Series A Preferred Stock and at the rate of 1-for-40 in the case of Series A-1 Preferred Stock). Finally, the warrants held by Toucan Capital and Toucan Partners are exercisable at exercise prices ranging from $0.01 to $0.04 per share. This significant concentration of ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. Company management and Toucan Capital have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, they can dictate the management of our business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to you.

      In addition, Toucan Capital and Toucan Partners each has a right of first refusal to participate in our future issuances of debt or equity securities Also, under the terms of our Recapitalization Agreement, we are required to consult with Toucan Capital on how we conduct many aspects of our business. As a result, Toucan Capital has significant influence in regard to how we conduct our business, and with its stock ownership, could influence any matters requiring stockholder approval. This influence may cause us to conduct our business differently from the way we have in the past. The concentration of ownership may also delay, deter or prevent acts that would result in a change in control, which, in turn, could reduce the market price of our common stock.

There may not be an active, liquid trading market for our common stock.

      On December 14, 2001, our common stock was listed on the NASDAQ National Market. Prior to that time there was no public market for our common stock. On December 23, 2002, our common stock was delisted from the NASDAQ National Market and our common stock is currently listed on the Over The Counter Bulletin Board, or OTCBB, which is generally recognized as being a less active market than the NASDAQ National Market. You may not be able to sell your shares at the time or at the price desired.

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Our common stock may experience extreme price and volume fluctuations, which could lead to costly litigation for us and make an investment in us less appealing.

      The market price of our common stock may fluctuate substantially due to a variety of factors, including:

•  announcements of technological innovations or new products by us or our competitors;

•  development and introduction of new cancer therapies;

•  media reports and publications about cancer therapies;

•  announcements concerning our competitors or the biotechnology industry in general;

•  new regulatory pronouncements and changes in regulatory guidelines;

•  general and industry-specific economic conditions;

•  changes in financial estimates or recommendations by securities analysts; and

•  changes in accounting principles.

      The market prices of the securities of biotechnology companies, particularly companies like ours without earnings and consistent product revenues, have been highly volatile and are likely to remain highly volatile in the future. This volatility has often been unrelated to the operating performance of particular companies. In the past, securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Moreover, market prices for stocks of biotechnology-related and technology companies occasionally trade at levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations. Whether or not meritorious, litigation brought against us following fluctuations in the trading prices of our securities could result in substantial costs, divert management’s attention and resources and harm our financial condition and results of operations.

Our incorporation documents, and bylaws and stockholder rights plan may delay or prevent a change in our management.

      Our amended and restated certificate of incorporation, bylaws and stockholder rights plan contain provisions that could delay or prevent a change in our management team. Some of these provisions:

•  authorize the issuance of preferred stock that can be created and issued by the board of directors without prior stockholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock;

•  authorize our board of directors to issue dilutive shares of common stock upon certain events; and

•  provide for a classified board of directors

      These provisions could allow our board of directors to affect your rights as a stockholder since our board of directors can make it more difficult for common stockholders to replace members of the board. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace our current management team. In addition, we are party to an investor rights agreement which includes protective provisions affording certain assurances to investors which could have the potential to discourage a change in control.

The resale, or the availability for resale, of the shares issued in the PIPE Financing could have a material adverse impact on the market price of our common stock.

      In March 2006, we entered into the PIPE Financing, consisting of a private placement of an aggregate of approximately 39.5 million shares and accompanying warrants to purchase an aggregate of approximately 19.7 million shares. In connection with the PIPE Financing, we agreed to register the resale of the shares of common stock sold in the PIPE Financing and the shares underlying the warrants issued

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in the PIPE Financing. Under the terms of the purchase agreement relating to the PIPE Financing, we are obligated to file the registration statement by May 19, 2006 and have the registration statement declared effective by July 3, 2006 (subject to potential extension to August 2, 2006 if the SEC reviews the registration statement). The resale of a substantial number of such shares, or even the availability of these shares for resale, could have a material adverse impact on our stock price.

Item 1B. Unresolved Staff Comments

      None.

Item 2. Properties

      We vacated our former 14,000 square foot facility, which housed administrative and laboratory space, on December 14, 2005. We continue to maintain our headquarters in Bothell, Washington where we currently sublease approximately 2,325 square feet of general administration space. Our current lease expires on December 31, 2006. We remain primarily liable, through September 30, 2006, for performance under the original July 1, 2003 lease with Benaroya Capital, which we subsequently assigned to a third party with Benaroya’s concurrence.

Item 3. Legal Proceedings

Soma Arbitration

      We were parties to an engagement letter, dated October 15, 2003, with Soma Partners, LLC, or Soma, a New Jersey-based investment bank, pursuant to which we engaged them to locate potential investors. Pursuant to the terms of the engagement letter, any disputes arising between the parties would be submitted to arbitration in the New York metropolitan area. A significant dispute arose between the parties. Soma filed an arbitration claim against us with the American Arbitration Association in New York, NY claiming unpaid commission fees of $186,000 and seeking declaratory relief regarding potential fees for future transactions that may be undertaken by us with Toucan Capital. We vigorously disputed Soma’s claims on multiple grounds. We contended that we only owed Soma approximately $6,000.

      Soma subsequently filed an amended arbitration claim, claiming unpaid commission fees of $339,000 and warrants to purchase 6% of the aggregate securities issued to date, and seeking declaratory relief regarding potential fees for future financing transactions which may be undertaken by us with Toucan Capital and others, which could potentially be in excess of $4 million. Soma also requested the arbitrator award its attorneys’ fees and costs related to the proceedings. We strongly disputed Soma’s claims and defended ourselves.

      The arbitration proceedings occurred from March 8-10, 2005 and on May 24, 2005, the arbitrator ruled in our favor and denied all claims of Soma. In particular, the arbitrator decided that we did not owe Soma the fees and warrants sought by Soma, that we would not owe Soma fees in connection with future financings, if any, and that we had no obligation to pay any of Soma’s attorneys’ fees or expenses. The arbitrator agreed with us that the only amount we owed Soma was $6,702.87, which payment we made on May 27, 2005.

      On August 29, 2005, Soma filed a notice of petition to vacate the May 24, 2005 arbitration award issued by the Supreme Court of the State of New York.

      On December 30, 2005, the Supreme Court of the State of New York dismissed Soma’s petition, denying Soma’s August 29, 2005 motion to vacate the May 24, 2005 award.

      On February 3, 2006, Soma filed another notice of appeal with the Supreme Court of the State of New York. As of the date of the filing of this report, the Supreme Court of the State of New York has yet to act on this matter. We believe that Soma’s latest appeal is without merit and we intend to vigorously defend the appeal.

      We have no other legal proceeding pending at this time.

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Item 4. Submission of Matters to a Vote of Security Holders

      There were no matters submitted for stockholders’ approval in the quarter ended December 31, 2005.

PART II

Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters

Market Information and Price Range of Common Stock

      Our common stock is quoted on the OTCBB under the symbol “NWBT.OB” Public trading of our common stock commenced on December 14, 2001 on the NASDAQ National Market. Prior to that time, there was no public market for our stock. On December 23, 2002, our common stock was delisted from NASDAQ and subsequently commenced trading on the OTCBB. The following table summarizes our common stock’s high and low sales prices for the periods indicated as reported by the OTCBB. These prices do not include retail markups, markdowns or commissions.

	2004				2005
	High		Low		High		Low
4th Quarter	$	0.06	$	0.03	$	0.17	$	0.09
3rd Quarter		0.09		0.02		0.22		0.13
2nd Quarter		0.15		0.02		0.26		0.16
1st Quarter		0.28		0.12		0.70		0.03

      As of April 14, 2006, there were approximately 266 holders of record of our common stock. Such holders include any broker or clearing agencies as holders of record but exclude the individual stockholders whose shares are held by brokers or clearing agencies.

Dividend Policy

      We have never declared or paid cash dividends on our capital stock. We currently intend to retain future earnings, if any, to fund the development and growth of our business and do not currently anticipate paying any cash dividends in the foreseeable future. The payment of future dividends, if any, will be determined by our board of directors.

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Item 6. Selected Financial Data

      The following table shows selected financial data for each of the years ending December 31, 2001 to December 31, 2005 and for the period from our inception through December 31, 2005 and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements and notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K.

																			Period from
																			March 18,
																			1996
				Years Ended December 31,															(Inception) to
																			December 31,
				2001			2002			2003			2004			2005			2005
				(In thousands, except per share data)
Statement of Operations Data:
Total revenues				$	129		$	9		$	529		$	390		$	124		$	2,639
Operating costs and expenses
	Cost of research material sales				67			7			79			40			12			382
	Research and development				4,907			5,956			1,624			3,621			4,469			32,067
	General and administrative				4,759			7,463			4,059			2,845			2,005			30,694
	Depreciation and amortization				467			593			207			132			63			2,266
	Loss on facility sublease				—			721			174			—			—			895
	Asset impairment loss				—			1,032			904			130			—			2,066
			Total operating costs and expenses		10,200			15,772			7,047			6,768			6,549			68,370
			Loss from operations		(10,071	)		(15,763	)		(6,518	)		(6,378	)		(6,425	)		(65,731	)
Other Income (expense), net
		Warrant valuation			—			—			—			(368	)		—			(368	)
	Gain on sale of intellectual property to Medarex				—			2,840			816			—			—			3,656
	Interest expense				(1,062	)		(38	)		(73	)		(1,765	)		(3,517	)		(13,137	)
	Interest income				193			157			23			3			5			736
	Net loss				(10,940	)		(12,804	)		(5,752	)		(8,508	)		(9,937	)		(74,844	)
			Accretion of redemption value of mandatorily redeemable membership units and preferred stock		(379	)		—			—			—			—			(1,872	)
			Series A preferred stock redemption fee		(1,700	)		—			—			—			—			(1,700	)
			Beneficial conversion feature of series D convertible preferred stock		(4,274	)		—			—			—			—			(4,274	)
Net loss applicable to common stockholders				$	(17,293	)	$	(12,804	)	$	(5,752	)	$	(8,508	)	$	(9,937	)	$	(82,690	)
Net loss per share applicable to common stockholders  — basic and diluted				$	(6.57	)	$	(0.76	)	$	(0.30	)	$	(0.45	)	$	(0.52	)
Weighted average shares used in computing basic and diluted net loss per share					2,631			16,911			18,908			19,028			19,068

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	Years Ended December 31,
	2001		2002		2003			2004			2005
	(In thousands)
Balance Sheet Data:
Cash	$	14,966	$	2,539	$	255		$	248		$	352
Working capital (deficit)		13,501		3,466		(392	)		(5,353	)		(11,502	)
Total assets		19,476		7,572		871			558			631
Long-term obligations, net of current portion and discounts		123		378		49			12			3
Mandatorily redeemable convertible preferred stock		—		—		—			—			—
Convertible preferred stock		—		—		—			—			—
Total stockholders’ equity (deficit)		16,935		4,876		16			(5,217	)		(11,418	)

Item 7. Management’s Discussion and Analysis of Financial Condition and Plan of Operations

      The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those statements included with this annual report.

Overview

      We have experienced recurring losses from operations, have a working capital deficit of $11.5 million and have a deficit accumulated during the development stage of $82.7 million at December 31, 2005.

Recapitalization

      Since the beginning of 2002, we recognized that we did not have sufficient working capital to fund our operations beyond 12 months and needed to raise additional capital from third parties in order to continue our clinical and research programs. In April 2002, we retained an investment bank to assist us in raising capital. Due to the economic climate in 2002 and declining stock prices of biotechnology companies in general, as well as our own stock price, we were unable to raise additional capital. In July 2002, we retained an additional investment banking firm to assist us in exploring various strategic options including raising additional capital, licensing our technology to a third party, or merging with another company. We contacted over 50 biotechnology companies and over 20 large pharmaceutical companies in an attempt to explore these options without success.

      From September 2002 through approximately September 2004, we reduced our staff from 67 to 8 employees, withdrew our investigational new drug application, or IND, for our Phase III clinical trial for hormone refractory prostate cancer and our IND for our Phase I trial for non-small cell lung cancer from the U.S. Food and Drug Administration, or FDA, and inactivated our Phase II clinical trial for brain cancer, which remained open with the FDA. In addition, we moved our corporate headquarters several times, each time to smaller facilities in order to reduce our monthly rent expense. During this time, we attempted to obtain capital from various sources, but were not successful. On November 13, 2003, we borrowed $335,000 from members of our management pursuant to a series of convertible promissory notes (and associated warrants to purchase an aggregate of 3.7 million shares of our common stock).

      Beginning in 2004, we undertook a significant recapitalization whereby we have raised an aggregate of approximately $14.5 million in gross proceeds from issuances of debt and equity through a series of private placements. These financings included:

•  the issuance of a series of convertible promissory notes to Toucan Capital in aggregate principal amount of approximately $6.75 million (and associated warrants to purchase an aggregate of 122.5 million shares of capital stock at exercise prices ranging from 0.01 to $0.04 per share) from February 2004 through September 2005. These notes accrued interest at 10% per annum from the respective issuance dates of the notes;

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•  the issuance of a convertible promissory note to Toucan Partners, in principal amount of $400,000 (and associated warrants to purchase an aggregate of 4 million shares of capital stock at an exercise price of $0.04 per share) in November 2005. This note accrues interest at 10% per annum from the issuance date of the note;

•  the issuance of a series of non-convertible promissory notes to Toucan Partners, in the aggregate principal amount of $550,000. These notes accrue interest at 10% per annum from the respective issuance dates of the notes;

•  the sale of Series A Preferred Stock to Toucan Capital for aggregate gross proceeds of approximately $1.3 million (and associated warrants to purchase an aggregate of 13 million shares of Series A Preferred Stock at an exercise price of $0.04 per share) in January 2005; and

•  the sale of 39.5 million shares of common stock (and accompanying warrants to purchase an aggregate of 19.7 shares of common stock at an exercise price of $0.14 per share) to certain accredited investors (the “PIPE Financing”) for aggregate proceeds of approximately $5.5 million in April 2006.

      Subsequently, the Toucan Partners’ non-convertible notes were amended and restated in order to make them convertible on the same terms and conditions as the convertible notes previously issued to Toucan Capital and Toucan Partners, and warrants were issued to Toucan Partners in respect of the amended notes on the same terms and conditions as warrants were issued to Toucan Capital and Toucan Partners. In April 2006, Toucan Capital elected to convert all of its promissory notes, including all accrued interest thereon, into a newly designated series of preferred stock, Series A-1 Preferred Stock, in accordance with the terms of the notes at a conversion price of $1.60 per share. The Series A-1 Preferred Stock is substantially identical to Series A Preferred Stock with the exception of the issuance price per share and liquidation preference per share (which are $1.60 per share, rather than $0.04 per share in the case of Series A) and the ratio at which the shares are convertible into common stock (which is 1-for-40, or one share of A-1 Preferred Stock for forty shares of common stock, rather than 1-for-1 in the case of Series A).

      Simultaneously with Toucan Capital’s loan conversion, Alton Boynton, the Company’s President and Marnix Bosch, the Company’s Vice President of Vaccine Research, and Development, each elected to convert the principal and accrued interest on their respective loans into 2,195,771 and 491,948 shares of the Company’s common stock, and in conjunction with the PIPE Financing, exercised their warrants for the issuance of 1,895,479 and 424,669 shares of the company’s common stock, respectively.

      As a result of the financings described above, Toucan Capital holds:

•  an aggregate of 32.5 million shares of Series A Preferred Stock (convertible into an aggregate of 32.5 million shares of Common Stock as of April 17, 2006);

•  an aggregate of 4.82 million shares of Series A-1 Preferred Stock (convertible into an aggregate of 192.7 million shares of Common Stock as of April 17, 2006);

•  warrants to purchase an aggregate of 66 million shares of capital stock at an exercise price of $0.01 per share;

•  warrants to purchase an aggregate of 56.5 million shares of capital stock at an exercise price of $0.04 per share; and

•  warrants to purchase an aggregate of 13 million shares of Series A Preferred Stock at an exercise price of $0.04 per share.

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      As a result of the financings described above, Toucan Partners holds:

•  convertible promissory notes in aggregate principal amount of $950,000, with accrued interest thereon of $26,300 as of April 17, 2006 (with such notes convertible as of April 17, 2006 into an aggregate of 24.4 million shares of capital stock at a conversion price of $0.04 per share); and

•  warrants to purchase an aggregate of 9.5 million shares of capital stock at an exercise price of $0.04 per share.

      The warrants held by Toucan Capital and Toucan Partners described above are fully vested and exercisable and generally have an exercise period of seven years from their respective dates of issuance.

      As a result of the PIPE Financing, the investors in the PIPE Financing hold:

•  an aggregate of 39.5 million shares of common stock; and

•  warrants to purchase an aggregate of 19.7 million shares of common stock at an exercise price of $0.14 per share.

      The investments made by Toucan Capital and Toucan Partners were made pursuant to the terms and conditions of a recapitalization agreement originally entered into on April 26, 2004, (which was subsequently amended and restated, and further amended) with Toucan Capital (as amended to date, the “Recapitalization Agreement”), which contemplated the possible recapitalization of the Company. As amended, the Recapitalization Agreement contemplates a bridge financing period and an equity financing period, with such equity financing period extending through December 31, 2006, or such later date as is mutually agreed by the Company and Toucan Capital. The Recapitalization Agreement includes a term sheet that outlines the terms of a potential equity financing, at Toucan Capital’s election, of up to $40 million through the issuance of new securities to Toucan Capital, Toucan Partners and a syndicate of other investors to be determined. However, neither Toucan Capital, Toucan Partners, nor any entity affiliated with either of them are obligated to invest any additional funds in the company

Series A Cumulative Convertible Preferred Stock and Series A-1 Cumulative Convertible Preferred Stock

      As described above, on January 26, 2005, we entered into a securities purchase agreement with Toucan Capital, pursuant to which it purchased 32.5 million shares of our Series A Preferred Stock at a purchase price of $0.04 per share, for an aggregate purchase price of $1.3 million. The Series A Preferred Stock:

      (i) is entitled to cumulative dividends at the rate of 10% per year;

      (ii) is entitled to a liquidation preference in the amount of its initial purchase price plus all accrued and unpaid dividends (to the extent of legally available funds);

      (iii) has a preference over the common stock, and is on a pari passu basis with the Series A-1 Preferred Stock, with respect to dividends and distributions;

      (iv) is entitled to participate on an as-converted basis with the common stock on any distributions after the payment of any preferential amounts to the Series A Preferred Stock and the Series A-1 Preferred Stock;

      (v) votes on an as converted basis with the common stock and the Series A-1 Preferred Stock on matters submitted to the common stockholders for approval and as a separate class on certain other material matters; and

      (vi) is convertible into common stock on a one-for-one basis (subject to adjustment in the event of stock dividends, stock splits, reverse stock splits, recapitalizations, etc.).

      The number of shares of common stock issuable upon conversion of each share of Series A Preferred Stock is also subject to increase in the event of certain dilutive issuances in which we sell or are deemed

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to have sold shares below the then applicable conversion price (currently $0.04 per share). The consent of the holders of a majority of the Series A Preferred Stock is required in the event that we elect to undertake certain significant business actions.

      As described above, in April 2006, Toucan Capital converted the aggregate principal amount, and all accrued interest thereon into an aggregate of 4.82 million shares of our newly designated Series A-1 Preferred Stock. The Series A-1 Preferred Stock is substantially identical to the Series A Stock described above, although its original issuance price and liquidation preference are $1.60 per share, and its conversion rate is initially 40 shares of common stock per share of Series A-1 Preferred Stock.

Toucan Capital Series A Warrant

      On January 26, 2005, we issued Toucan Capital a warrant, with a contractual life of 7 years, to purchase up to 13.0 million shares of Series A preferred stock with an exercise price of $0.04 per share. The number of shares issuable pursuant to the exercise of the warrant and the exercise price thereof is subject to adjustment in the event of stock splits, reverse stock splits, stock dividends and the like.

Toucan Partners Notes

      We have borrowed an aggregate of $950,000 from Toucan Partners from November 14, 2005 to March 9, 2006, comprised of the following loan transactions:

Date		Loan Principal		Due Date		Interest Rate
		(In thousands)
11/14/05		$	400		11/14/06		10	%
12/30/05			250		12/30/06		10	%
03/09/06			300		03/09/07		10	%
	Total	$	950

      Interest accrues on these notes at the rate of 10% per annum, based on a 365-day basis compounded annually from the respective original issuance dates of the notes. These notes are secured by a first priority security interest in all of our assets. The principal amount of, and accrued interest on, these notes, as amended, is convertible at Toucan Partners’ election into common stock or Series A Preferred Stock at a rate of $0.04 per share, or Series A-1 Preferred Stock at a rate of $1.60 per share.

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Bridge Warrants

Toucan Capital

      In connection with the loans made by Toucan Capital, Toucan Capital holds a series of warrants to purchase capital stock as follows:

Issuance Date	Warrant Shares(1)
	(In thousands)
04/26/04		36,000	(2)
06/11/04		30,000	(2)
07/30/04		20,000	(3)
10/22/04		5,000	(3)
11/10/04		5,000	(3)
12/27/04		2,500	(3)
04/12/05		4,500	(3)
05/13/05		4,500	(3)
06/16/05		5,000	(3)
07/26/05		5,000	(3)
09/07/05		5,000	(3)
Total		122,500

(1)	These warrants have a seven year exercise period from their respective issuance dates. The foregoing warrants are exercisable for shares of convertible preferred stock if other investors have purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement. However, if, other investors have not purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement, these warrants shall be exercisable for any equity security and/or debt security and/or any combination thereof. As a result, these warrants are currently exercisable at the holder’s election, for shares of common stock or Series A Preferred Stock, or Series A-1 Preferred Stock.
(2)	Per share exercise price is $0.01 for common stock or Series A Preferred Stock or $0.40 per share for Series A-1 Preferred Stock.
(3)	Per share exercise price is $0.04 for common stock or Series A Preferred Stock or $1.60 per share for Series A-1 Preferred Stock.

Toucan Partners

      Toucan Partners holds a series of warrants to purchase capital stock as follows:

Issuance Date	Shares
	(In thousands)(1)
11/14/05		4,000
04/17/06		5,500
Total		9,500

(1)  These warrants have a seven year exercise period from their respective issuance dates. The foregoing warrants are exercisable for shares of convertible preferred stock if other investors have purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement. However, if, other investors have not purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement, these warrants shall be exercisable for any equity security and/or

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debt security and/or any combination thereof. As a result, these warrants are currently exercisable at the holder’s election, for shares of common stock or Series A Preferred Stock, or Series A-1 Preferred Stock. Per share exercise price is $0.04 for common stock or Series A Preferred Stock or $1.60 per share for Series A-1 Preferred Stock.

Going Concern

      Our financial statements for the year ended December 31, 2005 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. Nevertheless, we have experienced recurring losses from operations and have a deficit accumulated during the development stage of $82.7 million that raises substantial doubt about our ability to continue as a going concern and our auditors have issued an opinion, for the year ended December 31, 2005, which states that there is substantial doubt about our ability to continue as a going concern.

      If we are unable to continue as a restructured company, we intend to advance our dendritic cell-based product and monoclonal antibody candidates, pursue potential corporate partnerships for our monoclonal antibody candidates, and further consider other alternatives including the possible sale of some or all of our assets.

Expenses

      Operating costs and expenses consist primarily of research and development expenses, including clinical trial expenses when we are actively participating in clinical trials, and general and administrative expenses.

      Research and development expenses include salary and benefit expenses and costs of laboratory supplies used in our internal research and development projects.

      From our inception through December 31, 2005, we incurred costs of approximately $32.1 million associated with our research and development activities. Because our technologies are unproven, we are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates for commercialization.

      General and administrative expenses include salary and benefit expenses related to administrative personnel, cost of facilities, insurance, legal support, as well as amortization costs of stock options granted to employees and warrants issued to consultants for their professional services.

      To date, our revenues have primarily been derived from the manufacture and sale of research materials, contract research and development services and research grants from the federal government. For the year ended December 31, 2005, we earned approximately $38,000 in revenues from the manufacture and sale of research materials. Effective December 31, 2005, we have withdrawn from selling research materials.

Critical Accounting Policies and Estimates

      Accounting principles generally accepted in the United States of America require our management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements, as well as the amounts of revenues and expenses during periods covered by our financial statements. The actual amounts of these items could differ materially from those estimates. Our accounting policies are described in more detail in Note 3 to our consolidated financial statements included elsewhere in this Form 10-K. We have identified the following as the most critical accounting policies and estimates used in this preparation of our consolidated financial statements.

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Restructuring liabilities.

      When circumstances warrant, we may elect to discontinue certain business activities or change the manner in which we conduct ongoing operations. When such a change is made, management will estimate the costs to exit a business or restructure ongoing operations. The components of the estimates may include estimates and assumptions regarding the timing and costs of future events and activities that represent management’s best expectations based on known facts and circumstances at the time of estimation. Management periodically reviews its restructuring estimates and assumptions relative to new information, if any, of which it becomes aware. Should circumstances warrant, management will adjust its previous estimates to reflect what it then believes to be a more accurate representation of expected future costs. Because management’s estimates and assumptions regarding restructuring costs include probabilities of future events, such estimates are inherently vulnerable to changes due to unforeseen circumstances, changes in market conditions, regulatory changes, changes in existing business practices and other circumstances that could materially and adversely affect the results of operations.

      We recognized, for the year ended December 31, 2002, a liability of approximately $929,000 and a loss on facility sublease of $721,000, net of deferred rent write off in estimating the loss of economic benefit from vacating approximately 22,000 square feet of laboratory and administrative space at our prior facility in accordance with EITF 94-3, Accounting for Costs Associated with Exit or Disposal Activities.

      On June 30, 2003, we entered into a settlement agreement with Nexus Canyon Park, our prior landlord. Under this Settlement Agreement, Nexus Canyon Park agreed to permit premature termination of our prior lease and excuse us from future performance of lease obligations in exchange for 90,000 shares of our unregistered common stock with a fair value of $35,000 and Nexus’ retention of our $1.0 million security deposit. The settlement agreement resulted in an additional loss on facility sublease and lease termination of $174,000, net of deferred rent of $202,000. SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities has replaced EITF 94-3 but similar charges may occur if we have to cancel our current lease or enter into other restructuring transactions.

Impairment of Long-Lived Assets

      As of December 31, 2005, we had approximately $53,000 of property and equipment, net of accumulated depreciation. In accounting for these long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of the assets, and the potential for impairment based on events or circumstances. The events or circumstances could include a significant decrease in market value, a significant change in asset condition or a significant adverse change in regulatory climate. Application of the test for impairment requires judgment.

      During 2003, we recognized non-cash asset impairment losses totaling $987,000, on certain facilities and property and equipment resulting from our decisions to cancel our leases or vacate certain space. The losses on the equipment were determined based on actual sales or disposal of assets. We identified an indicator of impairment with respect to our leasehold improvements as a result of our decision to vacate our prior administrative space. Accordingly, we reduced the carrying value of the assets to their estimated fair value of zero.

Stock-Based Compensation

      We have adopted the disclosure-only provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). Accordingly, we apply Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for stock options. Pursuant to APB 25, we recognize employee stock-based compensation expense based on the intrinsic value of the option at the date of grant. Deferred stock-based compensation includes amounts recorded when the exercise price of an option is lower than the fair value of the underlying common stock on the date of grant. We amortize deferred stock-based compensation over the vesting period of the option using the graded vesting method.

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      We record stock options granted to non-employees using the fair value approach in accordance with SFAS 123 and Emerging Issues Task Force Consensus Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. We periodically revalue the options to non-employees over their vesting terms. We determine the fair value of options granted to non-employees using the Black-Scholes option-pricing model. We have adopted the provisions of SFAS 123R, “Share-Based Payment (Revised 2004) as of January 1, 2006 using the modified prospective method with no restatement related to the stock awards outstanding as of December 31, 2005.

      Prior to our initial public offering, we determined the fair value of our common stock for purposes of these calculations based on our review of the primary business factors underlying the value of our common stock on the date these option grants were made or revalued, viewed in light of our initial public offering and the initial public offering price per share. The actual initial public offering price was significantly lower than the expected price used in determining compensation expense. Subsequent to our initial public offering, the fair value has been determined based on the price of the common stock as reported on the OTCBB.

      On an ongoing basis the estimate of expense for stock options and warrants is dependant on factors such as expected life and volatility of our stock. To the extent actual expense is different than that estimated, the actual expense that would have been recorded may be substantially different.

Revenue recognition

      The Company earns revenues through research grants and previously eared revenues through sale of research materials, providing research services to third parties. Revenues from sale of research materials are to multiple customers with whom there is no other contractual relationship and are recognized when shipped to the customer and title has passed.

      Research contracts and grants require the Company to perform research activities as specified in each respective contract or grant on a best efforts basis, and the Company is paid based on the fees stipulated in the respective contracts and grants which approximate the costs incurred by the Company in performing such activities. The Company recognizes revenue under the research contracts and grants based on completion of performance under the respective contracts and grants where no ongoing obligation on the part of the Company exists. Direct costs related to these contracts and grants are reported as research and development expenses.

Results of Operations

Operating costs:

      Operating costs and expenses consist primarily of research and development expenses, including clinical trial expenses which rise when we are actively participating in clinical trials, and general and administrative expenses.

Research and development:

      Discovery and preclinical research and development expenses include scientific personnel related salary and benefit expenses, costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures for preclinical and clinical trial operation and management when we are actively engaged in clinical trials.

      Because we are a development stage company, we do not allocate research and development costs on a project basis. We adopted this policy, in part, due to the unreasonable cost burden associated with accounting at such a level of detail and our limited number of financial and personnel resources. We shifted our focus, starting in 2002, from discovering, developing, and commercializing immunotherapy products to conserving cash and primarily concentrating on securing new working capital to re-activate our two DCVax^® clinical trial programs. Our business judgment continues to be that there is little value

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associated with evaluating expenditures at the project level since all projects have either been discontinued and/or their respective activity reduced to a subsistence level.

      For the year ended December 31, 2005, of our net loss of approximately $9.9 million, approximately 45% of our expended resources were apportioned to the re-activation of our two DCVax^® protocols. From our inception through December 31, 2005, we incurred costs of approximately $32.1 million associated with our research and development activities. Because our technologies are unproven, we are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates for commercialization.

General and administrative:

      General and administrative expenses include administrative personnel related salary and benefit expenses, cost of facilities, insurance, travel, legal support, property and equipment depreciation, amortization of stock options and warrants, and amortization of debt discounts and beneficial conversion costs associated with our debt financing.

Year Ended December 31, 2004 Compared to the Year Ended December 31, 2005

      Total Revenues. Revenues decreased 68.2% from $390,000 for the year ended December 31, 2004 to $124,000 for the year ended December 31, 2005. The research material sales component of revenue decreased 27.0% from $52,000 for the year ended December 31, 2004 to $38,000 for the year ended December 31, 2005 as we ceased research materials sales effective December 31, 2005. Research grant and other income decreased 74.5% from $338,000 for the year ended December 31, 2004 to $86,000 for the year ended December 31, 2005. This decrease in grant revenue was attributable to the cessation of two research grant awards in the first quarter of 2005.

      Cost of Research Material Sales. Cost of research material sales decreased 70.0% from $40,000 for the year ended December 31, 2004 to $12,000 for the year ended December 31, 2005. This decrease was due to lower direct sales and related direct labor costs. We ceased research materials sales effective December 31, 2005.

      Research and Development Expense. Research and development expense increased 23.4% from $3.6 million for the year ended December 31, 2004 to $4.5 million for the year ended December 31, 2005. This increase was primarily due to increased expenditures for consultants in preparation of regulatory filings with the FDA and entering into a service agreement for drug manufacturing, regulatory advice, research and development related to preclinical activities.

      General and Administrative Expense. General and administrative expense decreased 29.5% from $2.8 million for the year ended December 31, 2004 to $2.0 million for the year ended December 31, 2005. This decrease was primarily due to the elimination of two positions in 2005 and continuing to focus on the October 9, 2002 directive from our Board of Directors to initiate immediate actions to conserve cash.

      Depreciation and Amortization. Depreciation and amortization decreased 52.2% from $132,000 for the year ended December 31, 2004 to $63,000 for the year ended December 31, 2005. This decrease was primarily due to our continued disposal of all equipment and facilities heretofore necessary for proof-of-principle research and development as we moved forward in focusing on our primary business strategy of recapitalizing the company in anticipation of re-initiating our two clinical trial vaccine prospects.

      Asset Impairment Loss. Asset disposal costs of $130,000 for the year ended December 31, 2004 primarily relates to the write-off of unused property and equipment associated with our vacating a 14,000 square foot laboratory and administrative space and entering a sublease for approximately 5,047 square feet of space in 2005 where such assets were not to be utilized.

      Total Other Income (Expense), Net. Interest expense increased 99.2% from $1.8 million for the year ended December 31, 2004 to $3.5 million for the year ended December 31, 2005. This increase was due primarily to recognizing interest expense relative to the debt discount and interest accretion associated with

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the November 13, 2003 secured convertible promissory note and warrant financing and the loans from Toucan Capital and Toucan Partners. Interest income increased from $3,000 for the year ended December 31, 2004 to $5,000 for the year ended December 31, 2005. This increase was primarily due to having comparable higher average cash balances during the year ended 2005.

      Warrant valuation. Our total committed outstanding obligations for shares of common stock exceeded our authorized shares on July 30, 2004, when an additional $2.0 million loan, convertible into common stock, was received from Toucan Capital and a warrant was issued. The fair value of the warrant in excess of the authorized shares was approximately $2.8 million and was recognized as a liability on July 30, 2004. This liability must be revalued at each reporting date with any change in valuation included in other income/(expense) until such time as enough shares are authorized to cover all potentially convertible instruments. Our stock price had declined from $0.04 at July 30, 2004 to $0.03 at September 30, 2004, resulting in a warrant valuation gain of approximately $717,000 recognized for the quarter ending September 30, 2004. Additional warrant liability of approximately $1.5 million was recognized for the respective fair market valuations of the additional loans, convertible into shares, received from Toucan Capital, with warrants, on October 22, November 10, and December 27, 2004, for the year ended December 31, 2004. The aggregate shares by which we exceeded our authorized shares were required to be re-valuated when our stockholders approved an increase in our authorized shares, from 125 million to 400 million shares, which was recorded on December 29, 2004 with the Delaware Secretary of State. The approximate $1.0 million change in fair market valuation during the fourth quarter was recognized in other income as additional expense. The aggregate warrant liability of approximately $4.7 million was reclassified to equity upon approval of the additional authorized shares on December 29, 2004. As of December 31, 2005 our total committed outstanding obligations for shares of common stock exceeded our authorized shares. We have recognized a liability totalling $604,000 representing the fair value of our obligations for shares of common stock in excess of our authorized shares. As we exceeded our authorized shares on December 31, 2005, no corresponding charges to the statement of operations were recorded for the year ended December 31, 2005.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2004

      Total Revenues. Revenues decreased 26.3% from $529,000 for the year ended December 31, 2003 to $390,000 for the year ended December 31, 2004. The research material sales component of revenue increased from $24,000 for the year ended December 31, 2003 to $52,000 for the year ended December 31, 2004. Research grant and other income decreased 33.1% from $505,000 for the year ended December 31, 2003 to $338,000 for the year ended December 31, 2004. This decrease in grant revenue was attributable to the cessation of one research grant awards in the first quarter of 2004.

      Cost of Research Material Sales. Cost of research material sales decreased 49.4% from $79,000 for the year ended December 31, 2003 to $40,000 for the year ended December 31, 2004. This decrease was due to lower direct labor costs associated with lower sales in 2004 and a decrease in direct advertising in 2004.

      Research and Development Expense. Research and development expense increased from $1.6 million for the year ended December 31, 2003 to $3.6 million for the year ended December 31, 2004. This increase was primarily due to increased expenditures for consultants in preparation of regulatory filings with the FDA and entering into a service agreement for drug manufacturing, regulatory advice, research and development related to preclinical activities.

      General and Administrative Expense. General and administrative expense decreased 29.9% from $4.1 million for the year ended December 31, 2003 to $2.8 million for the year ended December 31, 2004. This decrease was primarily due to the October 9, 2002 directive from our Board of Directors to initiate immediate actions to conserve cash and the resulting staff reductions.

      Depreciation and Amortization. Depreciation and amortization decreased 36.2% from $207,000 for the year ended December 31, 2003 to $132,000 for the year ended December 31, 2004. This decrease was primarily due to the disposal of approximately $337,000 of equipment and leasehold improvements for the year ended December 31, 2004.

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      Loss on Facility Sublease and Lease Cancellation. Lease cancellation costs of $174,000 for the year ended December 31, 2003 are associated with the June 30, 2003 termination of our primary lease at our former facility and release from future lease obligations thereunder.

      Asset Impairment Loss. Asset disposal costs decreased 85.6% from $904,000 for the year ended December 31, 2003 to $130,000 for the year ended December 31, 2004. The 2003 impairment of $904,000 was primarily related to the write-off of leasehold improvements and equipment associated with the June 30, 2003 termination of our primary lease at our previous 38,000 square foot facility and our resulting move to another facility of approximately 14,000 square feet whereby such assets were not utilized. The 2004 impairment of $130,000 reflects continued recognition of the cost associated with non or underutilized equipment at the smaller 14,000 square foot facility.

      Total Other Income (Expense), Net. Interest expense increased from $73,000 for the year ended December 31, 2003 to $1.8 million for the year ended December 31, 2004. This increase was due primarily to recognizing interest expense relative to the debt discount associated with the secured convertible promissory note and warrants debt financing. Interest income decreased 87.0% from $23,000 for the year ended December 31, 2003 compared to $3,000 for the year ended December 31, 2004. This decrease was primarily due to the decline in market interest rates and having lower average cash balances during the year ended December 31, 2004.

      Warrant valuation. Our total committed outstanding obligations for shares of common stock exceeded our authorized shares on July 30, 2004 when an additional $2.0 million loan, convertible into common stock, was received from Toucan Capital and a warrant was issued. The fair value of the warrant in excess of the authorized shares was approximately $2.8 million and was recognized as a liability on July 30, 2004. This liability must be revalued at each reporting date with any change in valuation included in other income/(expense) until such time as enough shares are authorized to cover all potentially convertible instruments. Our stock price had declined from $0.04 at July 30, 2004 to $0.03 at September 30, 2004 resulting in a warrant valuation gain of approximately $717,000 recognized for the quarter ending September 30, 2004. Additional warrant liability of approximately $1.5 million was recognized for the respective fair market valuations of the additional loans, convertible into shares, received from Toucan Capital, with warrants, on October 22, November 10, and December 27, 2004, for the year ended December 31, 2004. The aggregate shares by which we exceeded our authorized shares were required to be re-valuated when our stockholders approved an increase in our authorized shares, from 125 million to 400 million shares, which was recorded on December 29, 2004 with the Delaware Secretary of State. The approximate $1.0 million change in fair market valuation during the fourth quarter was recognized in other income as additional expense resulting in a net increase in other income/(expense) of approximately $368,000 for the year ended December 31, 2004. The aggregate warrant liability of approximately $4.7 million was reclassified to equity upon approval of the additional authorized shares on December 29, 2004.

      Gain on Sale of Intellectual Property. The $816,000 gain was realized on the sale of royalty rights for the year ended December 31, 2003 and was negotiated based on the expected discounted net present value of the future 2% royalty obligation under that certain Assignment and License Agreement dated December 9, 2002 with Medarex and was received in cash on July 1, 2003.

Liquidity and Capital Resources

General Discussion

      We continue to face resource constraints in our operations. However, based on our December 31, 2005 payables balance we have only one significant unpaid invoice remaining outstanding as of April 12, 2006: approximately $1.9 million (inclusive of estimated late payment fees of approximately $271,700), owed to the contract manufacturer of our DCVax^® product candidate, Cognate Therapeutics, Inc., a related party, as disclosed on our balance sheet. We also regularly incur large legal bills for patent filing and prosecution, and our payment of such invoices has often been 30-60 days in arrears. As of December 31, 2005, we had unpaid invoices of approximately $220,000 for general legal and for patent

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related legal fees. We have continued to incur charges from our contract manufacturer and legal counsel during 2006.

      In addition, as of March 31, 2006, we have (i) a net assessed tax liability to the State of Washington of approximately $344,000 with payment of the assessment due on demand, (ii) capital lease obligations of approximately $9,500, (iii) approximately $90,000 of earned and accrued but unpaid vacation and sick pay due employees, and (iv) an estimated liability due to Toucan Capital of approximately $700,000 for their incurred costs in connection with our recapitalization.

      Since 2004, we have undergone a significant recapitalization, pursuant to which Toucan Capital and Toucan Partners loaned us an aggregate of $7.7 million and purchased $1.3 million in equity. These funds enabled us to continue to operate, and advance the our programs, while attempting to raise additional capital. On March 30, 2006, we entered into the PIPE Financing with unrelated investors pursuant to which we raised aggregate gross proceeds of approximately $5.5 million.

      Toucan Capital has indicated in its Schedule 13D/ A, filed with the SEC on November 23, 2005, that it does not presently intend to provide further funding to us, although the Schedule 13D/ A discusses the possibility that future investments may be made by Toucan Partners and potentially other affiliates of Toucan Capital. It is uncertain whether Toucan Partners or any other entity affiliated with Toucan Capital will invest additional funds in the company.

      Gains on the sale of previously impaired equipment to third parties aggregated $97,000 for the year ended December 31, 2005. Our remaining assets are comprised of office furniture and fixtures. We do not expect to make further assets available for sale.

Contingency

      We received a pro-rata tax assessment of $492,000 on October 21, 2003 related to the abandonment of tenant improvements at a prior facility on which use tax payments to the State of Washington had been deferred, including the disposal and impairment of previously qualified tax deferred equipment. We appealed this assessment and were granted a partial reduction in the assessment on July 8, 2005. We filed an addendum to our appeal petition on December 2, 2005. The net assessment, through December 31, 2005, of approximately $336,000, inclusive of accrued interest, is being carried as an estimated liability on our balance sheet and is included in general and administrative expense. Final review of the addendum to the petition is expected to take several additional months. We may not be successful in further reducing this assessment and the assessment is subject to payment on demand.

      In February 2004, we filed a refund request of approximately $175,000 related to certain other state taxes previously paid to the State of Washington’s Department of Revenue. The finalization of this refund request is not expected until mid 2006. We may not be successful in our efforts to receive a tax refund.

      We have issued three promissory notes to Toucan Partners, pursuant to which it has loaned us an aggregate of $950,000. Toucan Partners has the right, as of April 17, 2006, to convert principal and interest on the above loans to acquire up to 24.5 million shares of our capital stock and to exercise warrants have the right to acquire up to an aggregate of 9.5 million shares upon exercise of warrants having a contractual life of 7 years. Including the 32.5 million shares of Series A Preferred Stock and the 4.82 million shares of Series A-1 Preferred Stock held by Toucan Capital, Toucan Capital and Toucan Partners collectively have beneficial ownership of approximately 394.6 million shares of our common stock, which represents beneficial ownership of approximately 86% as of April 17, 2006. Toucan Capital and Toucan Partners each has a right of first refusal to participate in our future issuances of debt or equity securities.

      As of April 12, 2006, we have approximately $3.5 million in cash. We believe, based on recurring and projected operating and associated financing costs, our cash will be sufficient to fund our operations for the next twelve months. For operating capital after that date we intend to seek additional funds from Toucan

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Capital and its affiliates or other third parties. Toucan Capital, its affiliates or other third parties are not obligated to provide this funding to us.

      Any additional financing with Toucan Capital and its affiliates, or any other third party, is likely to be dilutive to stockholders and any debt financing, if available, may include additional restrictive covenants. If we are unable to obtain significant additional capital in the near-term, we may cease operations at anytime. We do not believe that our assets would be sufficient to satisfy the claims of all of our creditors in full. Therefore, if we were to pursue a liquidation it is highly unlikely that any proceeds would be received by our stockholders.

      Our financial statements as of and for the years ended December 31, 2004 and December 31, 2005 were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. Nevertheless, we have experienced recurring losses from operations since inception, have a working capital deficit of $11.5 million, and have a deficit accumulated during the development stage of $82.7 million, as of December 31, 2005, that raises substantial doubt about our ability to continue as a going concern.

      Our independent auditors have indicated in their report on our financial statements included with this annual report on Form 10-K, that there is substantial doubt about our ability to continue as a going concern. We need to raise significant additional funding to continue our operations, conduct research and development activities, pre-clinical studies and clinical trials necessary to bring our product candidates to market. However, additional funding may not be available on terms acceptable to us or at all. The alternative of issuing additional equity or convertible debt securities also may not be available and, in any event, would result in additional dilution to our stockholders.

Sources of Cash

Federal Grants

      On April 8, 2003, we were awarded an NIH cancer research grant. The total first year grant award was approximately $318,000, was earned under the grant, and was recognized in revenue through the year ended December 31, 2003. The total award for fiscal 2004-2005 was approximately $328,000, comprised of approximately $198,000 authorized for direct grant research expenditures and approximately $130,000 authorized for use to cover our facilities and administrative overhead costs. This grant’s remaining $35,000 award was recognized in January 2005. This grant ended January 31, 2005.

      Effective September 10, 2004, we were awarded a small business innovation research grant. The grant award for $100,000 had an award period that commenced September 10, 2004. Approximately $59,000 was earned under the grant and recognized in revenue through the year ended December 31, 2004. The remaining $41,000 of the grant’s aggregate award was recognized through the three months ended March 31, 2005. This grant ended on September 9, 2005.

Research Reagent Sales

      On April 21, 2003, we announced our entry into the research reagents market. We earned approximately $38,000 in revenue for the year ended December 31, 2005 from the manufacture and sale of research materials. We ceased selling research materials on December 31, 2005.

License Fees

      Our effort to license certain rights, title, and interest to technology relating to the worldwide use of specific antibodies for the diagnostic immunohistochemical market resulted in the July 1, 2003 license agreement with DakoCytomation California, Inc. with the payment of a one-time $25,000 license fee and future non-refundable minimum annual royalty payments of $10,000 credited against any royalty payments made to us. The $10,000 July 2005 annual royalty payment was recognized as revenue on August 1, 2005 while a $585 royalty payment on certain product sales was recognized as revenue on July 25, 2005.

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Management Loans

      On November 13, 2003, we borrowed an aggregate of $335,000 from certain members of our current and former management. The notes accrue interest at an annual rate equal to the prime rate plus 2% and were originally (i) payable by July 12, 2005 and (ii) secured by substantially all of our assets not otherwise collateralized. We repaid $50,000, including interest of $1,674, on June 1, 2004 and repaid an additional $50,000, including interest of $4,497, on February 24, 2005. The notes were amended on April 26, 2004, April 12, 2005, June 16, 2005 and July 26, 2005 to extend the maturity dates. Two of the remaining notes, in the aggregate amount of $224,000, were amended on March 9, 2006 to extend the maturity date of the notes to June 15, 2006. The third remaining note, plus accrued interest, in the aggregate amount of approximately $13,000, was repaid in full on March 24, 2006. As part of the management loans, the lenders were issued warrants initially exercisable to acquire an aggregate of 3.7 million shares of our common stock, expiring November 2008, subject to certain anti-dilution adjustments, at an exercise price to be determined as follows: (i) in the event that we completed an offering of our common stock generating gross proceeds to us of at least $1 million, then the price per share paid by investors in that offering; or (ii) if we did not complete such an offering, then $0.18, which was the closing price of our common stock on the date of the financing. In connection with our April 26, 2004 recapitalization agreement, these warrants were amended to remove the anti-dilution provisions and set the warrant exercise price at the lesser of (i) $0.10 per share or (ii) a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by us of convertible preferred stock as contemplated by the recapitalization agreement but not less than $0.04 per share. On April 17, 2006, the remaining outstanding principal and accrued interest on these management loans was converted into an aggregate of 2,687,719 shares of our common stock and the holders of these warrants exercised their warrants on March 27, 2006, on a net exercise basis, pursuant to which we issued them an aggregate of 2,320,148 shares of common Stock.

Toucan Capital Loans

      From February 2, 2004 through December 31, 2005, we issued thirteen promissory notes to Toucan Capital, pursuant to which Toucan Capital loaned us an aggregate of $6.75 million. As discussed above, Toucan Capital converted all of these promissory notes, including accrued interest, into shares of our Series A-1 Preferred Stock in April 2006.

Toucan Capital Series A Cumulative Convertible Preferred Stock

      On January 26, 2005, Toucan Capital purchased 32.5 million shares of our newly designated series A preferred stock at a purchase price of $0.04 per share, for an purchase price of $1.276 million, net of issue related costs of approximately $24,000.

Toucan Partners Loans

      From November 14, 2005 through March 9, 2006, we issued three promissory notes to Toucan Partners, LLC, an affiliate of Toucan Capital, pursuant to which Toucan Partners has loaned us an aggregate of $950,000. Payment is due under the notes upon written demand on or after the first anniversary of the respective note. Interest accrues at 10% per annum, compounded annually, on a 365-day year basis. As of April 17, 2006, these notes, principal plus accrued interest, are convertible into 24.4 million shares of our common stock at the election of Toucan Partners.

PIPE Financing

      On March 30, 2006, we entered into a securities purchase agreement (the “Purchase Agreement”) with a group of accredited investors pursuant to which we sold an aggregate of 39,467,891 shares of our common stock, at a price of $0.14 per share, and issued for no additional consideration, warrants to

40

purchase up to an aggregate of 19,733,945 shares of our common stock. The transaction closed on April 4, 2006 and we received gross proceeds of $5,525,505, before offering expenses.

      The warrants expire five years after issuance, and are initially exercisable at a price of $0.14 per share, subject to adjustments under certain circumstances including certain issuances or deemed issuances of shares below $0.14 per share.

      Under the Purchase Agreement, we have agreed to register for resale under the Securities Act both the shares and the shares underlying the warrants (the “Warrant Shares”). Under the terms of the Purchase Agreement, we are required to file a registration statement with the SEC within 45 days after closing. We also agreed to other customary obligations regarding registration, including matters relating to indemnification, maintenance of the registration statement, payment of expenses, and compliance with state “blue sky” laws. We may be liable for liquidated damages to holders of the shares and the Warrant Shares (a) if the registration statement is not filed on or prior to May 19, 2006; (b) if the registration statement is not declared effective by the SEC on or prior to July 3, 2006 (subject to potential extension under certain circumstances); or (c) if the registration statement (after being declared effective) ceases to be effective in a manner, and for a period of time, that violates our obligations under the Purchase Agreement. The amount of the liquidated damages is, in aggregate, one percent (1%) per month of the aggregate purchase price of the shares, subject to a cap of ten percent (10%) of the aggregate purchase price of the shares.

Uses of Cash

      We used $4.4 million in cash for operating activities during the year ended December 31, 2004, compared to $4.2 million for the year ended December 31, 2005. The decrease of approximately 5.4% reflects a leveling off of expenditures and business activity associated with identifying future clinical trial sites, research and development expenditures related to preclinical activities, and gradual re-implementation of the manufacturing process for our two DCVax^® clinical trial vaccines.

      We generated $161,000 in cash from investing activities for the year ended December 31, 2004 compared to $50,000 during the year ended December 31, 2005. The cash provided during 2005 is net of the aggregate $97,000 of proceeds from the sale of equipment and supplies and $43,000 in expenditures for computer equipment.

      We generated $4.3 million in cash from financing activities for the year ended December 31, 2004 primarily from the loans from Toucan Capital. We generated $4.2 million in cash from financing activities during the year ended December 31, 2005 consisting of (i) the January 26, 2005 sale of our newly designated series A preferred stock to Toucan Capital at a purchase price of $0.04 per share, for a net purchase price of $1.276 million, net of issue related costs of approximately $24,000, (ii) loans in the aggregate amount of $2.4 million from Toucan Capital, and (iii) loans in the aggregate amount of $650,000 from Toucan Partners.

Overview of Contractual Obligations

      We remain primarily liable for the performance of the provisions and obligations under our original June 18, 2003 lease, with Benaroya Capital Company, L.L.C. for 14,022 square feet of space at a building located in Bothell, Washington. This lease was for a term of 39 months commencing July 1, 2003 and terminating September 30, 2006. Effective December 15, 2004, with concurrence from Benaroya, we assigned this lease to MediQuest Therapeutics, Inc. Simultaneously, we entered into a sublease with MediQuest for approximately 5,047 square feet of administrative floor space. Our sublease was for a term of 12 months commencing December 15, 2004 and terminating December 31, 2005.

      On November 4, 2005, we entered into a lease agreement with The International Union of Operating Engineers Local 302 for 2,325 square feet of administrative space in a building located in Bothell, Washington. This lease is for a term of 12 months commencing January 1, 2006 and terminating December 31, 2006.

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      The amounts below scheduled below are as of December 31, 2005 and reflect our current lease obligation as well as the potential lease liability remaining with Benaroya in the event we must cure any breach of the lease contract.

Tabular Disclosure of Contractual Obligations

As of December 31, 2005 (In thousands)

				Payments Due by Period
				Less
				Than						More than
Contractual Obligation		Total		1 Year		1-3 Years		3-5 Years		5 Years
Loans(1)		$	7,400	$	7,400	$	—	$	—	$	—
Contract Manufacturing Agreement(2)			5,027		5,027		—		—		—
Capital Lease Obligations			13		10		3		—		—
Operating Lease Obligations			324		324		—		—		—
	Total	$	12,764	$	12,761	$	3	$	—	$	—

(1)	An aggregate of $7.4 million of these loans represents amounts payable to Toucan Capital pursuant to a series of convertible promissory notes which, subsequent to December 31, 2005, have been converted into shares of Series A-1 Preferred Stock.
(2)	On July 30, 2004, we entered an agreement with Cognate Therapeutics, Inc. The agreement includes a penalty of $2 million if cancelled after one year as well as payment for all services performed in winding down any ongoing activities.

      We have also entered into other collaborative arrangements under which we may be obligated to pay royalties or milestone payments if product development is successful. We do not anticipate that the aggregate amount of any royalty or milestone obligations under these arrangements will be material.

Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS 123R, Share-Based Payment (Revised 2004). SFAS 123R establishes standards for the accounting for transactions in which an entity receives employee services in exchange for the entity’s equity instruments or liabilities that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R eliminates the ability to account for share-based compensation using APB 25 and generally requires that such transactions be accounted for using a fair value method. The provisions of this statement are effective for financial statements issued for fiscal years beginning after June 15, 2005 and will become effective for the Company beginning with the first quarter of 2006. We will adopt SFAS 123R using the modified prospective method with no restatement and will record the related stock compensation expense commencing January 1, 2006 with respect to the stock options outstanding December 31, 2005. The impact that the adoption of this statement will have on the Company’s financial position and results of operations will be determined by share-based payments granted in future periods, as well as the fair value model and assumptions the Company will choose, which have not been finalized yet.

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets — an Amendment of APB Opinion No. 29.” This statement amends APB 29 to eliminate an exception to the fair value measurement principle for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 and were effective for the Company beginning in the third quarter of fiscal 2005. The adoption of this accounting principle did not have a significant impact on our financial position or results of operations.

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      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB 20 cumulative effect accounting with retroactive restatement of comparative financial statements. It applies to all voluntary changes in accounting principle and defines “retrospective application” to differentiate it from restatements due to incorrect accounting. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and will become effective for the Company in 2006. The adoption of this accounting principle is not expected to have a significant impact on our financial position or results of operations.

      In June 2005, the FASB issued final FASB Staff Position FAS No. 143-1, “Accounting for Electronic Equipment Waste Obligations.” The statement addresses obligations associated with the European Union’s Directive on Waste Electrical and Electronic Equipment (the Directive). The Directive requires EU-member countries to adopt legislation to regulate the collection, treatment, recovery and environmentally sound disposal of electrical and electronic waste equipment. It distinguishes between products put on the market after August 15, 2005 (new waste) and products put on the market before that date (historical waste). The FSP addresses historical waste and directs companies to apply the provisions of SFAS 143, “Accounting for Asset Retirement Obligations,” to the obligation associated with historical waste. The FSP is effective for the first reporting period ending after June 8, 2005, or the date of adoption of the law by the applicable EU-member country, and became effective for the Company in the second quarter of 2005. This accounting principle did not have a significant impact on our financial position or results of operations. New waste will also be accounted for under SFAS 143, and the accounting for new waste is not expected to have a significant impact on our financial position or results of operations.

      In November 2005, the FASB issued final FASB Staff Position FAS No. 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The FSP provides an alternative method of calculating excess tax benefits (the APIC pool) from the method defined in FAS123R for share-based payments. A one-time election to adopt the transition method in this FSP is available to those entities adopting FAS 123R using either the modified retrospective or modified prospective method. Up to one year from the initial adoption of FAS 123R or effective date of the FSP is provided to make this one-time election. However, until an entity makes its election, it must follow the guidance in FAS 123R. FSP 123R-3 is effective upon initial adoption of FAS 123R and will become effective for the Company in the first quarter of 2006. We are currently evaluating the potential impact of calculating the APIC pool with this alternative method and have not determined which method we will adopt, nor the expected impact on our financial position or results of operations.

      In September 2005, the EITF reached consensus on Issue No. 05-08, “Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature.” EITF 05-08 is effective for financial statements beginning in the first quarter of 2006. The adoption of EITF 05-08 is not expected to have a significant impact on the Company’s financial position or results of operations.

      In September 2005, the EITF reached consensus on Issue No. 05-07, “Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues.” EITF 05-07 is effective for future modifications of debt instruments beginning in the first quarter of 2006. The adoption of EITF 05-07 is not expected to have a significant impact on the Company’s financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      Our exposure to market risk is presently limited to the interest rate sensitivity of our cash which is affected by changes in the general level of U.S. interest rates. We are exposed to interest rate changes primarily as a result of our investment activities. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. To minimize risk, we maintain our cash in interest-bearing instruments, primarily money market funds. Due to the short-term nature of our cash, we believe that our exposure to market interest rate fluctuations is minimal. A hypothetical 10% change in short-term interest rates from those in effect at

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December 31, 2005 would not have a significant impact on our financial position or our expected results of operations. Our interest rate risk management objective with respect to our borrowings is to limit the impact of interest rate changes on earnings and cash flows. Except for our loans from management, our debt is carried at a fixed 10% rate of interest. We do not have any foreign currency or other derivative financial instruments.

Item 8. Financial Statements and Supplementary Data

Financial Statements

      Our financial statements required by this item are submitted as a separate section of this Form 10-K. See Item 15(a)(1) for a listing of financial statements provided in the section titled “Financial Statements.”

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      None.

Item 9A. Controls and Procedures

     (a) Evaluation of disclosure controls, procedures, and internal controls

      Our President, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), has concluded that, as of December 31, 2005 our disclosure controls and procedures contained significant internal control weaknesses that, in the aggregate, represent material weaknesses.

Material Weakness Identified

      In connection with the preparation of our financial statements for the year ended December 31, 2005, certain significant internal control deficiencies became evident to management that, in the aggregate, represent material weaknesses, including,

      (i) lack of independent directors for our audit committee;

      (ii) lack of an audit committee financial expert;

      (iii) insufficient personnel in our finance/accounting functions;

      (iv) insufficient segregation of duties; and

      (v) insufficient corporate governance policies.

      As part of the communications by Peterson Sullivan, PLLC, or Peterson Sullivan, with our audit committee with respect to Peterson Sullivan’s audit procedures for fiscal 2005, Peterson Sullivan informed the audit committee that these deficiencies constituted material weaknesses, as defined by Auditing Standard No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements,” established by the Public Company Accounting Oversight Board, or PCAOB.

      In accordance with Section 404 of the Sarbanes-Oxley Act of 2002, we intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2006 assessment of the effectiveness of our internal control over financial reporting.

Item 9B.     Other Information

      On April 17, 2006, certain members of management elected to convert the outstanding principal and accrued interest on prior loans made by such individuals to us for an aggregate of 2,677,103 million shares

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of Common Stock, in accordance with the terms of their promissory notes which were previously outstanding. The details of the conversions are set forth in the table below:

Name	Principal		Interest		Total		Conversion Price		Shares Issued
Alton Boynton	$	183,000	$	36,577.16	$	219,577.16	$	0.10		2,195,771
Marnix Bosch	$	41,000	$	8,194.88	$	49,194.88	$	0.10		491,948

      In March, 2006, certain members of management elected to exercise warrants for common stock on a net exercise basis, pursuant to the terms of the warrants. The details of the exercises are set forth below:

Name	Warrant Shares(1)		Exercise Price		Net Shares(2)
Alton Boynton		2,033,333	$	0.04		1,895,478
Marnix Bosch		455,555	$	0.04		424,668

(1)	Represents the maximum number of shares for which the warrants were exercisable on a cash basis.
(2)	Represents the number of shares received on the exercise of the warrants pursuant to the net exercise of the warrants.

      On April 17, 2006, Toucan Capital elected to convert all of its promissory notes into shares of our Series A-1 Preferred Stock pursuant to the terms of these promissory notes which were previously outstanding. The Series A-1 Preferred Stock is substantially identical to the Series A Preferred Stock, except that (i) the issuance price and liquidation preference of the Series A-1 Preferred Stock are $1.60 per share (as opposed to $0.04 per share for the Series A Preferred Stock), and (ii) each share of Series A-1 Preferred Stock is convertible into 40 shares of Common Stock (as opposed to one share of Common Stock in the case of the Series A Preferred Stock). The foregoing differences result in the Series A-1 Preferred Stock being economically equivalent to the Series A Preferred Stock.

      A breakdown of Toucan Capital’s note conversions on April 17, 2006 is set forth below:

Loan Date		Principal		Accrued Interest(1)		Conversion Shares(2)
		(In thousands)		(In thousands)		(In thousands)
02/02/04		$	50	$	12		1,554
03/01/04			50		11		1,532
04/26/04			500		104		15,092
06/11/04			500		96		14,912
07/30/04			2,000		356		58,889
10/22/04			500		76		14,403
11/10/04			500		74		14,339
12/27/04			250		33		7,079
04/12/05			450		46		12,394
05/13/05			450		42		12,294
06/16/05			500		41		13,539
07/26/05			500		36		13,399
09/07/05			500		30		13,249
	Total	$	6,750	$	957		192,675

(1)	Interest accrued at 10% per annum, based on a 365-day basis compounded annually from the respective original issuance dates of the notes.
(2)	The notes converted into Series A-1 Preferred Stock at a conversion price of $1.60 per share. Conversion shares presented in the table above represent shares of common stock issuable upon conversion of the Series A-1 Preferred Stock.

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      In connection with Toucan Partner’s consenting to the PIPE Financing described above, we amended the second and third Toucan Partners notes to conform them to the same terms and conditions as the series of Toucan Capital notes and the first Toucan Partners note. The amendments of the Toucan Partners second and third notes made them convertible into equity on the same terms and conditions as the other Toucan Capital and Toucan Partners notes, and provided for issuance of warrants to purchase an aggregate of 9.5 million shares of capital stock at an exercise price of $0.04 per share.

      All of the securities described in this Item 9B were issued pursuant to exemptions from registration under the Securities Act provided by Section 3(a)(9) in exchange for outstanding securities of the company and for no other remuneration.

      The authorization and issuance on April 17, 2006, of the Series A-1 Preferred Stock described above impacts the rights of the holders of our common stock in that (i) the certificate of designations of Series A-1 Preferred Stock prohibits us from issuing dividends or making distributions to the holders of our common stock for so long as any shares of Series A-1 Preferred Stock are outstanding unless all accrued and unpaid dividends of the Series A-1 Preferred Stock are paid and an equivalent dividend or distribution is paid on each outstanding share of Series A-1 Preferred Stock; and (ii) grants the holders of Series A-1 Preferred Stock a liquidation preference equal to their original purchase price plus all accrued but unpaid dividends in the event of our acquisition, dissolution, liquidation or winding up. In addition, the holders of Series A-1 Preferred Stock generally vote together with the holders of common stock on an as-converted basis.

      On April 17, 2006, our board of directors adopted a Certificate of Designations, Preferences and Rights (the “Certificate”) of the Series A-1 Preferred Stock and we filed the Certificate with the Delaware Secretary of State on April 17, 2006. The Certificate provides, among other things, that the Series A-1 Preferred Stock (i) is entitled to cumulative dividends at the rate of 10% per year; (ii) is entitled to a liquidation preference equal to its initial purchase price plus all accrued and unpaid dividends; (iii) has a preference over the common stock, and is pari passu with the Series A Preferred Stock, with respect to dividends and distributions; (iv) is entitled to participate on an as-converted basis with the common stock and Series A Preferred Stock on any distributions after the payment of any preferential amounts to the Series A-1 Preferred Stock and the Series A Preferred Stock; (v) votes on an as-converted basis with the common stock and the Series A Preferred Stock on matters submitted to common stockholders for approval and as a separate class on certain other material matters; and (vi) is convertible into common stock on the basis of 40 shares of common stock per share of Series A-1 Preferred Stock (subject to adjustment in the event of stock dividends, stock splits, reverse stock splits, recapitalizations, etc. and in the event of certain dilutive issuances by us). The Certificate also provides that the consent of the holders of a majority of the Series A-1 Preferred Stock is required in the event that we elect to

46

undertake certain significant business actions. The Certificate is filed as an exhibit to this annual report on Form 10-K and the foregoing description is qualified in its entirety by reference to the full text of the Certificate.

      On April 17, 2006, our board of directors adopted a Certificate of Amendment to the Certificate of Designations, Preferences and Rights (the “Amended Certificate”) of the Series A Preferred Stock and we filed the Amended Certificate with the Delaware Secretary of State on April 17, 2006. The Amended Certificate was adopted in order to conform certain rights, preferences and privileges of the Series A Preferred Stock to accommodate the issuance of the Series A-1 Preferred Stock described above. The Amended Certificate provides, among other things, that the Series A Preferred Stock (i) is pari passu with the Series A-1 Preferred Stock with respect to dividends and distributions (ii) is entitled to participate on an as-converted basis with the Common Stock and Series A-1 Preferred Stock on any distributions after the payment of any preferential amounts to the Series A Preferred Stock and the Series A-1 Preferred Stock; and (iii) votes on an as-converted basis with the Common Stock and the Series A-1 Preferred Stock on matters submitted to common stockholders for approval and as a separate class on certain other material matters.

      In conjunction with the conversion of Toucan Capital’s notes into Series A-1 Preferred Stock, on April 17, 2006, we entered into an Amended and Restated Investor Rights Agreement (the “IRA”) with Toucan Capital. The IRA implements the provisions of the binding term sheet we executed on April 26, 2004, under which Toucan Capital and other investors, such as Toucan Partners, who are holders of Series A or Series A-1 Preferred Stock receive registration rights in respect of the shares of common stock issuable upon conversion of the Series A Preferred Stock and Series A-1 Preferred Stock held by such investors, as well as the shares of common stock underlying the warrants held by such investors.

PART III

      We will file a definitive Information Statement for our 2006 Annual Meeting of Stockholders, or the 2006 Information Statement, with the SEC, pursuant to Regulation 14C, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2006 Information Statement that specifically address the items set forth herein are incorporated by reference.

Item 10. Directors and Executive Officers of the Registrant

      The information required by Item 10 is hereby incorporated by reference from our 2006 Information Statement under the captions “Election of Directors,” “Certain Additional Information about our Management,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Code of Ethics.”

Item 11. Executive Compensation

      The information required by Item 11 is hereby incorporated by reference from our 2006 Information Statement under the caption “Compensation of Directors and Executive Officers.”

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The information required by Item 12 is hereby incorporated by reference from our 2006 Information Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”

Item 13. Certain Relationships and Related Transactions

      The information required by Item 13 is hereby incorporated by reference from our 2006 Information Statement under the caption “Certain Relationships and Related Transactions.”

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Item 14. Principal Accountant Fees and Services

      The information required by Item 14 is hereby incorporated by reference from our 2006 Information Statement under the caption “Independent Auditor Firm Fees.”

Item 15. Exhibits, Financial Statement Schedules

      (a)(1) Index to Financial Statements and Independent Auditors Report.

      The financial statements required by this item are submitted in a separate section as indicated below.

	Page
Report of Peterson Sullivan, PLLC, Independent Registered Public Accounting Firm		49
Report of KPMG LLP, Independent Registered Public Accounting firm		50
Balance Sheets		51
Statements of Operations		52
Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss		53
Statements of Cash Flows		57
Notes to Financial Statements		60

(2) Index to Financial Statement Schedules

      All financial statement schedules are omitted since the required information is not applicable, not required or the required information is included in the financial statements or notes thereto.

(3) Exhibits

See Exhibit Index on page 84.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Northwest Biotherapeutics, Inc.

Bothell, Washington

We have audited the accompanying balance sheets of Northwest Biotherapeutics, Inc. (a development stage company) as of December 31, 2005 and 2004, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended December 31, 2005 and 2004, and for the period from March 18, 1996 (date of inception) to December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The Company’s financial statements for the period from March 18, 1996 (date of inception) through December 31, 2003, were audited by other auditors whose report, dated March 12, 2004, except as to Notes 1 and 12, which were as of April 26, 2004, expressed an unqualified opinion on those statements and included an explanatory paragraph that referred to substantial doubt about the Company’s ability to continue as a going concern. The financial statements for the period from March 18, 1996 (date of inception) through December 31, 2003, reflect a net loss of $64,245 (in thousands) of the accumulated deficit as of December 31, 2005. The other auditors’ report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such prior periods, is based solely on the report of such other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Northwest Biotherapeutics, Inc. (a development stage company) as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years ended December 31, 2005 and 2004, and for the period from March 18, 1996 (date of inception) to December 31, 2005, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has experienced recurring losses from operations since inception, has a working capital deficit, and has a deficit accumulated during the development stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Peterson Sullivan PLLC

January 25, 2006, except with respect to the subsequent events referred to in Note 13,
the date for which is March 30, 2006

Seattle, Washington

49

Report of Independent Registered Public Accounting Firm

The Board of Directors

Northwest Biotherapeutics, Inc.:

      We have audited the accompanying statements of operations, stockholders’ equity (deficit) and comprehensive loss, and cash flows for the year ended December 31, 2003 and for the period from March 18, 1996 (inception) through December 31, 2003 (which period doesn’t appear herein) of Northwest Biotherapeutics, Inc. (a development stage company) (Company). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the results of Northwest Biotherapeutics, Inc.’s (a development stage company) operations and its cash flows for the year ended December 31, 2003 and the period from March 18, 1996 (inception) through December 31, 2003, in conformity with U.S. generally accepted accounting principles.

      The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the financial statements, the Company has experienced recurring losses from operations, has a working capital deficit and has a deficit accumulated during the development stage which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KPMG LLP

Seattle, Washington

March 12, 2004, except as to note 2, which is as of April 26, 2004

50

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

BALANCE SHEETS

					December 31,			December 31,
					2004			2005
					(In thousands)
ASSETS
Current assets:
	Cash				$	248		$	352
	Accounts receivable					11			17
	Accounts receivable, related party					—			58
	Prepaid expenses and other current assets					151			117
				Total current assets		410			544
Property and equipment:
	Leasehold improvements					69			—
	Laboratory equipment					139			100
	Office furniture and other equipment					104			96
						312			196
	Less accumulated depreciation and amortization					(194	)		(143	)
		Property and equipment, net				118			53
		Restricted cash				30			31
		Deposit and other non-current assets				—			3
				Total assets	$	558		$	631
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Note payable to related parties, net				$	3,226		$	6,683
	Current portion of capital lease obligations					38			10
	Accounts payable					469			443
	Accounts payable, related party					984			3,353
	Accrued expenses					201			117
	Accrued expense, tax liability					494			336
	Accrued expense, related party					316			500
	Common stock warrant liability					—			604
	Deferred grant revenue					35			—
			Total current liabilities			5,763			12,046
Long-term liabilities:
	Capital lease obligations, net of current portion					12			3
			Total liabilities			5,775			12,049
Stockholders’ equity:
	Preferred stock, $0.001 par value; 100,000,000 shares authorized and zero and 32,500,000 shares issued and outstanding at December 31, 2004 and 2005					—			33
	Common stock, $0.001 par value; 300,000,000 shares authorized and 19,028,779 and 19,078,048 shares issued and outstanding at December 31, 2004 and 2005, respectively					19			19
	Additional paid-in capital					67,524			71,220
	Deferred compensation					(7	)		—
	Deficit accumulated during the development stage					(72,753	)		(82,690	)
			Total stockholders’ equity			(5,217	)		(11,418	)
				Total liabilities and stockholders’ equity	$	558		$	631

See accompanying notes to condensed financial statements.

51

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

												Period from
												March 18, 1996
			Years Ended December 31,									(Inception) to
												December 31,
			2003			2004			2005			2005
			(In thousands except per share
			data)
Revenues:
	Research materials sales		$	24		$	52		$	38		$	450
	Contract research and development from related parties			—			—			—			1,128
	Research grants and other			505			338			86			1,061
		Total revenues		529			390			124			2,639
Operating costs and expenses:
	Cost of research material sales			79			40			12			382
	Research and development			1,624			3,621			4,469			32,067
	General and administrative			4,059			2,845			2,005			30,694
	Depreciation and amortization			207			132			63			2,266
	Loss on facility sublease			174			—			—			895
	Asset impairment loss			904			130			—			2,066
		Total operating costs and expenses		7,047			6,768			6,549			68,370
Loss from operations				(6,518	)		(6,378	)		(6,425	)		(65,731	)
Other income (expense):
	Warrant valuation			—			(368	)		—			(368	)
	Gain on sale of intellectual property to Medarex			816			—			—			3,656
	Interest expense			(73	)		(1,765	)		(3,517	)		(13,137	)
	Interest income			23			3			5			736
		Net loss		(5,752	)		(8,508	)		(9,937	)		(74,844	)
Accretion of Series A preferred stock mandatory redemption obligation				—			—			—			(1,872	)
Series A preferred stock redemption fee				—			—			—			(1,700	)
Beneficial conversion feature of Series D preferred stock				—			—			—			(4,274	)
Net loss applicable to common stockholders			$	(5,752	)	$	(8,508	)	$	(9,937	)	$	(82,690	)
Net loss per share applicable to common stockholders — basic and diluted			$	(0.30	)	$	(0.45	)	$	(0.52	)
Weighted average shares used in computing basic and diluted loss per share				18,908			19,028			19,068

See accompanying notes to financial statements.

52

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

														Deficit
														Accumulated
	Common Stock					Preferred Stock				Additional				During the			Total
										Paid-In		Deferred		Development			Stockholders’
	Shares			Amount		Shares		Amount		Capital		Compensation		Stage			Equity (Deficit)
	(In thousands)
Balances at March 18, 1996		—		$	—		—		—	$	—	$	—	$	—		$	—
Accretion of membership units mandatory redemption obligation		—			—		—		—		—		—		(106	)		(106	)
Comprehensive loss — net loss		—			—		—		—		—		—		(1,233	)		(1,233	)
Balances at December 31, 1996		—			—		—		—		—		—		(1,339	)		(1,339	)
Accretion of membership units mandatory redemption obligation		—			—		—		—		—		—		(275	)		(275	)
Comprehensive loss — net loss		—			—		—		—		—		—		(2,560	)		(2,560	)
Balances at December 31, 1997		—			—		—				—		—		(4,174	)		(4,174	)
Conversion of membership units to common stock		2,203			2		—		—		—		—		(2	)		—
Accretion of Series A preferred stock mandatory redemption obligation		—			—		—		—		—		—		(329	)		(329	)
Comprehensive loss — net loss		—			—		—		—		—		—		(4,719	)		(4,719	)
Balances at December 31, 1998		2,203			2		—		—		—		—		(9,224	)		(9,222	)
Issuance of Series C preferred stock warrants for services related to sale of Series C preferred shares		—			—		—		—		394		—		—			394
Accretion of Series A preferred stock mandatory redemption obligation		—			—		—		—		—		—		(354	)		(354	)
Comprehensive loss — net loss		—			—		—		—		—		—		(5,609	)		(5,609	)
Balances at December 31, 1999		2,203			2		—		—		394		—		(15,187	)		(14,791	)
Issuance of Series C preferred stock warrants in connection with lease agreement		—			—		—		—		43		—		—			43
Exercise of stock options for cash		2			—		—		—		1		—		—			1
Issuance of common stock at $0.85 per share for license rights		5			—		—		—		4		—		—			4
Issuance of Series D preferred stock warrants in convertible promissory note offering		—			—		—		—		4,039		—		—			4,039
Beneficial conversion feature of convertible promissory notes		—			—		—		—		1,026		—		—			1,026
Issuance of Series D preferred stock warrants for services related to sale of Series D preferred shares		—			—		—		—		368		—		—			368
Issuance of common stock warrants in conjunction with issuance of promissory note		—			—		—		—		3		—		—			3
Cancellation of common stock		(275	)		—		—		—		—		—		—			—

53

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS — (Continued)

														Deficit
														Accumulated
	Common Stock				Preferred Stock				Additional					During the			Total
									Paid-In		Deferred			Development			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Compensation			Stage			Equity (Deficit)
	(In thousands)
Accretion of Series A preferred stock mandatory redemption obligation		—		—		—		—		—		—			(430	)		(430	)
Comprehensive loss — net loss		—		—		—		—		—		—			(12,779	)		(12,779	)
Balances at December 31, 2000		1,935		2		—		—		5,878		—			(28,396	)		(22,516	)
Issuance of Series D preferred stock warrants in conjunction with refinancing of note payable to stockholder		—		—		—		—		225		—			—			225
Beneficial conversion feature of convertible promissory note		—		—		—		—		456		—			—			456
Beneficial conversion feature of Series D preferred stock		—		—		—		—		4,274		—			(4,274	)		—
Issuance of Series D preferred stock warrants for services related to the sale of Series D preferred shares		—		—		—		—		2,287		—			—			2,287
Exercises of stock options and warrants for cash		1,158		1		—		—		407		—			—			408
Issuance of common stock in initial public offering for cash, net of offering costs of $2,845		4,000		4		—		—		17,151		—			—			17,155
Conversion of preferred stock into common stock		9,776		10		—		—		31,569		—			—			31,579
Series A preferred stock redemption fee		—		—		—		—		—		—			(1,700	)		(1,700	)
Issuance of stock options to nonemployees for services		—		—		—		—		45		—			—			45
Deferred compensation related to employee stock options		—		—		—		—		1,330		(1,330	)		—			—
Amortization of deferred compensation		—		—		—		—		—		314			—			314
Accretion of Series A preferred stock mandatory redemption obligation		—		—		—		—		—		—			(379	)		(379	)
Comprehensive loss — net loss		—		—		—		—		—		—			(10,940	)		(10,940	)
Balances at December 31, 2001		16,869		17		—		—		63,622		(1,016	)		(45,689	)		16,934
Issuance of unregistered common stock		1,000		1		—		—		199		—			—			200
Issuance of common stock, Employee Stock Purchase Plan		9		—		—		—		6		—			—			6
Issuance of common stock warrants to Medarex		—		—		—		—		80		—			—			80
Issuance of restricted stock to nonemployees		8		—		—		—		34		—			—			34

54

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS — (Continued)

																Deficit
																Accumulated
	Common Stock					Preferred Stock				Additional						During the			Total
										Paid-In			Deferred			Development			Stockholders’
	Shares			Amount		Shares		Amount		Capital			Compensation			Stage			Equity (Deficit)
	(In thousands)
Issuance of stock options to nonemployees for service		—			—		—		—		57			—			—			57
Issuance of stock options to employees		—			—		—		—		22			(22	)		—			—
Cancellation of employee stock options		—			—		—		—		(301	)		301			—			—
Exercise of stock options and warrants for cash		32			—		—		—		18			—			—			18
Deferred compensation related to employee restricted stock option		99			—		—		—		449			(449	)					—
Cancellation of employee restricted stock grants		(87	)		—		—		—		(392	)		392			—			—
Amortization of deferred compensation, net		—			—		—		—		—			350			—			350
Comprehensive loss — net loss		—			—		—		—		—			—			(12,804	)		(12,804	)
Balances at December 31, 2002		17,930			18		—		—		63,794			(444	)		(58,493	)		4,875
Issuance of unregistered common stock to Medarex		1,000			1		—		—		199			—			—			200
Issuance of unregistered common stock to Nexus		90			—		—		—		35			—			—			35
Issuance of common stock warrants to Medarex		—			—		—		—		80			—			—			80
Issuance of warrants with convertible promissory note		—			—		—		—		221			—			—			221
Beneficial conversion feature of convertible promissory note		—			—		—		—		114			—			—			114
Issuance of common stock, Employee Stock Purchase Plan		4			—		—		—		—			—			—			—
Exercise of stock options and warrants for cash		8			—		—		—		—			—			—			—
Cancellation of employee restricted stock grants		(4	)		—		—		—		(20	)		20			—			—
Cancellation of employee stock options		—			—		—		—		(131	)		131			—			—
Amortization of deferred compensation, net		—			—		—		—		—			240			—			240
Non-employee stock compensation		—			—		—		—		2			—			—			2
Comprehensive loss — net loss		—			—		—		—		—			—			(5,752	)		(5,752	)
Balances at December 31, 2003		19,028		$	19		—		—	$	64,294		$	(53	)	$	(64,245	)	$	15
Issuance of warrants with convertible promissory note		—			—		—		—		1,711			—			—			1,711
Beneficial conversion feature of convertible promissory note		—			—		—		—		1,156			—			—			1,156
Issuance of common stock, Employee Stock Purchase Plan		1			—		—		—		—			—			—			—

55

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS — (Continued)

															Deficit
															Accumulated
	Common Stock				Preferred Stock				Additional						During the			Total
									Paid-In			Deferred			Development			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Compensation			Stage			Equity (Deficit)
	(In thousands)
Cancellation of employee stock options		—		—		—		—		(5	)		5			—			—
Amortization of deferred compensation, net		—		—		—		—		—			41			—			41
Warrant valuation				—		—				368			—			—			368
Comprehensive loss — net loss		—		—		—		—		—			—			(8,508	)		(8,508	)
Balances at December 31, 2004		19,029	$	19		—		—	$	67,524		$	(7	)	$	(72,753	)	$	(5,217	)
Issuance of unregistered common stock and preferred stock to Toucan Capital		—		—		32,500		33		1,243			—			—			1,276
Issuance of stock options to nonemployees for services		—		—		—		—		3			—			—			3
Issuance of warrants with convertible promissory note		—		—		—		—		1,878			—			—			1,878
Exercise of stock options and warrants for cash		49		—		—		—		4			—			—			4
Amortization of deferred compensation, net		—		—		—		—		—			7			—			7
Beneficial conversion feature of convertible promissory note		—		—		—		—		1,172			—			—			1,172
Common Stock warrant liability		—		—		—		—		(604	)		—			—			(604	)
Comprehensive loss — net loss		—		—		—		—		—			—			(9,937	)		(9,937	)
Balances at December 31, 2005		19,078	$	19		32,500	$	33	$	71,220		$	—		$	(82,690	)	$	(11,418	)

See accompanying notes to condensed financial statements.

56

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS — (Continued)

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

												Period from
												March 18, 1996
			Years Ended December 31,									(Inception) to
												December 31,
			2003			2004			2005			2005
			(In thousands)
Cash Flows from Operating Activities:
Net Loss			$	(5,752	)	$	(8,508	)	$	(9,937	)	$	(74,844	)
	Reconciliation of net loss to net cash used in operating activities:
		Depreciation and amortization		207			132			63			2,266
		Amortization of deferred financing costs		—			—			—			320
		Amortization of debt discount		42			1,559			2,908			10,258
		Accrued interest converted to preferred stock		—			—			—			260
		Accreted interest on convertible promissory note		2			192			603			797
		Stock-based compensation costs		242			41			10			1,093
		Loss (gain) on sale and disposal of equipment		—			(7	)		41			516
		Gain on sale of intellectual property and royalty rights		(816	)		—			—			(3,656	)
		Gain on sale of property and equipment		(95	)		(41	)		(97	)		(233	)
		Warrant valuation		—			368			—			368
		Asset impairment loss		904			130			—			2,066
		Loss on facility sublease		174			—			—			895
	Increase (decrease) in cash resulting from changes in assets and liabilities:
		Accounts receivable		(5	)		(3	)		(64	)		(75	)
		Prepaid expenses and other current assets		660			(66	)		34			349
		Accounts payable and accrued expenses		(84	)		1,809			2,289			5,153
		Accrued loss on sublease		(266	)		—			1			(265	)
		Deferred grant revenue		—			35			(35	)		—
		Deferred rent		110			(66	)		—			410
		Net Cash used in Operating Activities		(4,677	)		(4,425	)		(4,184	)		(54,322	)
Cash Flows from Investing Activities:
	Purchase of property and equipment, net			(149	)		—			(43	)		(4,580	)
	Proceeds from sale of property and equipment			95			41			97			233
	Proceeds from sale of intellectual property			816			—			—			1,816
	Proceeds from sale of marketable securities			1,828			—			—			2,000
	Refund of security deposit			(45	)		45			(3	)		(3	)
	Transfer of restricted cash			—			75			(1	)		(1,035	)
		Net Cash (used in) provided by Investing Activities		2,545			161			50			(1,569	)

57

NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS — (Continued)

												Period from
												March 18, 1996
			Years Ended December 31,									(Inception) to
												December 31,
			2003			2004			2005			2005
			(In thousands)
	Cash Flows from Financing Activities:
	Proceeds from issuance of note payable to stockholder			—			—			—			1,650
	Repayment of note payable to stockholder			—			—			—			(1,650	)
	Proceeds from issuance of convertible promissory note and warrants, net of issuance costs			335			4,350			3,050			12,799
	Repayment of convertible promissory note			—			(52	)		(54	)		(106	)
	Borrowing under line of credit, Northwest Hospital			—			—			—			2,834
	Repayment of line of credit to Northwest Hospital			—			—			—			(2,834	)
	Payment on capital lease obligations			(67	)		(41	)		(38	)		(311	)
	Payment on note payable			(420	)								(420	)
	Proceeds from issuance of preferred stock, net			—			—			1,276			28,708
	Proceeds from exercise of stock options and warrants			—			—			—			220
	Proceeds from issuance of common stock, net			—			—			4			17,373
	Series A preferred stock redemption fee			—			—			—			(1,700	)
	Deferred financing costs			—			—			—			(320	)
		Net Cash provided by (used in) Financing Activities		(152	)		4,257			4,238			56,243
Net increase (decrease) in cash				(2,284	)		(7	)		104			352
Cash at beginning of period				2,539			255			248			—
Cash at end of period			$	255		$	248		$	352		$	352
Supplemental disclosure of cash flow information
	Cash paid during the period for interest		$	29		$	12		$	7		$	1,396
Supplemental schedule of non-cash financing activities Equipment acquired through capital leases			$	—		$	—		$	—		$	285
Common stock warrant liability				—			4,714			604			5,318
Accretion of Series A preferred stock mandatory redemption obligation				—			—			—			1,872
Beneficial conversion feature of convertible promissory notes				—			2,766			3,050			6,842
Conversion of convertible promissory notes and accrued interest to Series D preferred stock				—			—			—			5,324
Issuance of Series C preferred stock warrants in connection with lease agreement				—			—			—			43
Issuance of common stock for license rights				—			—			—			4
Liability for and issuance of common stock and warrants to Medarex				280			—			—			840
Issuance of common stock to landlord				—			—			—			35
Deferred compensation on issuance of stock options and restricted stock grants				240			41			7			759

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NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS — (Continued)

							Period from
							March 18, 1996
	Years Ended December 31,						(Inception) to
							December 31,
	2003		2004		2005		2005
	(In thousands)
Cancellation of options and restricted stock grant		151		5		—		849
Financing of prepaid insurance through note payable		—		—		71		491
Stock subscription receivable		—		—		—		480

See accompanying notes to financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2003, 2004 and 2005

(1) Organization and Description of Business

      Northwest Biotherapeutics, Inc. (the “Company”) was organized to discover and develop innovative diagnostics and immunotherapies for prostate cancer. During 1998, the Company incorporated as a Delaware corporation. Prior to 1998, the Company was a limited liability company, which was formed on March 18, 1996. The Company is a development stage company, has yet to generate significant revenues from its intended business purpose and has no assurance of future revenues. While in the development stage, the Company’s principal activities have included defining and conducting research programs, conducting clinical trials, raising capital and recruiting scientific and management personnel.

(2) Operations and Financing

      The Company has experienced recurring losses from operations, has a working capital deficit of $11.5 million and has a deficit accumulated during the development stage of $82.7 million at December 31, 2005.

      On November 13, 2003, the Company borrowed an aggregate of $335,000 from certain members of its management which enabled the Company to continue operating into the first quarter of 2004. Net of repayments, the aggregate loan principal liability remaining at December 31, 2005 is $235,000, as more fully described in the following table:

Lender	Title	Principal
Alton L. Boynton, Ph.D.	Director, President, Chief Scientific Officer, Chief Operating Officer and Secretary	$	183,000
Marnix Bosch, Ph.D.	Vice President of Vaccine Research and Development		41,000
Larry L. Richards	Former Controller		11,000
	Total	$	235,000

      The notes initially had a 12-month term, accrued interest at an annual rate equal to the prime rate plus 2% and were secured by substantially all of the Company’s assets not otherwise collateralized. The aggregate principal amount of the original notes was $335,000 of which $50,000, including interest of $1,674, was repaid on June 1, 2004 and $50,000, including interest of $4,479, was repaid on February 24, 2005. In connection with the April 26, 2004 recapitalization agreement with Toucan Capital (the “Recapitalization Agreement”), holders of notes representing 70% of the outstanding principal amount of the notes agreed to amend their notes to set the conversion price at $0.10 per share and change the maturity date to November 12, 2004 in the event the Company raised at least $15 million in a financing prior to that time or May 12, 2005 if the Company had not completed a $15 million financing by May 12, 2005. The maturity date of two of the notes has been further extended to June 15, 2006 pursuant to amendments entered into on March 9, 2006. The note, plus accrued interest, in the aggregate amount of approximately $13,000 due to the former Controller was repaid in full on March 24, 2006.

      As part of the November 13, 2003 loan, the lenders were issued warrants initially exercisable to acquire an aggregate of 3.7 million shares of the Company’s common stock, expiring November 2008 subject to certain anti-dilution adjustments, at an exercise price to be determined as follows: (i) in the event that the Company completed an offering of its common stock generating gross proceeds of at least $1 million, then the price per share paid by investors in that offering; or (ii) if the Company did not complete such an offering, then $0.18, which was the closing price of its common stock on the date of the financing. In connection with the Recapitalization Agreement, the warrants were amended. The purpose of the amendment was to remove the anti-dilution provisions and set the warrant exercise price at the lesser

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of (i) $0.10 per share or (ii) a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by the Company of convertible preferred stock as contemplated by the Recapitalization Agreement, but in any event not less than $0.04 per share.

      Proceeds from the offering were allocated between the notes and warrants on a relative fair value basis. The value allocated to the warrants on the date of the grant was approximately $221,000. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, risk-free interest rate of 3.36%, volatility of 194%, and a contractual life of 5 years. The value of the warrants was recorded as a deferred debt discount against the $335,000 proceeds of the notes. In addition, a beneficial conversion feature related to the Notes was determined to be approximately $221,000 but is capped at the remaining value originally allocated to the notes of approximately $114,000. As a result, the total discount on the notes equaled the face value of $335,000 which was fully amortized by December 31, 2004.

Toucan Capital Loans

      During 2004 and 2005, the Company entered into multiple agreements with Toucan Capital Fund II, L.P. (“Toucan Capital”) and its affiliate, Toucan Partners, LLC, (“Toucan Partners”), all of which relate to the recapitalization agreement originally entered into on April 26, 2004 with Toucan Capital, which contemplates the possible recapitalization of the Company. At Toucan Capital’s option, and if successfully implemented, the recapitalization could provide the Company with up to $40 million through the issuance of new securities to Toucan Capital and a syndicate of other investors to be determined. If the recapitalization is successful, Toucan Capital, Toucan Partners and the investor syndicate would potentially own, on a combined basis, over 95% of the outstanding capital stock of the Company. The proposed recapitalization would occur in two stages, a loan period, followed by a potential equity financing.

      The Company and Toucan Capital amended the Recapitalization Agreement on July 30, 2004, October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005. The amendments (i) updated certain representations and warranties of the parties made in the Recapitalization Agreement, and (ii) made certain technical changes in the Recapitalization Agreement in order to facilitate the bridge loans described therein.

      The sixth amendment to the amended and restated binding term sheet, dated July 26, 2005, extended subsequent closings of the convertible preferred stock to December 31, 2006, or such later date as is mutually agreed by the Company and Toucan Capital.

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      As part of the Company’s recapitalization, the Company borrowed an aggregate of $6.75 million from Toucan Capital, from February 2, 2004 through September 7, 2005, comprised of the following loan transactions and balances as of December 31, 2005:

							Accrued		Conversion		Warrant
Loan Date		Principal(1)		Due Date			Interest(2)		Shares(2)		Shares(3)(4)
		(In thousands)					(In thousands)		(In thousands)		(In thousands)
02/02/04		$	50		06/01/06	(5)	$	10		1,500		3,000	(6)
03/01/04			50		06/01/06	(5)		10		1,490		3,000	(6)
04/26/04			500		06/01/06	(5)		87		14,688		30,000	(6)
06/11/04			500		06/01/06	(5)		81		14,515		30,000	(6)
07/30/04			2,000		06/01/06	(5)		293		57,319		20,000	(7)
10/22/04			500		06/01/06	(5)		61		14,014		5,000	(7)
11/10/04			500		06/01/06	(5)		58		13,942		5,000	(7)
12/27/04			250		06/01/06	(5)		25		6,882		2,500	(7)
04/12/05			450		06/01/06	(5)		32		11,965		4,500	(7)
05/13/05			450		06/01/06	(5)		29		11,932		4,500	(7)
06/16/05			500		06/16/06			27		13,041		5,000	(7)
07/26/05			500		07/26/06			21		12,893		5,000	(7)
09/07/05			500		09/07/06			16		12,629		5,000	(7)
	Total	$	6,750				$	750		186,810		122,500

(1)	The notes are secured by a first priority senior security interest in all of the Company’s assets.
(2)	Interest accrues at 10% per annum, based on a 365-day basis compounded annually from the respective original issuance dates of the notes.
(3)	The notes are convertible into, and the warrants are exercisable for, shares of convertible preferred stock if the convertible preferred stock is approved and authorized and other investors have purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement. However, if, for any reason, such convertible preferred stock is not approved or authorized and/or if other investors have not purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement, these notes shall be convertible into, and these warrants shall be exercisable for any equity security and/or debt security and/or any combination thereof.
(4)	Exercise period is 7 years from the issuance date of the convertible note except for the February 2, 2004 and March 1, 2004 warrants, which have an April 26, 2011 expiration date.
(5)	As of March 9, 2006, the maturity dates were extended to June 1, 2006.
(6)	Per share exercise price is $0.01.
(7)	Per share exercise price is $0.04.

Toucan Capital Loans and Related Beneficial Conversions, Warrant Valuations, and Amortization

      The loan funding period commenced on February 2, 2004 when the Company issued Toucan Capital an unsecured convertible promissory note in the amount of $50,000. On March 1, 2004, the Company issued Toucan Capital a secured convertible promissory note in the amount of $50,000. The notes were convertible at prices below the current price of the Company’s common stock at the date of issuance resulting in a beneficial conversion cost of approximately $100,000, which was amortized over the 12-month term of the notes. Amortization of deferred debt discount on both notes totalling approximately $88,000 and $12,000 was recorded for years ended December 31, 2004 and 2005, respectively. The related interest accretion on the notes totalling approximately $9,000 and $11,000 was recorded for the years ended December 31, 2004 and 2005, respectively.

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      The Recapitalization Agreement stipulated that the February and March 2004 notes for $50,000 each were to be cancelled and reissued effective April 26, 2004 as two separate notes for $50,000 each and conforming to the conditions of the note signed for the April 26, 2004 bridge loan for $500,000. As a result, the notes issued in February and March 2004, respectively, (i) accrue interest at 10% per annum on a 365 day basis compounded annually from their respective original issuance dates, (ii) are secured by a first priority senior security interest in all of the Company’s assets, and (iii) have warrants with coverage equal to three hundred percent (300%) of the amount due under the bridge notes.

      Proceeds from the issuance of $4,250,000 and $2,400,000 senior convertible promissory notes and warrants during the years ended December 31, 2004 and 2005, respectively, were allocated between the notes and warrants on a relative fair value basis. The total value allocated to the warrants based on the date of each grant was approximately $1,611,000 and $1,527,000 for the years ended December 31, 2004 and 2005, respectively. The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following assumptions:

	2004		2005
Risk-free interest rates		1.61% - 3.87%		2.86% - 4.03%
Contractual life		7 years		7 years
Expected volatility		218% - 239%		416% - 440%
Dividend yield		0%		0%

      The value of the warrants was recorded as a deferred debt discount against the $4,250,000 and $2,400,000 proceeds of the notes in each of the years ended December 31, 2004 and 2005, respectively. In addition, beneficial conversion features related to the notes were determined to be approximately $1,155,000 and $873,000. As a result, the total discount on the notes equalled the $2,766,000 and $2,400,000 during the years ended December 31, 2004 and 2005, respectively and is being amortized over the twelve-month terms of each of the notes. Amortization of deferred debt discount of approximately $1,178,000 and $2,643,000 was recorded for the years ended December 31, 2004 and 2005, respectively. Interest accretion on the notes of approximately $164,082 and $566,000 was recorded for the years ended December 31, 2004 and 2005, respectively.

      Based on the average closing price per share of the Company’s common stock for the twenty trading days prior to the January 26, 2005 sale of the series A stock, the warrant exercise price was fixed, pursuant to the terms thereof, at $0.04 per share on January 26, 2005. In connection with the first closing of the Equity Financing on January 26, 2005, the Company and Toucan Capital amended the October 22, November 10 and December 27, 2004 warrants to clarify that the exercise price of each of these warrants is $0.04 per share (subject to certain adjustments).

Toucan Partners Loans, Beneficial Conversion, Warrant Valuation, and Amortization

      The Company borrowed $650,000 from Toucan Partners, an affiliate of Toucan Capital, from November 14, 2005 to December 30, 2005, comprised of the following loan transactions:

						Interest			Conversion		Warrant
Loan Date		Principal(1)		Due Date		Rate(2)			Shares(3)		Shares(3)
		(In thousands)							(In thousands)		(In thousands)
11/14/05		$	400		11/14/06		10	%		10,150		4,000	(4)
12/30/05			250		12/30/06		10	%		6,253		2,500	(5)
	Total	$	650							16,403		6,500

(1)	The notes are secured by a first priority senior security interest in all of the Company’s assets.
(2)	Interest accrues at 10% per annum, based on a 365-day basis compounded annually from the respective original issuance dates of the notes.

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(3)	The notes are convertible into, and the warrants are exercisable for, shares of convertible preferred stock if the convertible preferred stock is approved and authorized and other investors have purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement. However, if, for any reason, such convertible preferred stock is not approved or authorized and/or if other investors have not purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the Recapitalization Agreement, these notes shall be convertible into, and the warrants shall be exercisable for, any equity security and/or debt security and/or any combination thereof.
(4)	Exercise period is 7 years from the issuance date of the note.
(5)	Exercise period is 7 years from April 17, 2006 (the issuance date of the warrant).

      Proceeds from the issuance of $400,000 senior convertible promissory notes and warrants on November 14, 2005 were allocated between the notes and warrants on a relative fair value basis. The value allocated to the warrants on the date of the grant was approximately $226,000. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, risk-free interest rate of 4.10%, volatility of 408%, and a contractual life of 7 years. The value of the warrants was recorded as a deferred debt discount against the $400,000 proceeds of the notes. In addition, a beneficial conversion feature related to the notes was determined to be approximately $174,000. As a result, the total discount on the note equalled $400,000 which is being amortized over the twelve-month term of the notes. Amortization of deferred debt discount of approximately $52,000 was recorded for the year ended December 31, 2005. Interest accretion on the note of approximately $5,100 was recorded for the year ended December 31, 2005.

      On December 30, 2005 the Company issued Toucan Partners a secured promissory note in the amount of $250,000. Interest accretion of approximately $68 was recognized during the year ended December 31, 2005.

      Subsequently, this note was amended and warrants were issued to Toucan Partners in respect of the non-convertible note and the non-convertible notes were amended and restated in order to make it convertible on the same terms and conditions as the convertible notes previously issued to Toucan Capital and Toucan Partners and to provide for the issuance of warrants on the same terms and conditions as the convertible note previously issued to Toucan Capital and Toucan Partners. Accordingly, the proceeds from the issuance of the note and warrants were allocated between the notes and warrants on a relative fair value basis. The value allocated to the warrants was $125,000. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, risk-free interest rate of 4.36%, volatility of 402% and a contractual life of 7 years. The value of the warrants was recorded as a deferred debt discount against the $250,000 proceeds of the note. In addition, a beneficial conversion feature related to the notes was determined to be approximately $125,000. As a result, the total discount on the note equalled $250,000 and is being amortized over the twelve-month term of the note.

Toucan Capital Series A Cumulative Convertible Preferred Stock

      On January 26, 2005, the Company entered into a securities purchase agreement with Toucan Capital pursuant to which they purchased 32.5 million shares of our newly designated Series A Preferred Stock at a purchase price of $0.04 per share, for an aggregate purchase price of $1.3 million. The Series A Preferred Stock:

      (i) is entitled to cumulative dividends at the rate of 10% per year;

      (ii) is entitled to a liquidation preference in the amount of its initial purchase price plus all accrued and unpaid dividends (to the extent of legally available funds);

      (iii) has a preference over the common stock, and is pari passu with the Series A-1 Preferred Stock, with respect to dividends and distributions;

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      (iv) is entitled to participate on an as-converted basis with the common stock on any distributions after the payment of any preferential amounts to the Series A Preferred Stock and the Series A-1 Preferred Stock;

      (v) votes on an as converted basis with the common stock and the Series A-1 Preferred Stock on matters submitted to the common stockholders for approval and as a separate class on certain other material matters; and

      (vi) is convertible into common stock on a one-for-one basis (subject to adjustment in the event of stock dividends, stock splits, reverse stock splits, recapitalizations, etc.).

      The number of shares of common stock issuable upon conversion of each share of series A stock is also subject to increase in the event of certain dilutive issuances in which we sell or are deemed to have sold shares below the then applicable conversion price (currently $0.04 per share). The consent of the holders of a majority of the Series A Preferred Stock is required in the event that we elect to undertake certain significant business actions.

      In the event that the Company sells at least $15 million of convertible preferred stock for cash to investors other than Toucan Capital on the terms and conditions set forth in the Restated Recapitalization Agreement and the Term Sheet (a “Qualified Preferred Stock Financing”), the warrants will be exercisable only for shares of Convertible Preferred Stock. Unless and until the Company completes a Qualified Preferred Stock Financing, the warrants will be exercisable for any debt or equity security authorized for issuance by the Company (which currently consists of common stock, Series A Preferred Stock and Series A-1 Preferred Stock). The number of shares issuable pursuant to the warrants and the exercise prices thereof are subject to adjustment in the event of stock splits, reverse stock splits, stock dividends, and the like. The exercise price is also subject to downward adjustment in the event of certain dilutive issuances in which the Company sells or is deemed to have sold shares below the then applicable exercise price.

Liability For Potentially Dilutive Securities in Excess of Authorized Number of Common Shares

      In accordance with EITF 00-19, the Company accounts for potential shares that can be converted to common stock, that are in excess of authorized shares, as a liability that is recorded at fair value. Total potential outstanding common stock exceeded the Company’s authorized shares on December 30, 2005 when an additional $250,000 loan was received from Toucan Partners. This non-convertible note was amended and restated in order to make it convertible on the same terms and conditions as the convertible notes previously issued to Toucan Capital and Toucan Partners. The fair value of the warrants in excess of the authorized shares at December 31, 2005 was approximately $604,000 and was recognized as a liability on December 30, 2005. This liability is required to be evaluated at each reporting date with any change in value included in other income/(expense) until such time as enough shares are authorized to cover all potentially convertible instruments.

      Similarly, total potential outstanding common stock exceeded the Company’s authorized shares on July 30, 2004 when an additional $2.0 million loan, convertible into common stock, was received from Toucan Capital and additional warrants were issued. The fair value of the warrants in excess of the authorized shares was approximately $2.8 million and was recognized as a liability on July 30, 2004. During the fourth quarter of 2004, the Company received three additional loans from Toucan Capital, convertible into common stock totaling $1.25 million and additional warrants were issued. The total fair value of the warrants in excess of the authorized shares was approximately $1.5 million and was recognized as a liability at the dates of issuance of the convertible debt and warrants. This liability was evaluated at each reporting date and any changes in value were included in other income/(expense) until enough shares were authorized to cover all potentially convertible instruments. Effective December 29, 2004, the number of authorized common shares was increased to 300 million. The liability for potential shares in excess of total authorized shares was revalued at that date. This valuation resulted in a fourth quarter loss of approximately $1.0 million, due to net increases in the net fair value of related warrants at that date. This loss was offset against the September 30, 2004 gain of approximately $717,000 for a net loss as of

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December 31, 2004 of approximately $368,000, included in the 2004 statement of operations as a warrant valuation.

Liquidity

      The Company’s actual cash needs will depend on many unpredictable factors, including the timing of research and development activities, the timeframe for successful development of an effective product, and the commercialization of such product, all of which includes the regulatory approval process. The regulatory approval process is uncertain, includes extensive pre-clinical testing and clinical trials of each product in order to establish its safety and effectiveness, can take many years and requires the expenditure of substantial resources. Also, the Company is appealing an assessed tax liability as discussed in note 8(c). As a result of these factors, the Company cannot accurately predict the amount or timing of future cash needs.

      Any additional financing with Toucan Capital or any other third party is likely to be dilutive to stockholders, and any debt financing, if available, may include additional restrictive covenants. If the Company is unable to obtain significant additional capital in the near-term, the Company may cease operations at anytime. The Company does not believe that its assets would be sufficient to satisfy the claims of all of its creditors and the liquidation preferences of its preferred stockholders in full. Therefore, if the Company were to pursue a liquidation it is highly unlikely that any proceeds would be received by the Company’s common stockholders.

      There can be no assurance that the recapitalization plan or any other alternatives will be successful. If the recapitalization is unsuccessful, the Company’s inability to obtain additional cash as needed could have a material adverse effect on its financial position, results of operations and its ability to continue its existence. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

(3) Summary of Significant Accounting Policies

     (a) Use of Estimates in Preparation of Financial Statements

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     (b) Cash

      Cash consists of checking and money market accounts. While cash held by financial institutions may at times exceed federally insured limits, management believes that no material credit or market risk exposure exists due to the high quality of the institutions. The Company has not experienced any losses on such accounts.

     (c) Fair Value of Financial Instruments and Concentrations of Risk

      Financial instruments, consisting of cash, accounts receivable, restricted cash, accounts payable, accrued expenses, and capital lease obligations, are recorded at cost, which approximates fair value based on the short term maturities of these instruments.

      Credit is extended based on an evaluation of a customer’s financial condition and collateral is generally not required. Accounts receivable are generally derived from revenue earned from entities located in the United States. The Company records an allowance for potential credit losses based upon the expected collectibility of the accounts receivable. To date, the Company has not experienced any material credit losses.

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      In January 2003, research materials sales were made to multiple customers, primarily in the United  States of America, with whom there were no other contractual relationships. Effective December 31, 2005, the Company no longer sells research materials.

     (d) Property and Equipment

      During 2003 and 2004, the Company determined that the carrying value of a significant part of its fixed assets was not recoverable, and recorded an impairment charge to reduce the carrying value of its long-lived assets to their estimated fair values. Property and equipment are stated at cost, as adjusted for any prior impairments. Property and equipment are depreciated or amortized over the following estimated useful lives using the straight-line method:

Leasehold improvements	Shorter of life of the lease or useful life
Laboratory equipment	5-7 years
Office furniture and other equipment	3-5 years

      Expenditures for maintenance and repairs are expensed as incurred. Gains and losses from disposal representing the difference between any proceeds received from the sale of property and equipment and the recorded values of the asset disposed are recorded in total operating costs and expenses.

     (e) Impairment of long-lived assets

      In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ((SFAS 144), long-lived assets including property and equipment are reviewed for possible impairment whenever significant events or changes in circumstances, including changes in our business strategy and plans, indicate that an impairment may have occurred. An impairment is indicated when the sum of the expected future undiscounted net cash flows identifiable to that asset or asset group is less than its carrying value. Long-lived assets to be held and used, including assets to be disposed of other than by sale, for which the carrying amount is not recoverable are adjusted to their estimated fair value at the date an impairment is indicated, which establishes a new basis for the assets for depreciation purposes. Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. Impairment losses are determined from actual or estimated fair values, which are based on market values, net realizable values or projections of discounted net cash flows, as appropriate.

     (f) Restricted Cash

      Restricted cash of $31,000 and $30,000 as of December 31, 2005 and 2004, respectively represents a deposit to secure the Company’s credit limit on its corporate credit cards.

     (g) Operating Leases

      The Company recognizes lease expense on a straight-line basis over the initial lease term. The Company has operating leases on real property and equipment expiring at various dates through 2007. For leases that contain rent holidays or escalation clauses, the Company recognizes rent expense on a straight-line basis and record the difference between the rent expense and rental amount payable as deferred rent. As of December 31, 2005 and 2004, we did not have any deferred rent.

     (h) Revenue Recognition

      The Company earns revenues through sale of research materials, providing research services to third parties and through research grants. Revenues from sale of research materials are to multiple customers with whom there is no other contractual relationship and are recognized when shipped to the customer and title has passed.

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      Research contracts and grants require the Company to perform research activities as specified in each respective contract or grant on a best efforts basis, and the Company is paid based on the fees stipulated in the respective contracts and grants which approximate the costs incurred by the Company in performing such activities. The Company recognizes revenue under the research contracts and grants based on completion of performance under the respective contracts and grants where no ongoing obligation on the part of the Company exists. Direct costs related to these contracts and grants are reported as research and development expenses.

     (i) Research and Development Expenses

      Research and development costs are expensed as incurred. These costs include, but are not limited to, personnel costs, lab supplies, depreciation, amortization and other indirect costs directly related to the Company’s research and development activities.

     (j) Income Taxes

      Deferred income taxes are provided utilizing the liability method whereby the estimated future tax effects of carry forwards and temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those carry forwards and temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is recorded on deferred tax assets if it is more likely than not that such deferred tax assets will not be realized. Prior to 1998, the Company was an LLC and the Company’s tax losses and credits generally flowed directly to the members.

     (k) Stock-Based Compensation

      The Company accounts for its stock option plans for employees in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense related to employee stock options is recorded if, on the date of grant, the fair value of the underlying stock exceeds the exercise price. The Company applies the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees, and to provide pro-forma results of operations disclosures for employee stock option grants as if the fair-value-based method of accounting in SFAS No. 123 had been applied to those transactions.

      As required under SFAS No. 123, the pro forma effects of stock-based compensation on net loss are estimated at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not, in management’s opinion, necessarily provide a reliable single measure of the fair value of the Company’s employee stock options.

      Stock compensation costs related to fixed employee awards with pro rata vesting are recognized on a straight-line basis over the period of benefit, generally the vesting period of the options. For options and warrants issued to non-employees, the Company recognizes stock compensation costs utilizing the fair value methodology prescribed in SFAS No. 123 over the related period of benefit.

      Had the Company recognized the compensation cost of employee stock options based on the fair value of the options on the date of grant as prescribed by SFAS No. 123, the pro-forma net loss applicable

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to common stockholders and related loss per share would have been adjusted to the pro-forma amounts indicated below:

		Year Ended December 31,
		2003			2004			2005
Net loss applicable to common stockholders (in thousands)
	As reported	$	(5,752	)	$	(8,508	)	$	(9,937	)
Add: Stock-based employee compensation expense included in reported net loss, net			240			41			7
	Deduct: Stock-based employee compensation determined under fair value based method for all awards		(590	)		(47	)		(13	)
	Pro-forma net loss	$	(6,102	)	$	(8,514	)	$	(9,943	)
Net loss per share — basic and diluted:
	As reported	$	(0.30	)	$	(0.45	)	$	(0.52	)
	Pro-forma	$	(0.32	)	$	(0.45	)	$	(0.52	)

      The per share weighted average fair value of stock options granted during the year ended December 31, 2003 was $0.10. There were no stock options granted for the year ended December 31, 2004. The per share weighted average fair value of stock options granted during the year ended December 31, 2005 was $0.21 on the date of grant using the minimum-value method for grants prior to August 13, 2001 and an option valuation method that considers expected volatility for grants thereafter with the following assumptions:

	2003			2005
Risk-free interest rate		2.97	%		3.53	%
Expected life		5 years			5 years
Expected volatility		200	%		403	%
Dividend yield		0	%		0	%

     (l) Loss Per Share

      Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period excluding 2,000 unvested restricted shares as of December 31, 2004. Diluted loss per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock method. Any potentially dilutive securities are antidilutive due to the Company’s net losses. For the periods presented, there is no difference between the basic and diluted net loss per share.

     (m) Operating Segments

      The Company is principally engaged in the discovery and development of innovative immunotherapies for cancer and has a single operating segment as management reviews all financial information together for the purposes of making decisions and assessing the financial performance of the company.

Operating costs:

      Operating costs and expenses consist primarily of research and development expenses, including clinical trial expenses which rise when we are actively participating in clinical trials, and general and administrative expenses.

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Research and development:

      Discovery and preclinical research and development expenses include scientific personnel related salary and benefit expenses, costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures for preclinical and clinical trial operation and management when we are actively engaged in clinical trials.

      Because the Company is a development stage company it does not allocate research and development costs on a project basis. The Company adopted this policy, in part, due to the unreasonable cost burden associated with accounting at such a level of detail and its limited number of financial and personnel resources. The Company’s business judgment continues to be that there is little value associated with evaluating expenditures at the project level since the Company is focusing primarily on its lead clinical trial programs as most of the Company’s expenditures relate to those programs.

      For the year ended December 31, 2005, of the Company’s net loss of approximately $9.9 million, approximately 45% of its expended resources were apportioned to the re-activation of its two DCVax^® clinical trial programs. From its inception through December 31, 2005, the Company incurred costs of approximately $32.1 million associated with its research and development activities. Because its technologies are novel and unproven, the Company is unable to estimate with any certainty the costs it will incur in the continued development of its product candidates for commercialization.

General and administrative:

      General and administrative expenses include administrative personnel related salary and benefit expenses, cost of facilities, insurance, travel, legal support, property and equipment depreciation, amortization of stock options and warrants, and amortization of debt discounts and beneficial conversion costs associated with the Company’s debt financing.

     (n) Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS 123R, Share-Based Payment (Revised 2004). SFAS 123R establishes standards for the accounting for transactions in which an entity receives employee services in exchange for the entity’s equity instruments or liabilities that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R eliminates the ability to account for share-based compensation using APB 25 and generally requires that such transactions be accounted for using a fair value method. The provisions of this statement are effective for financial statements issued for fiscal years beginning after June 15, 2005 and will become effective for the Company beginning with the first quarter of 2006. We will adopt SFAS 123R using the modified prospective method with no restatement and will record the related stock compensation expense commencing January 1, 2006 with respect to the stock options outstanding December 31, 2005. The impact that the adoption of this statement will have on the Company’s financial position and results of operations will be determined by share-based payments granted in future periods, as well as the fair value model and assumptions the Company will choose, which have not been finalized yet.

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets — an Amendment of APB Opinion No. 29.” This statement amends APB 29 to eliminate an exception to the fair value measurement principle for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions of this statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 and were effective for the Company beginning in the third quarter of fiscal 2005. The adoption of this accounting principle did not have a significant impact on our financial position or results of operations.

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      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB 20 cumulative effect accounting with retroactive restatement of comparative financial statements. It applies to all voluntary changes in accounting principle and defines “retrospective application” to differentiate it from restatements due to incorrect accounting. The provisions of this statement are effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and will become effective for the Company in 2006. The adoption of this accounting principle is not expected to have a significant impact on our financial position or results of operations.

      In June 2005, the FASB issued final FASB Staff Position FAS No. 143-1, “Accounting for Electronic Equipment Waste Obligations.” The statement addresses obligations associated with the European Union’s Directive on Waste Electrical and Electronic Equipment (the “Directive”). The Directive requires EU-member countries to adopt legislation to regulate the collection, treatment, recovery and environmentally sound disposal of electrical and electronic waste equipment. It distinguishes between products put on the market after August 15, 2005 (new waste) and products put on the market before that date (historical waste). The FSP addresses historical waste and directs companies to apply the provisions of SFAS 143, “Accounting for Asset Retirement Obligations,” to the obligation associated with historical waste. The FSP is effective for the first reporting period ending after June 8, 2005, or the date of adoption of the law by the applicable EU-member country, and became effective for the Company in the second quarter of 2005. This accounting principle did not have a significant impact on our financial position or results of operations. New waste will also be accounted for under SFAS 143, and the accounting for new waste is not expected to have a significant impact on our financial position or results of operations.

      In November 2005, the FASB issued final FASB Staff Position FAS No. 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The FSP provides an alternative method of calculating excess tax benefits (the APIC pool) from the method defined in FAS 123R for share-based payments. A one-time election to adopt the transition method in this FSP is available to those entities adopting FAS 123R using either the modified retrospective or modified prospective method. Up to one year from the initial adoption of FAS 123R or effective date of the FSP is provided to make this one-time election. However, until an entity makes its election, it must follow the guidance in SFAS 123R. FSP 123R-3 is effective upon initial adoption of FAS 123R and will become effective for the Company in the first quarter of 2006. We are currently evaluating the potential impact of calculating the APIC pool with this alternative method and have not determined which method we will adopt, nor the expected impact on our financial position or results of operations.

      In September 2005, the EITF reached consensus on Issue No. 05-08, “Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature.” EITF 05-08 is effective for financial statements beginning in the first quarter of 2006. The adoption of EITF 05-08 is not expected to have a significant impact on the Company’s financial position or results of operations.

      In September 2005, the EITF reached consensus on Issue No. 05-07, “Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues.” EITF 05-07 is effective for future modifications of debt instruments beginning in the first quarter of 2006. The adoption of EITF 05-07 is not expected to have a significant impact on the Company’s financial position or results of operations.

(4) Stockholders’ Equity (Deficit)

     (a) Issuance of Unregistered Common Stock

      On June 30, 2003, the Company entered into a Settlement Agreement with Nexus Canyon Park, its prior landlord. Under this Settlement Agreement, Nexus Canyon Park agreed to permit premature termination of its prior lease and excuse the Company from future performance of lease obligations in exchange for 90,000 shares of its unregistered common stock with a fair value of $35,000 and Nexus’ retention of the Company’s $1.0 million lease security deposit. The Settlement Agreement resulted in an additional loss on facility sublease and lease termination of $174,000, net of deferred rent of $202,000.

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     (b) Issuance of Unregistered Preferred Stock

      On January 26, 2005, we entered into a securities purchase agreement with Toucan Capital pursuant to which they purchased 32.5 million shares of our newly designated series A preferred stock at a purchase price of $0.04 per share, for an aggregate purchase price of approximately $1.3 million. The series A preferred stock:

      (i) is entitled to cumulative dividends at the rate of 10% per year;

      (ii) is entitled to a liquidation preference in the amount of its initial purchase price plus all accrued and unpaid dividends (to the extent of legally available funds);

      (iii) has a preference over the common stock, and is pari passu with the Series A-1 Preferred Stock, with respect to dividends and distributions;

      (iv) is entitled to participate on an as-converted basis with the common stock and the Series A-1 Preferred Stock on any distributions after the payment of any preferential amounts to the Series A Preferred Stock;

      (v) votes on an as converted basis with the common stock and the Series A-1 Preferred Stock on matters submitted to the common stockholders for approval and as a separate class on certain other material matters; and

      (vi) is convertible into common stock on a one-for-one basis (subject to adjustment in the event of stock dividends, stock splits, reverse stock splits, recapitalizations, etc.).

      The number of shares of common stock issuable upon conversion of each share of Series A Preferred Stock is also subject to increase in the event of certain dilutive issuances in which we sell or are deemed to have sold shares below the then applicable conversion price (currently $0.04 per share). The consent of the holders of a majority of the Series A Preferred Stock is required in the event that we elect to undertake certain significant business actions.

     (c) Stock Purchase Warrants

     Medarex

      On December 9, 2002, the Company entered into an assignment and license agreement with Medarex wherein the Company sold certain intellectual property to Medarex in exchange for certain of their intellectual property and received $3.0 million, consisting of $1.0 million in cash and two payments of $1.0 million each payable in common stock. The Company realized a total of $3.0 million in cash as all of the foregoing shares were sold within 30 days of their issuance in 2003. Additionally, a $400,000 payable of ours to Medarex was forgiven by Medarex. Pursuant to this agreement, the Company issued to Medarex 2.0 million unregistered shares of its common stock. The 2.0 million shares of unregistered common stock were issued as follows: (i) 1.0 million shares were issued on December 26, 2002 (ii) 500,000 shares were issued on January 8, 2003; and (iii) 500,000 shares were issued on February 9, 2003. Also in conjunction with the December 9, 2002 agreement with Medarex, the Company issued warrants to purchase unregistered common stock as follows: (i) on December 26, 2002, issued a warrant to purchase 400,000 shares of its common stock at an exercise price of $0.216 per share; (ii) on January 8, 2003, issued a warrant to purchase 200,000 shares of its common stock at an exercise price of $0.177 per share; and (iii) on February 9, 2003 issued the final warrant to purchase 200,000 shares of its common stock at an exercise price of $0.102 per share. The warrants may be exercised at any time after six-months following their issue date and prior to the tenth anniversary of the issue date.

      The fair value of the 800,000 warrant shares was $159,678 on the date of grant, which was determined using the Black-Scholes option pricing model with the following assumptions: expected dividend yield 0%, risk-free interest rate of 4.17%, volatility of 191%, and an expected life of 10-years. As of December 31, 2002, one-half of the warrant value, $79,839, was recognized as an increase to additional

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paid in capital and $79,839 was recognized as a long-term liability, for the 400,000 warrant shares to be issued in 2003.

      The net gain recognized on this sale of intellectual property was $2.8 million, made up of the receipt of $3.0 million of cash and stock from Medarex and forgiveness of the $400,000 payable to Medarex, offset by the issuance of 2.0 million shares of unregistered common stock and warrants to purchase 800,000 shares of common stock valued at approximately $560,000.

Management Loan Warrants

      On November 13, 2003, the Company borrowed an aggregate of $335,000 from certain members of its current and former management. The lenders were issued warrants initially exercisable to acquire an aggregate of 3.7 million shares of the Company’s common stock, expiring November 2008 subject to certain anti-dilution adjustments, at an exercise price to be determined as follows: (i) in the event that the Company completed an offering of its common stock generating gross proceeds of at least $1 million, then the price per share paid by investors in that offering; or (ii) if the Company did not complete such an offering, then $0.18, which was the closing price of its common stock on the date of the financing. In connection with the Recapitalization Agreement, the warrants were amended. The purpose of the amendment was to remove the anti-dilution provisions and set the warrant exercise price at the lesser of (i) $0.10 per share or (ii) a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by the Company of convertible preferred stock as contemplated by the Recapitalization Agreement, but not less than $0.04 per share. See further discussion of these loans and warrants in note (2) Operations and Financing.

Toucan Capital and Toucan Partners Warrants

      From February 1, 2004 through December 31, 2005, the Company has issued eleven warrants for 122.5 million shares of Company capital stock to Toucan Capital pursuant to which Toucan Capital has loaned the Company an aggregate of $6.75 million in loan financing, as more fully described in note (2) Operations and Financing.

      On January 26, 2005, we issued Toucan Capital a warrant, with a contractual life of 7 years, to purchase 13.0 million shares of series A preferred stock in connection with a securities purchase agreement pursuant to which Toucan Capital purchased 32.5 million shares of our newly designated series A preferred stock at a purchase price of $0.04 per share, for an aggregate purchase price of $1.3 million. The number of shares issuable pursuant to the exercise of the warrant and the exercise price thereof is subject to adjustment in the event of stock splits, reverse stock splits, stock dividends and the like, as more fully described in note (2) Operations and Financing.

      From November 14 through December 31, 2005, the Company issued warrants for 6.5 million shares of Company capital stock to Toucan Partners pursuant to which Toucan Partners loaned the Company $650,000 in loan financing, as more fully described in note (2) Operations and Financing.

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      A summary of stock purchase warrants outstanding at December 31, 2005 is as follows:

			Weighted-
	Number		Average
Type of Warrant	Outstanding		Exercise Price
	(In thousands)
Common stock warrant		810	$	0.24
Series A preferred stock warrants		142,000	$	0.03
Series C preferred stock warrants(1)		235	$	2.50
Series D preferred stock warrants(1)		324	$	5.00
Common stock warrants issued in connection with convertible promissory notes		3,722	$	0.04

(1)  The exercise of Series C and Series D Preferred Stock warrants will result in the issuance of an equal number of shares of the Company’s common stock with no issuance of preferred stock.

      The exercise of Series A Preferred Stock warrants will result in the issuance of an equal number of shares of the Company’s Series A Preferred Stock.

     (d) Stock Option Plans

      The Company’s stock option plans are administered by the Board of Directors, which determines the terms and conditions of the options granted, including exercise price, number of options granted and vesting period of such options.

      Options granted under the plans are generally priced at or above the estimated fair market value of the Company’s common stock on the date of grant and generally vest over four years. Compensation expense, if any, is charged over the period of vesting. All options, if not previously exercised or canceled, expire ten years from the date of grant, or the expiration date specified in the individual option agreement, if earlier.

      During the year ended December 31, 2003, the Company granted options to purchase an aggregate of 895,000 shares of common stock to various employees with weighted average exercise prices of $0.10 which was equal to the fair value of the underlying common stock on the date of grant resulting in no deferred compensation recognition for the year ended December 31, 2003.

      During the year ended December 31, 2004, the Company did not grant any stock options.

      During the year ended December 31, 2005, the Company granted non-qualified options to purchase an aggregate of 25,000 shares of common stock to a non-employee consultant with a weighted average exercise price of $0.21. The fair value of the underlying common stock is evaluated monthly for specific performance compliance with $510 of compensation expense recognized for the year ended December 31, 2005.

(i)  1998 Stock Option Plan (1998 Plan)

      The Company’s 1998 Stock Option Plan (1998 Plan) has reserved 413,026 shares of common stock for stock option grants to employees, directors and consultants of the Company. As of December 31, 2005, net of forfeitures, a total of 337,146 shares remain available for granting under this plan.

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(ii)  1999 Executive Stock Option Plan (1999 Plan)

      The Company’s 1999 Executive Stock Option Plan (1999 Plan) has reserved 586,166 shares of common stock for issuance. As of December 31, 2005, net of forfeiture, a total of 420,956 shares remain available for granting under this plan.

(iii)  2001 Stock Option Plan (2001 Plan)

      Under the 2001 Stock Option Plan (2001 Plan), 1,800,000 shares of the Company’s common stock have been reserved for grant of stock options to employees and consultants. Additionally, on January 1 of each year, commencing January 1, 2002, the number of shares reserved for grant under the 2001 Plan will increase by the lesser of (i) 15% of the aggregate number of shares available for grant under the 2001 Plan or (ii) 300,000 shares. As of December 31, 2005, net of forfeitures, a total of 2,423,320 shares remain available under this plan.

(iv)  2001 Non-employee Director Stock Incentive Plan

      Under the 2001 Non-employee Director Stock Incentive Plan (2001 Director Plan), 200,000 shares of the Company’s common stock have been reserved for grant of stock options to non-employee directors of the Company. As of December 31, 2005, net of forfeitures, a total of 147,500 shares remain available under this plan.

      A summary of stock option activity is as follows:

		Options Outstanding
					Weighted-
		Number			Average
		of Shares			Exercise Price
		(In thousands except
		weighted average)
Balance at December 31, 2002			1,208			1.24
	Granted		895			0.10
	Exercised		(8	)		0.00
	Forfeited		(301	)		1.27
Balance at December 31, 2003			1,794			0.71
	Granted		—			—
	Exercised		—			—
	Forfeited		(930	)		0.78
Balance at December 31, 2004			864		$	0.63
	Granted		25			0.21
	Exercised		(49	)		0.08
	Forfeited		(97	)		0.99
Balance at December 31, 2005			743		$	0.60

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      Additional information regarding stock options outstanding and exercisable at December 31, 2005 is as follows, in thousands, except option price and weighted average exercise price.

	Options Outstanding
			Weighted-				Options Exercisable
			Average
			Remaining		Weighted-				Weighted-
	Number		Contractual		Average		Number		Average
Range of Exercise Prices	Outstanding		Life (Years)		Exercise Price		Exercisable		Exercise Price
	(In thousands except weighted average)
$0.00  - 0.50		430		7.6	$	0.11		292	$	0.11
0.51  - 1.01		188		4.0		0.85		188		0.85
1.02  - 2.02		102		5.3		1.25		102		1.25
2.03  - 5.05		23		6.0		4.93		23		4.94
$0.0000 - 5.05		743		6.3	$	0.60		605	$	0.71

      Options exercisable as of December 31, 2003, 2004 and 2005 totaled 1,078,000, 556,301 and 605,000, respectively.

(e)     Common Stock Equivalents

      The following common stock equivalents on an as-converted basis were excluded from the calculation of diluted net loss per share, as the effect would be antidilutive.

	Years Ended December 31
	2003		2004		2005
	(In thousands)
Preferred stock		—		—		32,500
Common stock options		1,794		864		743
Common stock warrants		810		810		810
Convertible preferred stock warrants		559		559		13,599
Convertible promissory note		1,861		110,333		186,306
Convertible promissory note stock warrants		3,722		102,222		132,722

     (f) Employee Stock Purchase Plan

      In June 2001, the Company adopted an employee stock purchase plan which became effective upon consummation of the Company’s initial public offering and reserved 500,000 shares of common stock for issuance under this plan. Under this plan, employees may purchase up to 1,000 shares of the Company’s common stock during each six-month offering period commencing on April 1 and October 1 of each year. The purchase price of the common stock is equal to the lower of 85% of the market price on the first and last day of each offering period. As of December 31, 2005, a total of 14,374 shares have been issued under the plan.

     (g) Employee 401(k) Plan

      On August 19, 1999, the Company adopted a 401(k) Plan for certain eligible employees. Under the plan, an eligible employee may elect to contribute up to 60% of his or her pre-tax total compensation, not to exceed the annual limits established by the Internal Revenue Service. The Company will match their contribution at the rate of $0.50 for every employee contributed dollar with a maximum Company match of $3,000 annually. For the years ended December 31, 2003, 2004 and 2005, the Company contributed approximately $40,000; $17,000 and $15,000 of matching dollars, respectively.

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     (h) Stockholder Rights Agreement

      On March 6, 2002, the Company adopted a Stockholder Rights Agreement, under which each common stockholder of record at the close of business on March 4, 2002 received a dividend of one right per share of common stock held. Each right entitles the holder to purchase one share of common stock from the Company at a price equal to $19.25 per share, subject to certain anti-dilution provisions. The rights become exercisable only in the event that a third party acquires beneficial ownership of, or announces a tender or exchange offer for, at least 15% of the then outstanding shares of the Company’s common stock and such acquisition or offer is determined by the Board of Directors to not be in the best interests of the stockholders. If the acquisition or offer were determined by the Board of Directors to be in the best interests of the stockholders, the rights may be redeemed by the Company for $0.0001 per right. The rights will expire on February 25, 2012, unless earlier redeemed, exchanged or terminated in accordance with the rights agreement.

      In connection with the Recapitalization Agreement, the Board of Directors and Mellon Investor Services LLC, its Rights Agent, on April 26, 2004, amended the Stockholder Rights Agreement. The definition of an “Acquiring Person” was amended to exclude Toucan Capital Fund II, L.P. and other investors selected by Toucan from the definition of “Acquiring Person” for those shares of the Company’s capital stock they acquire, or are deemed to beneficially own, in connection with the Recapitalization Agreement.

(5) Related Party Transactions

     (a) Agreement with Medarex

      On June 20, 2003, under a First Amendment to Assignment and License Agreement with Medarex, the Company released Medarex from future royalty obligations in exchange for a cash payment of $816,000. The purchase price of $816,000 was negotiated based on the expected discounted net present value of a future 2% royalty obligation under that certain Assignment and License Agreement dated December 9, 2002. The Company received the cash payment on July 1, 2003. See further discussions regarding transactions with Medarex in Note 4.

     (b) Cognate Agreement

      The Company entered into a service agreement, dated July 30, 2004, with Cognate Therapeutics, Inc. Cognate is a contract manufacturing and services Organization (CRO), majority owned by Toucan Capital and two of the principals of Toucan Capital are board members of Cognate. The Company committed to utilizing Cognate’s services for a two year period related primarily to manufacturing its DCVax^® product candidates, regulatory advice, research and development preclinical activities and managing clinical trials. Monthly expenditures ranged between approximately $250,000 and $487,000 during the years ending December 31, 2004 and 2005. The contract with Cognate includes a penalty of $2.0 million if cancelled after one year as well as payment for all services performed in winding down any ongoing activities. The Company entered into this contract after extensive consultations with an independent expert in the field of Good Manufacturing Practices (GMP), regulatory affairs, and clinical trial activities, as well as consultations with a former FDA Commissioner, and after considering the ability of other contract research and manufacturing organizations to comply with the Company’s requirement to rapidly commence technology transfers involving manufacturing, immune monitoring, and regulatory clinical advice and after obtaining approval of our Board of Directors. The Company did not find any other CRO who could meet its needs in order to rapidly restart its clinical programs. The Company believes entering into this agreement has given it an opportunity to restart its clinical and research programs much more efficiently and rapidly as opposed to rebuilding its infrastructure, internal GMP facilities, regulatory, clinical and research and development expertise. The Company recognized approximately $2.9 million and $3.5 million of costs relative to this agreement during the years ending December 31, 2004 and 2005, respectively. The costs are included in research and development expense.

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(6) Income Taxes

      There was no income tax benefit attributable to net losses for 2004 and 2005. The difference between taxes computed by applying the U.S. federal corporate rate of 34% and the actual income tax provisions in 2004 and 2005 is primarily the result of establishing a valuation allowance on the Company’s deferred tax assets arising primarily from tax loss carry forwards.

      The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets at December 31 are comprised of the following (in thousands):

		2003			2004			2005
Net operating loss carry forwards		$	14,699		$	17,126		$	20,450
Research and development credit carry forwards			1,136			1,319			1,525
Depreciation and amortization			627			981			927
Other			355			313			325
	Gross deferred tax assets		16,817			19,739			23,227
Less valuation allowance			(16,817	)		(19,739	)		(23,227	)
	Net deferred tax assets	$	—		$	—		$	—

      The increase in the valuation allowance for deferred tax assets for 2003, 2004 and 2005 of $2.2 million, $2.9 million and $3.5 million, respectively, was due to the inability to utilize net operating losses and research and development credits.

      At December 31, 2005, the Company had net operating loss carry forwards for income tax purposes of approximately $60.1 million and unused research and development tax credits of approximately $1.5 million available to offset future taxable income and income taxes, respectively, expiring beginning 2018 through 2022. The Company’s ability to utilize net operating loss and credit carry forwards is limited pursuant to the Tax Reform Act of 1986, due to cumulative changes in stock ownership in excess of 50% such that some net operating losses may never be utilized.

(7) Scientific Collaboration Arrangements

      The Company has also entered into certain collaborative arrangements under which it may be obligated to pay royalties or milestone payments if product development is successful. It is not anticipated that the aggregate amount of any royalty or milestone obligations under these other arrangements will be material to the Company’s operations.

(8) Commitments and Contingencies

     (a) Lease Obligations

      The Company leases its facilities and certain equipment. Effective December 15, 2004, the Company entered into a sublease with MediQuest for approximately 5,047 square feet of administrative floor space. The Company, however, remains primarily liable until September 30, 2006, for the performance of the provisions and obligations under the original June 18, 2003 lease, with Benaroya Capital Company, LLC,

78

for the base rent in the amounts scheduled below. Commitments for minimum rentals under non-cancelable leases in effect as of December 31, 2005 are as follows:

			Capital		Operating
			Leases		Leases
			(in thousands)
2006			$	11	$	324
2007				3
		Total minimum lease payments		14	$	324
Less amount representing interest				1
	Present value of minimum lease payments			13
Less current portion				10
			$	3

      At December 31, 2004 and 2005, included in property and equipment are assets under capital leases totaling approximately $170,000 and $110,000, respectively, and related net accumulated amortization totaling approximately $129,000 and $109,000, respectively. Rent expense was approximately $635,000, $256,000, and $96,000 in 2003, 2004, and 2005, respectively

     (b) Legal Matters

      The Company signed an engagement letter with Soma Partners, LLC (“Soma”), a New Jersey-based investment bank dated October 15, 2003 pursuant to which the Company engaged them to locate potential investors. Pursuant to the terms of the engagement letter, any disputes arising between the parties would be submitted to arbitration in the New York metropolitan area. A significant dispute arose between the parties. Soma filed an arbitration claim against the Company with the American Arbitration Association in New York, NY claiming unpaid commission fees of $186,000 and seeking declaratory relief regarding potential fees for future transactions that may be undertaken by us with Toucan Capital. The Company vigorously disputed Soma’s claims on multiple grounds, contending the Company only owed Soma approximately $6,000.

      Soma subsequently filed an amended arbitration claim, claiming unpaid commission fees of $339,000 and warrants to purchase 6% of the aggregate securities issued to date, and seeking declaratory relief regarding potential fees for future financing transactions which may be undertaken by the Company with Toucan Capital and others, which could potentially be in excess of $4 million. Soma also requested the arbitrator award its attorneys’ fees and costs related to the proceedings. The Company strongly disputed Soma’s claims and defended itself.

      The arbitration proceedings occurred from March 8-10, 2005 and on May 24, 2005, the arbitrator ruled in favor of the Company and denied all claims of Soma. In particular, the arbitrator decided that the Company did not owe Soma the large fees and warrants sought by Soma, that the Company would not owe Soma fees in connection with future financings, if any, and that the Company had no obligation to pay any of Soma’s attorneys’ fees or expenses. The arbitrator agreed with the Company that the only amount owed Soma was $6,702.87, which payment was made on May 27, 2005.

      On August 29, 2005, Soma filed a notice of petition to vacate the May 24, 2005 arbitration award issued by the Supreme Court of the State of New York.

      On December 30, 2005, the Supreme Court of the State of New York dismissed Soma’s petition, denying Soma’s August 29, 2005 motion to vacate the May 24, 2005 award in the Company’s favor.

      On February 3, 2006, Soma filed another notice of appeal with the Supreme Court of the State of New York. As of the date of the filing of this report, the Supreme Court of the State of New York has yet to act on this matter. The Company believes that this latest appeal is without merit and intends to vigorously defend the appeal.

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      The Company has no other legal proceeding pending at this time.

     (c) Sales Tax Assessment

      The Company received a pro-rata tax assessment of $492,000 on October 21, 2003 related to the abandonment of tenant improvements at a prior facility on which use tax payments to the State of Washington had been deferred, including the disposal and impairment of previously qualified tax deferred equipment. The Company appealed this assessment and was granted a partial reduction in the assessment on July 8, 2005. The Company filed an addendum to its appeal petition on December 2, 2005. The net assessment, through December 31, 2005, of approximately $336,000, inclusive of accrued interest, is being carried as an estimated liability on the Company’s balance sheet and is included in general and administrative expense. Final review of the addendum to the petition is expected to take several additional months. The Company may not be successful in further reducing this assessment and the assessment is subject to payment on demand.

      In February 2004, the Company filed a refund request of approximately $175,000 related to certain other state taxes previously paid to the State of Washington’s Department of Revenue. The finalization of this refund request is not expected until mid-2006. The Company may not be successful in its efforts to receive a tax refund.

(9) Notes Payable

     (a) Notes Payable to Related Parties.

Management Loans

      On November 13, 2003, the Company borrowed an aggregate of $335,000 from members of its current and former management, as more fully described in note (2) Operations and Financing.

Toucan Capital Loans

      From February 1, 2004 through September 7, 2005, the Company issued thirteen promissory notes to Toucan Capital pursuant to which Toucan Capital loaned the Company an aggregate of $6.75 million in bridge loan financing as more fully described in note (2) Operations and Financing.

Toucan Partners Loans

      From November 14, 2005 through December 30, 2005, the Company issued two promissory notes to Toucan Partners pursuant to which Toucan Partners loaned the Company an aggregate of $650,000 in loan financing, as more fully described in note (2) Operations and Financing.

(10) Unaudited Quarterly Financial Information (in thousands, except loss per share data)

      The following table contains selected unaudited statement of operations information for each of the quarters in 2004 and 2005. The Company believes that the following information reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	2004			2004			2004			2004
Total revenues	$	127		$	116		$	91		$	56
Net loss applicable to common stockholders	$	(828	)	$	(1,019	)	$	(2,266	)	$	(4,395	)

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	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	2004			2004			2004			2004
Net loss per share applicable to common stockholders — basic and diluted	$	(0.04	)	$	(0.05	)	$	(0.12	)	$	(0.24	)
Weighted average shares used in computing basic and diluted loss per share		19,025			19,026			19,026			19,026

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	2005			2005			2005			2005
Total revenues	$	87		$	8		$	15		$	14
Net loss applicable to common stockholders	$	(2,526	)	$	(2,638	)	$	(2,782	)	$	(1,987	)
Net loss per share applicable to common stockholders — basic and diluted	$	(0.13	)	$	(0.14	)	$	(0.15	)	$	(0.10	)
Weighted average shares used in computing basic and diluted loss per share		19,035			19,078			19,078			19,078

(11) Loss on Sublease

      On June 30, 2003, the Company entered into a Settlement Agreement with Nexus Canyon Park, its landlord of a Bothell, Washington facility. Under this Settlement Agreement, Nexus Canyon Park agreed to permit premature termination of the lease and excuse the Company from future performance of lease obligations in exchange for 90,000 shares of its unregistered common stock with a fair value of $35,000 and Nexus’ retention of the Company’s $1.0 million lease security deposit. The Settlement Agreement resulted in an additional loss on facility sublease and lease termination of $174,000, net of deferred rent of $202,000.

(12) Impairment and Disposal of Long-lived Assets

      Upon signing the June 30, 2003 lease cancellation with Nexus, its prior landlord with respect to the entire prior leased space, the Company on September 30, 2003 recorded an additional loss on disposal of assets of approximately $904,000 primarily related to leasehold improvements and equipment that were not utilized in its new facility of 14,000 square feet.

      The Company subsequently vacated its 14,000 square foot laboratory and administrative space on December 15, 2004 and entered a sublease at the same facility for approximately 5,047 square feet of strictly administrative space. The Company sold, disposed, or impaired $337,000 of fixed assets, in the third and fourth quarters of 2004, recognizing a loss on retirement of fixed assets of approximately $83,000, net of depreciation, and cash received of approximately $41,000, the net of which is included in general and administrative expenses as of December 31, 2004.

      The Company vacated the 5,045 square foot facility when signing a new sublease on November 4, 2005, and moving to a smaller administrative only facility of 2,325 square feet on December 31, 2005. The Company sold, disposed, or impaired $159,000 of fixed assets and leasehold improvements, in the third and fourth quarters of 2005, recognizing a loss on retirement of fixed assets of approximately $41,000, net of depreciation, and cash received of approximately $97,000, the net of which is included in general and administrative expenses as of December 31, 2005.

(13) Subsequent Events

Loan Agreement

      On March 9, 2006, the Company issued Toucan Partners a secured promissory note in the principal amount of $300,000 with repayment due upon written demand on or after the first anniversary of the note. Interest accrues at the rate of 10% per annum, compounded annually, on a 365-day year basis.

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      Subsequently, the non-convertible note was amended and restated in order to make it convertible on the same terms and conditions as the convertible notes previously issued to Toucan Capital and Toucan Partners, and warrants were issued to Toucan Partners on the same terms and conditions as warrants were previously issued to Toucan Capital and Toucan Partners.

Private Placement

      On March 30, 2006, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a group of accredited investors pursuant to which the Company agreed to sell an aggregate of 39,467,891 shares of its common stock, at a price of $0.14 per share, and to issue, for no additional consideration, warrants to purchase up to an aggregate of approximately 19.7 million shares of Company common stock. The Company received gross proceeds of $5,525,505, before offering expenses.

      The Warrants expire five years after issuance, and are initially exercisable at a price of $0.14 per share, subject to adjustments under certain circumstances.

      Under the Purchase Agreement, the Company has agreed to register for resale under the Securities Act both the Shares and the Warrant Shares. Under the terms of the Purchase Agreement, the Company is required to file a registration statement with the SEC within 45 days of the transaction closing date. The Company also agreed to other customary obligations regarding registration, including matters relating to indemnification, maintenance of the registration statement, payment of expenses, and compliance with state “blue sky” laws. The Company may be liable for liquidated damages to holders of the Shares and Warrant Shares (a) if the registration statement is not filed on or prior to May 19, 2006; (b) if the registration statement is not declared effective by the SEC on or prior to July 3, 2006 (subject to potential extension under certain circumstances); or (c) if the registration statement (after being declared effective) ceases to be effective in a manner, and for a period of time, that violates the Company’s obligations under the Purchase Agreement. The amount of the liquidated damages payable to the PIPE investors is, in aggregate, one percent (1%) of the aggregate purchase price of the shares per month, subject to a cap of ten percent (10%) of the aggregate purchase price of the shares.

Exercise of Management Warrants

      In conjunction with the private placement, Alton Boynton, the Company’s President and Marnix Bosch, the Company’s Vice President, Vaccine Research and Development, exercised their warrants, on a net exercise basis, for 1,895,479 and 424,669 shares respectively.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bothell, State of Washington, on April 17, 2006.

NORTHWEST BIOTHERAPEUTICS, INC.

By:  /s/ALTON L. BOYNTON

Alton L. Boynton

Its: President (Principal Executive Officer and Principal Financial & Accounting Officer)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ ALTON L. BOYNTON, PH.D. Alton L. Boynton, Ph.D.	Director	April 17, 2006

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NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)

EXHIBIT INDEX

Exhibit
Number			Description
	3	.1*	Sixth Amended and Restated Certificate of Incorporation, as amended.
	3	.2	Second Amended and Restated Bylaws of the Company.(3.2)(1)
	3	.3*	Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Preferred Stock, as amended.
	3	.4*	Certificate of Designations, Preferences and Rights of Series A-1 Cumulative Convertible Preferred Stock.
	4	.1	Form of common stock certificate.(4.1)(2)
	4	.2	Northwest Biotherapeutics, Inc. Stockholders Rights Plan dated February 26, 2002 between the Company and Mellon Investors Services, LLC.(4.2)(3)
	4	.3	Form of Rights Certificate.(4.1)(3)
	4	.4	Rights Agreement Amendment dated April 26, 2004.(4.1)(4)
	10	.1	Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated November 14, 2005 in the principal amount of $400,000 between the Company and Toucan Partners, LLC.(10.27)(5)
	10	.2*	Amended and Restated Loan Agreement, Security Agreement and 10% Secured Promissory Note originally dated December 30, 2005, and amended and restated on April 17, 2006 in the principal amount of $250,000 between the Company and Toucan Partners, LLC.
	10	.3*	Amended and Restated Loan Agreement, Security Agreement and 10% Secured Promissory Note originally dated March 9, 2006, and amended and restated on April 17, 2006 in the principal amount of $300,000 between the Company and Toucan Partners, LLC.
	10	.4*	Amended and Restated Investor Rights Agreement dated April 17, 2006.
	10	.5	Securities Purchase Agreement, dated March 30, 2006 by and among the Company and the Investors identified therein.(10.1)(6)
	10	.6	Form of Warrant.(10.2)(6)
	10	.7	Warrant to purchase securities of the Company dated April 26, 2004 issued to Toucan Capital Fund II, L.P.(10.9)(7)
	10	.8	Warrant to purchase securities of the Company dated June 11, 2004 issued to Toucan Capital Fund II, L.P.(10.8)(7)
	10	.9	Warrant to purchase securities of the Company dated July 30, 2004 issued to Toucan Capital Fund II, L.P.(10.7)(7)
	10	.10	Warrant to purchase securities of the Company dated October 22, 2004 issued to Toucan Capital Fund II, L.P.(10.3)(8)
	10	.11	Warrant to purchase securities of the Company dated November 10, 2004 issued to Toucan Capital Fund II, L.P.(10.3)(9)
	10	.12	Warrant to purchase securities of the Company dated December 27, 2005 issued to Toucan Capital Fund II, L.P.(10.3)(10)
	10	.13	First Amendment to Warrants between Northwest Biotherapeutics, Inc. and Toucan Capital Fund II, L.P. dated January 26, 2005.(10.5)(1)
	10	.14	Warrant to purchase Series A Preferred Stock dated January 26, 2005 issued to Toucan Capital Fund II, L.P.(10.2)(1)
	10	.15	Warrant to purchase securities of the Company dated April 12, 2005 issued to Toucan Capital Fund II, L.P.(10.39)(11)
	10	.16	Warrant to purchase securities of the Company dated May 13, 2005 issued to Toucan Capital Fund II, L.P.(10.3)(12)

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Exhibit
Number			Description
	10	.17	Warrant to purchase securities of the Company dated June 16, 2005 issued to Toucan Capital Fund II, L.P.(10.3)(13)
	10	.18	Warrant to purchase securities of the Company dated July 26, 2005 issued to Toucan Capital Fund II, L.P.(10.3)(14)
	10	.19	Warrant to purchase securities of the Company dated September 7, 2005 issued to Toucan Capital Fund II, L.P.(10.3)(15)
	10	.20	Warrant to purchase securities of the Company dated November 14, 2005 issued to Toucan Partners, LLC.(10.17)(5)
	10	.21*	Warrant to purchase securities of the Company dated April 17, 2006 issued to Toucan Partners, LLC.
	10	.22*	Warrant to purchase securities of the Company dated April 17, 2006 issued to Toucan Partners, LLC.
	10	.23*	Amended and Restated Recapitalization Agreement by and between the Company and Toucan Capital Fund II, L.P., as amended.
	10	.24*	Amended and Restated Binding Term sheet, as amended.
	10	.25	Amended and Restated Employment Agreement with Dr. Alton L. Boynton(10.1)(16)
	10	.26	Employment Agreement with Paul Zeltzer.(99.1)(17)
	10	.27*	Form of Warrant to purchase common stock of the Company dated November 13, 2003, as amended.
	10	.28	Services Proposal between the Company and Cognate Therapeutics, Inc. dated July 30, 2004.(10.35)(7)
	10	.29	1998 Stock Option Plan.(10.15)(2)
	10	.30	1999 Executive Stock Option Plan.(10.16)(2)
	10	.31	2001 Stock Option Plan.(10.17)(2)
	10	.32	2001 Nonemployee Director Stock Incentive Plan.(10.18)(2)
	10	.33	Employee Stock Purchase Plan.(10.19)(2)
	10	.34*	Lease Agreement.
	10	.35*	Clinical Study Agreement between the Company and the Regents of the University of California dated February 14, 2006.
	11	.1	Computation of net loss per share (included in notes to financial statements).
	23	.1*	Consent of KPMG LLP, Independent Registered Accounting Firm.*
	23	.2*	Consent of Peterson Sullivan, PLLC, Independent Registered Accounting Firm.*
	31	.1*	Certification of President (Principal Executive, Financial and Accounting Officer), Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	32	.1*	Certification of President Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith.

(1)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K, February 1, 2005.
(2)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Form S-1 (Registration No. 333-67350).
(3)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Form 8-A on July 8, 2002.
(4)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Form 10-K on May 14, 2004.

85

(5)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Quarterly Report on Form 10-Q on November 14, 2005.
(6)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on March 31, 2006.
(7)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Quarterly Report on Form 10-Q on November 15, 2004.
(8)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on October 22, 2004.
(9)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on November 10, 2004.

(10)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on December 27, 2004.
(11)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Annual Report on Form 10-K on April 15, 2005.
(12)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on May 18, 2005.
(13)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on June 21, 2005.
(14)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on August 1, 2005.
(15)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on September 9, 2005.
(16)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Quarterly Report on Form 10-Q on November 11, 2003.
(17)	Incorporated by reference to the exhibit shown in the preceding parentheses filed with the Registrant’s Current Report on Form 8-K on August 5, 2005.

86 EX-3.1 2 v16023exv3w1.txt EXHIBIT 3.1 EXHIBIT 3.1 SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NORTHWEST BIOTHERAPEUTICS INC. The undersigned, Daniel O. Wilds and Alton L. Boynton, hereby certify that: 1. They are the duly elected and acting President and Secretary, respectively, of Northwest Biotherapeutics, Inc., a Delaware corporation. 2. The Certificate of Incorporation of this corporation was originally filed with the Secretary of State of Delaware on July 29, 1998. 3. The First Amended and Restated Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on September 15, 1998. 4. The Second Amended and Restated Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on March 26, 1999. 5. The Third Amended and Restated Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on October 24, 2000. 6. The Fourth Amended and Restated Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on June 1, 2001. 7. The Fifth Amended and Restated Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on June 26, 2001. 8. The Certificate of Incorporation of this corporation shall be amended and restated to read in full as follows: ARTICLE I The name of the corporation is Northwest Biotherapeutics Inc. (the "Corporation"). ARTICLE II The address of the Corporation's registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New Castle. The name of its registered agent at such address is Corporation Service Company. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE IV CAPITALIZATION 1. Authorized Capital. (a) The total number of shares of stock that the Corporation shall have the authority to issue is one hundred forty million (140,000,000) shares of capital stock, consisting of (i) fifteen million (15,000,000) shares of preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii) one hundred twenty-five million (125,000,000) shares of common stock, par value $0.001 per share (the "Common Stock"). (b) Subject to the provisions of this Certificate of Incorporation and the Preferred Stock Designation (as defined below) creating any series of Preferred Stock, the Corporation may issue shares of its capital stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors of the Corporation (the "Board of Directors"), which is expressly authorized to fix the same in its absolute discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. (c) The right to cumulate votes for the election of directors as provided in Section 214 of the DGCL shall not be granted and is hereby expressly denied. (d) No stockholder of the Corporation shall by reason of his/her/its holding shares of any class of capital stock of the Corporation have any preemptive or preferential right to acquire or subscribe for any additional, unissued or treasury shares (whether now or hereafter acquired) of any class of capital stock of the Corporation now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying any right, option or warrant to subscribe for or acquire shares of any class of capital stock of the Corporation now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures, bonds or other securities would adversely affect the dividends or voting or other rights of that stockholder. 2. Preferred Stock. (a) The Preferred Stock may be issued from brae to time in one or more series. Authority is hereby expressly granted to and vested in the Board of Directors to authorize from time to time the issuance of Preferred Stock in one or more series. With respect to each 2 series of Preferred Stock authorized by it, the Board of Directors shall be authorized to establish by resolution or resolutions, and by filing a certificate pursuant to applicable law of the State of Delaware (the "Preferred Stock Designation"), the following to the fullest extent now or hereafter permitted by the DGCL: (1) the designation of such series; (2) the number of shares to constitute such series; (3) whether such series is to have voting rights (full, special or limited) or is to be without voting rights; (4) if such series is to have voting rights, whether or not such series is to be entitled to vote as a separate class either alone or together with the holders of the Common Stock or one or more other series of Preferred Stock; (5) the preferences and relative, participating, optional, conversion or other special rights (if any) of such series and the qualifications, limitations or restrictions (if any) with respect to such series; (6) the redemption rights and price(s), if any, of such series, and whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking funds or funds are to be established, the periodic amount thereof and the terms and provisions relative to the operation thereof, (7) the dividend rights and preferences (if any) of such series, including, without limitation, (i) the rates of dividends payable thereon, (ii) the conditions upon which and the time when such dividends are payable, (iii) whether or not such dividends shall be cumulative or noncumulative and, if cumulative, the date or dates from which such dividends shall accumulate and (iv) whether or not the payment of such dividends shall be preferred to the payment of dividends payable on the Common Stock or any other series of Preferred Stock; (8) the preferences (if any), and the amounts thereof, which the holders of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding-up of, or upon any distribution of the assets of, the Corporation; (9) whether or not the shares of such series, at the option of the Corporation or the holders thereof or upon the happening of any specified event, shall be convertible into or exchangeable for (i) shares of Common Stock, (ii) shares of any other series of Preferred Stock or (iii) any other stock or securities of the Corporation; (10) if such series is to be convertible or exchangeable, the price or prices or ratio or ratios or rate or rates at which such conversion or exchange may be 3 made and the terms and conditions (if any) upon which such price or prices or ratio or ratios or rate or rates may be adjusted; and (11) such other rights, powers and preferences with respect to such series as may to the Board of Directors seem advisable. Any series of Preferred Stock may vary from any other series of Preferred Stock in any or all of the foregoing respects and in any other manner. (b) The Board of Directors may, with respect to any existing series of Preferred Stock but subject to the Preferred Stock Designation creating such series, (i) increase the number of shares of Preferred Stock designated for such series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series and (ii) decrease the number of shares of Preferred Stock designated for such series by a resolution subtracting from such series shares of Preferred Stock designated for such series (but not below the number of shares of such series then outstanding), and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock. (c) No vote of the holders of the Common Stock or the Preferred Stock shall, unless otherwise expressly provided in a Preferred Stock Designation creating any series of Preferred Stock, be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation. Shares of any series of Preferred Stock that have been authorized for issuance pursuant to this Certificate of Incorporation and that have been issued and reacquired in any manner by the Corporation (including upon conversion or exchange thereof) shall be restored to the status of authorized and unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors and a Preferred Stock Designation as set forth above. 3. Common Stock. (a) The holders of shares of the Common Stock shall be entitled to vote upon all matters submitted to a vote of the common stockholders of the Corporation and shall be entitled to one vote for each share of the Common Stock held. (b) Subject to the prior rights and preferences (if any) applicable to shares of Preferred Stock of any series, the holders of shares of the Common Stock shall be entitled to receive such dividends (payable in cash, stock or otherwise) as may be declared thereon by the Board of Directors at any time and from time to time out of any funds of the Corporation legally available therefor. (c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the preferential or other rights (if any) of the holders of shares of the Preferred Stock in respect thereof, the holders of shares of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to 4 its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. For purposes of this paragraph (c), a liquidation, dissolution or winding-up of the Corporation shall not be deemed to be occasioned by or to include (i) any consolidation or merger of the Corporation with or into another corporation or other entity or (ii) a sale, lease, exchange or conveyance of all or a part of the assets of the Corporation. 4. Stock Options, Warrants, etc. Unless otherwise expressly prohibited in the Preferred Stock Designation creating any series of Preferred Stock, the Corporation shall have authority to create and issue warrants, rights and options entitling the holders thereof to purchase from the Corporation shares of the Corporation's capital stock of any class or series or other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued capital stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights or options; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. ARTICLE V The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal Bylaws or adopt new Bylaws; provided however, that the Board of Directors may not repeal or amend any bylaw that stockholders have expressly provided may not be amended or repealed by the Board of Directors. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of this Corporation by the affirmative vote of the holders of not less than two-thirds of the outstanding shares entitled to vote thereon and, to the extent, if any, provided by resolution adopted by the Board of Directors authorizing the issuance of a class of series of Common Stock or Preferred Stock, by the affirmative vote of the holders of not less than two-thirds of the outstanding shares of such class or series, voting as a separate group. ARTICLE VI (A) Board Of Directors. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors, the number of which shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption) (the "Whole Board"). The Directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, Class I, Class II and Class III, each consisting as nearly as possible of one-third of the Whole Board. All Directors shall hold office until their successors are elected and qualified, or until their earlier death, resignation, disqualification or removal. Class I Directors shall be elected for a term of one year; Class II Directors shall be elected for a term of two years; and Class III Directors shall be elected for a term of three years; and at each annual stockholders' meeting thereafter, successors to the Directors whose terms 5 shall expire that year shall be elected to hold office for a term of three years, so that the term of office of one class of Directors shall expire in each year. Any vacancy on the Board of Directors that results from an increase in the number of Directors may be filled by the affirmative vote of a majority of the Directors then in office and a majority of the Continuing Directors, voting separately and as a subclass of Directors, and any other vacancy on the Board of Directors may be filled by the affirmative vote of a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director. Any Director elected to fill a vacancy not resulting from an increase in the number of Directors shall serve for a term equivalent to the remaining unserved portion of the term of such newly elected Director's predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such Directorships shall be governed by the terms of this Amended and Restated Certificate of Incorporation applicable thereto, and such Directors shall not be divided into classes pursuant to this Section (A) unless expressly provided by such terms. (B) Removal of Directors by Stockholders. A Director may be removed from office only for "cause" at a special meeting of stockholders called for that purpose, by the affirmative vote of the holders of not less than two-thirds of the shares entitled to elect the Director or Directors whose removal is being sought. The vacancy created by the removal of any Director under this Section (B) shall be filled only by the affirmative vote of the holders of at least two-thirds of the shares entitled to elect the Director who was removed. As used herein, "cause" shall mean (a) willful and continued material failure, refusal or inability to perform the Director's duties to the corporation or the willful engaging in gross misconduct that is materially and demonstrably damaging to the corporation; or (b) conviction for any crime involving moral turpitude or any other illegal act that materially and adversely reflects upon the business, affairs or reputation of the corporation or on the Director's ability to perform the Director's duties to the corporation. ARTICLE VII (A) To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. (B) The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation. (C) Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any 6 action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision ARTICLE VIII (A) Amendments to Restated Certificate of Incorporation. The following Articles and Sections may be amended or repealed only upon the affirmative vote of the holders of at least two-thirds of the outstanding shares and, to the extent, if any, provided by resolution adopted by the Board of Directors authorizing the issuance of a class or series of Common Stock or Preferred Stock, by the affirmative vote of the holders of at least two-thirds of the outstanding shares of such class or series, voting as a separate voting group: Article V ("Bylaws"); Article VI ("Directors"); Article VII ("Limitation of Director Liability"); Article VIII ("Amendments to Restated Certificate of Incorporation"); Article IX ("Business Combinations"). ARTICLE IX (A) Business Combinations. 1. Definitions. For the purposes of this Article IX: a. "Business Combination" means (i) a merger, share exchange or consolidation of this corporation or any of its Subsidiaries with any other corporation; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other disposition or encumbrance, whether in one transaction or a series of transactions, by this corporation or any of its Subsidiaries of all or a substantial part of this corporation's assets otherwise than in the usual and regular course of business; or (iii) any agreement, contract or other arrangement providing for any of the foregoing transactions. b. "Subsidiary" means a domestic or foreign corporation, a majority of the outstanding voting shares of which are owned, directly or indirectly, by this corporation. 2. Information Considered by Board of Directors. In considering a Business Combination, the Board of Directors may take into account factors in addition to potential economic benefits to the stockholders, including without limitation (i) comparison of the proposed consideration to be received by stockholders in relation to the then current market price of the corporation's capital stock, the estimated current value of the corporation in a freely negotiated transaction and the estimated future value of the corporation as an independent entity, 7 and (ii) the impact of such a transaction on the employees, suppliers and customers of the corporation and its effect on the communities in which the corporation operates. The foregoing Fifth Amended and Restated Certificate of Incorporation has been duly adopted by the Corporation's Board of Directors and stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. Executed at Seattle, Washington, on June 21, 2001. /s/ Daniel O. Wilds ---------------------------------------- Daniel O. Wilds, President /s/ Alton L. Boynton ---------------------------------------- Alton L. Boynton, Secretary 8 CERTIFICATE OF AMENDMENT OF THE SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NORTHWEST BIOTHERAPEUTICS Pursuant to Section 242 of the General Corporation Law of the State of Delaware Northwest Biotherapeutics, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: That, by written action of the Board of Directors of the Corporation, a resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Certificate of Incorporation, as amended, of the Corporation and declaring such amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware, and written notice of such consent has been given to all stockholders who have not consented in writing to such amendment. The resolution setting forth the amendment is as follows: RESOLVED: That Article IV, Section 1(a) of the Sixth Amended and Restated Certificate of Incorporation of the Corporation, be and hereby is deleted in its entirety and the following Article IV, Section 1(a) is inserted in lieu thereof. ARTICLE IV (a) The total number of shares that the Corporation shall have the authority to issue is four hundred million (400,000,000) shares of capital stock, consisting of (i) one hundred million (100,000,000) shares of preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii) three hundred million (300,000,000) shares of common stock, par value $0.001 per share (the "Common Stock"). Executed at Seattle, Washington, on December 29, 2004. NORTHWEST BIOTHERAPEUTICS, INC. By ------------------------------------- Name: Alton L. Boynton Title: President, Chief Executive Officer and Secretary EX-3.3 3 v16023exv3w3.txt EXHIBIT 3.3 Exhibit 3.3 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK OF NORTHWEST BIOTHERAPEUTICS, INC. (Pursuant to Section 151 of the Delaware General Corporation Law) Northwest Biotherapeutics, Inc. (the "COMPANY"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies that, pursuant to authority conferred on its Board of Directors (the "BOARD") by the Sixth Amended and Restated Certificate of Incorporation, as amended, of the Company, the following resolution was adopted by the Board by unanimous written consent dated January 26, 2005, which resolution remains in full force and effect on the date hereof: RESOLVED, that there is hereby established a series of the Company's authorized Preferred Stock (the "PREFERRED STOCK") having a par value of $0.001 per share, which series shall be designated as "Series A Cumulative Convertible Preferred Stock" (the "SERIES A PREFERRED") and shall consist of fifty million (50,000,000) shares. The shares of Series A Preferred shall have the voting powers, designations, preferences and other special rights, and qualifications, limitations and restrictions thereof set forth below: 1. DIVIDEND RIGHTS. (A) Holders of Series A Preferred, in preference to the holders of Common Stock, shall be entitled to receive, when, as and if declared by the Board, but only out of funds that are legally available therefor, cash dividends at the rate of ten percent (10%) of the Original Issue Price (as defined below) per annum on each outstanding share of Series A Preferred. Such dividends shall be cumulative, whether or not earned or declared, shall be compounded quarterly, and shall be payable as and when declared by the Board, and upon the occurrence of a Liquidation Event, Acquisition or Asset Transfer (each as defined below). (B) The "ORIGINAL ISSUE PRICE" of the Series A Preferred shall be four cents ($0.04) per share (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof). (C) So long as any shares of Series A Preferred are outstanding, the Company shall not pay or declare any dividend, whether in cash or property, or make any other distribution on the Common Stock or any other securities issued by the Company other than the Series A Preferred, or purchase, redeem or otherwise acquire for value any shares of Common Stock or any other securities issued by the Company other than the Series A Preferred until all 1. dividends as set forth in Section 1(a) above on the Series A Preferred shall have been paid or declared an set apart, except for: (I) acquisitions of up to $100,000 of Common Stock by the Company per year from employees, officers, directors, consultants, advisors or other persons performing services for the Company pursuant to agreements which permit the Company to repurchase such shares at cost upon termination of services to the Company; (II) subject to approval of the holders of a majority of the outstanding shares of Series A Preferred in accordance with Section 2(b)(vi) hereof, acquisitions of Common Stock in exercise of the Company's right of first refusal to repurchase such shares; or (III) distributions to holders of Common Stock in accordance with Sections 3 and 4. (D) In the event dividends are paid on any share of Common Stock or any other securities issued by the Company, the Company shall pay an additional dividend on all outstanding shares of Series A Preferred in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock or any other securities issued by the Company, respectively. (E) The provisions of Sections 1(c) and 1(d) shall not apply to a dividend payable solely in Common Stock to which the provisions of Section 5(f) hereof are applicable. 2. VOTING RIGHTS. (A) GENERAL RIGHTS. Each holder of shares of the Series A Preferred shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series A Preferred could be converted (pursuant to Section 5 hereof) immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent and shall have voting rights and powers equal to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the Company. Except as otherwise provided herein or as required by law, the Series A Preferred shall vote together with the Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the Common Stock. (B) SEPARATE VOTE OF SERIES A PREFERRED. For so long as at least 1,000,000 shares of Series A Preferred (subject to adjustment for any stock split, reverse stock split or other similar event affecting the Series A Preferred after the filing date hereof) remain outstanding, in addition to any other vote or consent required herein or by law, the approval of the Board and the vote or written consent of the holders of at least a majority of the outstanding Series A Preferred shall be necessary for effecting or validating the following actions (whether by merger, recapitalization or otherwise): 2. (I) Any amendment, alteration, or repeal of any provision of the Certificate of Incorporation or the Bylaws of the Company (including any filing of a Certificate of Designation); (II) Any issuance of shares of Series A Preferred or any other securities exercisable for or convertible into Series A Preferred; (III) Any increase or decrease (other than by conversion) in the designated number of shares of Series A Preferred; (IV) Any increase or decrease (other than by conversion) in the authorized number of shares of Common Stock or Preferred Stock; (V) Any authorization, designation or issuance, whether by recapitalization, reclassification or otherwise, of any class or series of equity securities or any other securities exercisable for or convertible into equity securities of the Company that has redemption rights or that ranks on a parity with or senior to the Series A Preferred in right of liquidation preference, voting rights, dividend rights or any other rights, preferences or privileges, or any increase in the authorized or designated number of any such new class or series; (VI) Any redemption, repurchase, acquisition (or payment into or setting aside for a sinking fund for such purpose), payment or declaration of dividends or other distributions with respect to Common Stock or common stock equivalents (except for acquisitions of Common Stock by the Company permitted by Section 1(c)(i) hereof); (VII) Any agreement by the Company or its stockholders regarding an Asset Transfer or Acquisition (each as defined in Section 4 hereof); (VIII) Any dissolution, liquidation or winding up of the Company; (IX) Any increase or decrease in the authorized number of members of the Board; (X) Any sale, lease, assignment, transfer or other conveyance of, or any encumbrance granted upon, all or substantially all of the assets of the Company or any of its subsidiaries in one or more related transactions; (XI) Any reclassification, recapitalization or other change of any capital stock of the Company; (XII) Any issuance of shares of Common Stock or Convertible Securities after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary other than pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board and the holders of a majority of the outstanding shares of Series A Preferred; or 3. (XIII) Any agreement, promise, commitment, obligation or undertaking to do any of the foregoing. 3. LIQUIDATION RIGHTS. (A) Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), before any distribution or payment shall be made to the holders of any Common Stock or other equity security, the holders of Series A Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution for each share of Series A Preferred held by them, an amount per share of Series A Preferred equal to the Original Issue Price plus (to the extent of current and/or retained earnings) all accrued and unpaid dividends and declared and unpaid dividends on the Series A Preferred (or such lesser amount as is the maximum amount acceptable under applicable U.S. Small Business Administration and Securities and Exchange Commission rules and regulations). If, upon any such Liquidation Event, the assets of the Company shall be insufficient to make payment in full to all holders of Series A Preferred of the liquidation preference set forth in this Section 3(a), then such assets (or consideration) shall be distributed among the holders of Series A Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled. (B) After the payment of the full liquidation preference of the Series A Preferred as set forth in Section 3(a) above, the assets of the Company legally available for distribution in such Liquidation Event (or the consideration received by the Company or its stockholders in such Acquisition or Asset Transfer), if any, shall be distributed ratably to the holders of the Common Stock and Series A Preferred on an as-if-converted to Common Stock basis. 4. ASSET TRANSFER OR ACQUISITION RIGHTS. (A) In the event that the Company is a party to an Acquisition or Asset Transfer (as hereinafter defined), then each holder of Series A Preferred shall be entitled to receive, for each share of Series A Preferred then held, out of the proceeds of such Acquisition or Asset Transfer, the greater of the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event pursuant to (i) Section 3(a) and 3(b) above or (ii) the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event with respect to such shares if such shares had been converted to Common Stock immediately prior to such Acquisition or Asset Transfer. (B) For the purposes of this Section 4: (i) "ACQUISITION" shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in 4. excess of fifty percent (50%) of the Company's voting power is transferred; provided that an Acquisition shall not include (x) any issuance of Series A Preferred contemplated by the Amended and Restated Recapitalization Agreement, dated as of July 30, 2004, by and between the Company and Toucan Capital Fund II, L.P., as such agreement may be amended from time to time (the "Recapitalization Agreement"), the conversion of any of the Notes representing Bridge Funding, or exercise of any Bridge Warrants or Preferred Stock Warrants (each as defined in the Recapitalization Agreement) and (y) any transaction or series of transactions specifically deemed not to constitute an "Acquisition" by the vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred; and (ii) "ASSET TRANSFER" shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company. (C) In any Acquisition or Asset Transfer, if the consideration received is other than cash, the value of such consideration will be deemed its fair market value as determined in good faith by the Board, provided that any securities shall be valued as follows: (I) Securities not subject to investment letter or other similar restrictions on free marketability (which shall be covered by (ii) below): (A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing sale prices of the securities on such quotation system over the ten (10) day period ending three (3) days prior to the closing; (B) If actively traded over-the-counter, the value shall be deemed to be the average of the last reported sales price of the securities over the ten (10) day period ending three (3) days prior to the closing; and (C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board. (II) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (A), (B) or (C) to reflect the approximate fair market value thereof, as determined in good faith by the Board. (III) Notwithstanding anything to the contrary in this Section 4, if the definitive transaction documents for an Acquisition or Asset Transfer provide for a different method of valuation, the method of valuation set forth in such documents shall control. 5. CONVERSION RIGHTS. The holders of the Series A Preferred shall have the following rights with respect to the conversion of the Series A Preferred into shares of Common Stock (the "CONVERSION RIGHTS"): 5. (A) OPTIONAL CONVERSION. Subject to and in compliance with the provisions of this Section 5, any shares of Series A Preferred may, at the option of the holder, be converted at any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series A Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "SERIES A PREFERRED CONVERSION RATE" then in effect (determined as provided in Section 5(b)) by the number of shares of Series A Preferred being converted. (B) SERIES A PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A Preferred (the "SERIES A PREFERRED CONVERSION RATE") shall be the quotient obtained by dividing the Original Issue Price of the Series A Preferred by the "Series A Preferred Conversion Price," calculated as provided in Section 5(c). (C) SERIES A PREFERRED CONVERSION PRICE. The conversion price for the Series A Preferred shall initially be the Original Issue Price of the Series A Preferred (the "SERIES A PREFERRED CONVERSION PRICE"). Such initial Series A Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 5. All references to the Series A Preferred Conversion Price herein shall mean the Series A Preferred Conversion Price as so adjusted. (D) MECHANICS OF CONVERSION. Each holder of Series A Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) in cash or, to the extent sufficient funds are not then legally available therefor or to the extent that the holder so elects, in Common Stock (at the Common Stock's fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends and accrued and unpaid dividends on the shares of Series A Preferred being converted and (ii) in cash (at the Common Stock's fair market value determined by the Board as of the date of conversion) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A Preferred. For the purposes of this Section 5(d), the fair market value of the Company's Common Stock shall be the last reported sales price reported on the NASD over-the-counter bulletin board (or if the Common Stock is traded on another securities market, the last reported sales price of the Common Stock on such securities market) on the date of conversion. If the Common Stock is not publicly traded on the date of conversion, the fair market value of the Company's Common Stock for the purposes of this Section 5(d) shall be the fair market value as determined in good faith by the Board. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. 6. (E) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any time or from time to time on or after the date that the first share of Series A Preferred is issued (the "ORIGINAL ISSUE DATE") the Company effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Preferred, the Series A Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if at any time or from time to time after the Original Issue Date the Company combines the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A Preferred, the Series A Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. (F) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If at any time or from time to time on or after the Original Issue Date the Company pays to holders of Common Stock a dividend or other distribution in additional shares of Common Stock without a corresponding dividend or other distribution to holders of Preferred Stock, the Series A Preferred Conversion Price then in effect shall be decreased as of the time of such issuance, as provided below: (I) The Series A Preferred Conversion Price shall be adjusted by multiplying the Series A Preferred Conversion Price then in effect by a fraction equal to: (A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and (B) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution; (II) If the Company fixes a record date to determine which holders of Common Stock are entitled to receive such dividend or other distribution, the Series A Preferred Conversion Price shall be fixed as of the close of business on such record date and the number of shares of Common Stock shall be calculated immediately prior to the close of business on such record date; and (III) If such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Preferred Conversion Price shall be adjusted pursuant to this Section 5(f) to reflect the actual payment of such dividend or distribution. (G) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, SUBSTITUTION, REORGANIZATION, MERGER OR CONSOLIDATION. If at any time or from time to time on or after the Original Issue Date the Common Stock issuable upon the conversion of the Series A Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by 7. recapitalization, reclassification, merger, consolidation or otherwise (other than an Acquisition or Asset Transfer as defined in Section 4 or a subdivision or combination of shares or stock dividend provided for elsewhere in this Section 5), in any such event each holder of Series A Preferred shall then have the right to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, merger, consolidation or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Preferred could have been converted immediately prior to such recapitalization, reclassification, merger, consolidation or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of Series A Preferred after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the Series A Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A Preferred) shall be applicable after that event and be as nearly equivalent as practicable. (H) SALE OF SHARES BELOW SERIES A PREFERRED CONVERSION PRICE. (I) If at any time or from time to time on or after the Original Issue Date the Company issues or sells, or is deemed by the express provisions of this Section 5(h) to have issued or sold, Additional Shares of Common Stock (as defined below), other than as provided in Section 5(e), 5(f) or 5(g) above, for an Effective Price (as defined below) less than the then effective Series A Preferred Conversion Price (a "Qualifying Dilutive Issuance"), then and in each such case, the then existing Series A Preferred Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price equal to such Effective Price. (II) For the purpose of making any adjustment required under this Section 5(h), the aggregate consideration received by the Company for any issue or sale of securities (the "AGGREGATE CONSIDERATION") shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as defined below) or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options. (III) For the purpose of the adjustment required under this Section 5(h), if the Company issues or sells (x) Preferred Stock or other stock, options, warrants, purchase rights or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as "CONVERTIBLE SECURITIES") or (y) rights 8. or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Series A Preferred Conversion Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus: (A) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and (B) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses. (C) If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities. (D) No further adjustment of the Series A Preferred Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Series A Preferred Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Series A Preferred Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities 9. or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior conversions of Series A Preferred. (IV) For the purpose of making any adjustment to the Conversion Price of the Series A Preferred required under this Section 5(h), "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 5(h) (including shares of Common Stock subsequently reacquired or retired by the Company), other than: (A) shares of Common Stock issued upon conversion of the Series A Preferred; (B) shares of Common Stock or Convertible Securities issued after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary that are (i) issued pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board; and (ii) designated as excluded from the definition of "Additional Shares of Common Stock" by the vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred; (C) up to 35,000 shares of Common Stock issued pursuant to the exercise of options with an exercise price of $0.0001 per share that were outstanding on April 26, 2004 and held by members of the Board; (D) shares of Common Stock or Convertible Securities issued pursuant to the exercise of the Initial Bridge Warrants (as defined in the Recapitalization Agreement); and (E) such additional shares of Common Stock or Convertible Securities that are designated as excluded from the definition of "Additional Shares of Common Stock" by the vote or written consent of the holders of a majority of the outstanding shares of Series A Preferred. References to Common Stock in the subsections of this clause (iv) above shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 5(h). The "EFFECTIVE PRICE" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 5(h), into the Aggregate Consideration received, or deemed to have been received by the Company for such issue under this Section 5(h), for such Additional Shares of Common Stock. In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable. 10. (V) In the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance (the "FIRST DILUTIVE ISSUANCE"), then in the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive Issuance as a part of the same transaction or series of related transactions as the First Dilutive Issuance (a "SUBSEQUENT DILUTIVE ISSUANCE"), then and in each such case upon a Subsequent Dilutive Issuance the Series A Preferred Conversion Price shall be reduced to the Series A Preferred Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance. (I) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A Preferred, if the Series A Preferred is then convertible pursuant to this Section 5, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and shall, upon request, prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Preferred so requesting at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Series A Preferred Conversion Price at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A Preferred. Failure to request or provide such notice shall have no effect on any such adjustment. (J) NOTICES OF RECORD DATE. Upon (i) 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, or (ii) any Acquisition (as defined in Section 4) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 4), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A Preferred at least ten (10) days prior to (x) the record date, if any, specified therein; or (y) if no record date is specified, the date upon which such action is to take effect (or, in either case, such shorter period approved by the holders of a majority of the outstanding Series A Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. 11. (K) AUTOMATIC CONVERSION. (I) Each share of Series A Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A Preferred Conversion Price, at any time upon the affirmative election of the holders of at least two-thirds of the outstanding shares of the Series A Preferred. Upon such automatic conversion, any declared and unpaid dividends and accrued and unpaid dividends shall be paid in accordance with the provisions of Section 5(d). (II) Upon the occurrence of the event specified in Section 5(k)(i) above, the outstanding shares of Series A Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A Preferred, the holders of Series A Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A Preferred. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any declared and unpaid dividends and accrued and unpaid dividends shall be paid in accordance with the provisions of Section 5(d). (L) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock (as determined by the Board) on the date of conversion. (M) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred, the Company will take such corporate 12. action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (N) NOTICES. Any notice required by the provisions of this Section 5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. (O) PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred so converted were registered. 6. NO REISSUANCE OF SERIES A PREFERRED. No shares or shares of Series A Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued. 7. AMENDMENTS. This Certificate of Designations may only be amended with the prior written consent of the holders of at least a majority of the outstanding Series A Preferred; provided, however, that Section 5(k)(i) hereof and this Section 7 may only be amended with the prior written consent of the holders of at least two-thirds of the outstanding Series A Preferred. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holders of at least a majority (or, in the case of actions prohibited or required to be performed by Section 5(k)(i) hereof or this Section 7, at least two-thirds) of the outstanding Series A Preferred. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 13. IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be duly executed as of the 26th day of January, 2005. NORTHWEST BIOTHERAPEUTICS, INC. /s/ Alton L. Boynton --------------------------------------- Name: Alton L. Boynton Title: President 14. CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK OF NORTHWEST BIOTHERAPEUTICS, INC. Northwest Biotherapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows, in accordance with the provisions of Section 151 of the Delaware General Corporation Law: FIRST: The name of the corporation is Northwest Biotherapeutics, Inc. (the "CORPORATION") SECOND: The date on which the Certificate of Incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware was on July 3, 2002. THIRD: The Corporation's Certificate of the Designations, Preferences and Rights of the Series A Cumulative Convertible Preferred Stock of the Corporation was originally filed with the Delaware Secretary of State on January 26, 2005 (the "SERIES A CERTIFICATE OF DESIGNATION"). FOURTH: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending the Certificate of Designation as follows: The Series A Certificate of Designation is hereby amended by striking out Section 1, subparagraphs (b), (c) and (d) thereof and by substituting in lieu of said subparagraphs the following new subparagraphs: (b) The original issue price of the Series A Preferred shall be four cents ($0.04) per share, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof (the "ORIGINAL ISSUE PRICE"). (c) So long as any shares of Series A Preferred are outstanding, the Company shall not pay or declare any dividend, whether in cash or property, or make any other distribution on the Common Stock or any other securities issued by the Company other than the Series A Preferred or the Series A-1 Cumulative Convertible Preferred Stock ("SERIES A-1 PREFERRED"), or purchase, redeem or otherwise acquire for value any shares of Common Stock or any other securities issued by the Company other than the Series A Preferred Series or the A-1 Preferred until all dividends as set forth in Section 1(a) above on the Series A Preferred shall have been paid or declared and set apart, except for: (I) acquisitions of up to $100,000 of Common Stock by the Company per year from employees, officers, directors, consultants, advisors or other persons performing services for the Company pursuant to agreements which permit the Company to repurchase such shares at cost upon termination of services to the Company; (II) subject to approval of the holders of a majority of the outstanding shares of Series A Preferred in accordance with Section 2(b)(vi) hereof, acquisitions of Common Stock in exercise of the Company's right of first refusal to repurchase such shares; or (III) distributions to holders of Common Stock in accordance with Sections 3 and 4. (d) In the event dividends are paid on any share of Common Stock or any other securities issued by the Company other than the Series A-1 Preferred, the Company shall pay an additional dividend on all outstanding shares of Series A Preferred in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock or any other securities issued by the Company, respectively. The Series A Certificate of Designation is hereby further amended by striking out Section 2, subparagraph (b)(vi) thereof and by substituting in lieu of said subparagraph the following new subparagraph: (vi) Any redemption, repurchase, acquisition (or payment into or setting aside for a sinking fund for such purpose), payment or declaration of dividends or other distributions with respect to Common Stock or common stock equivalents (except for acquisitions of Common Stock by the Company permitted by Section 1(c)(i) hereof and except for payment and declaration of dividends on Series A Preferred or Series A-1 Preferred); The Series A Certificate of Designation is hereby further amended by striking out Section 3 thereof and by substituting in lieu of said section the following new section: 3. LIQUIDATION RIGHTS. (a) Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), the holders of Series A Preferred shall be entitled to receive on a pari passu basis with the Series A-1 Preferred (collectively, with Series A Preferred, the "SERIES PREFERRED") before any distribution or payment shall be made to the holders of any Common Stock and any other equity security not expressly made senior to or pari passu with the holders of Series Preferred (the "JUNIOR STOCK"), out of the assets of the Company legally available for distribution for each share of Series Preferred held by them, an amount per share of Series A Preferred equal to the Original Issue Price plus (to the extent of current and/or retained earnings) all accrued and unpaid dividends and declared and unpaid dividends on the Series Preferred (or such lesser amount as is the maximum amount acceptable under applicable U.S. Small Business Administration and Securities and Exchange Commission rules and regulations). If, upon any such Liquidation Event, the assets of the Company shall be insufficient to make payment in full to all holders of Series Preferred of the liquidation preference set forth in this Section 3(a), then such assets (or consideration) shall be distributed among the holders of Series Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled. (b) After the payment of the full liquidation preference of the Series Preferred as set forth in Section 3(a) above and any other class or series of stock of the Company ranking upon liquidation senior or pari passu with the Series Preferred, the assets of the Company legally available for distribution in such Liquidation Event (or the consideration received by the Company or its stockholders in such Acquisition or Asset Transfer), if any, shall be distributed ratably to the holders of Junior Stock and Series Preferred on an as-if-converted to Common Stock basis. The Series A Certificate of Designation is hereby further amended by striking out Section 5 subparagraph (h)(iv)(A) thereof and by substituting in lieu of said subparagraph the following new subparagraph: (A) shares of Common Stock issued upon conversion of the Series A Preferred and Series A-1 Preferred; FIFTH: That the Corporation's holders of Series A Preferred waived notice of the time, place and purpose of a special meeting of the holders of Series A Preferred and duly approved the above amendment by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by Alton Boynton, its President, this 17th day of April, 2006. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton Boynton ----------------------------------- Name: Alton Boynton Title: President EX-3.4 4 v16023exv3w4.txt EXHIBIT 3.4 EXHIBIT 3.4 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A-1 CUMULATIVE CONVERTIBLE PREFERRED STOCK OF NORTHWEST BIOTHERAPEUTICS, INC. (Pursuant to Section 151 of the Delaware General Corporation Law) Northwest Biotherapeutics, Inc. (the "COMPANY"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies that, pursuant to authority conferred on its Board of Directors (the "BOARD") by the Sixth Amended and Restated Certificate of Incorporation, as amended, of the Company, the following resolution was adopted by the Board by unanimous written consent dated April 17, 2006, which resolution remains in full force and effect on the date hereof: RESOLVED, that there is hereby established a series of the Company's authorized Preferred Stock (the "PREFERRED STOCK") having a par value of $0.001 per share, which series shall be designated as "Series A-1 Cumulative Convertible Preferred Stock" (the "SERIES A-1 PREFERRED") and shall consist of ten million (10,000,000) shares. The shares of Series A-1 Preferred shall have the voting powers, designations, preferences and other special rights, and qualifications, limitations and restrictions thereof set forth below: 1. DIVIDEND RIGHTS. (A) Holders of Series A-1 Preferred, in preference to the holders of Common Stock, shall be entitled to receive, when, as and if declared by the Board, but only out of funds that are legally available therefor, cash dividends at the rate of ten percent (10%) of the Original Issue Price (as defined below) per annum on each outstanding share of Series A-1 Preferred. Such dividends shall be cumulative, whether or not earned or declared, shall be compounded quarterly, and shall be payable as and when declared by the Board, and upon the occurrence of a Liquidation Event, Acquisition or Asset Transfer (each as defined below). (B) The original issue price of the Series A-1 Preferred shall be one dollar and sixty cents ($1.60) per share, as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof (the "ORIGINAL ISSUE PRICE"). (C) So long as any shares of Series A-1 Preferred are outstanding, the Company shall not pay or declare any dividend, whether in cash or property, or make any other 1. distribution on the Common Stock or any other securities issued by the Company other than the Series A-1 Preferred or the Series A Cumulative Convertible Preferred Stock ("SERIES A PREFERRED"), or purchase, redeem or otherwise acquire for value any shares of Common Stock or any other securities issued by the Company other than the Series A-1 Preferred or the Series A Preferred until all dividends as set forth in Section 1(a) above on the Series A-1 Preferred shall have been paid or declared an set apart, except for: (I) acquisitions of up to $100,000 of Common Stock by the Company per year from employees, officers, directors, consultants, advisors or other persons performing services for the Company pursuant to agreements which permit the Company to repurchase such shares at cost upon termination of services to the Company; (II) subject to approval of the holders of a majority of the outstanding shares of Series A-1 Preferred in accordance with Section 2(b)(vi) hereof, acquisitions of Common Stock in exercise of the Company's right of first refusal to repurchase such shares; or (III) distributions to holders of Common Stock in accordance with Sections 3 and 4. (D) In the event dividends are paid on any share of Common Stock or any other securities issued by the Company other than the Series A Preferred, the Company shall pay an additional dividend on all outstanding shares of Series A-1 Preferred in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock or any other securities issued by the Company, respectively. (E) The provisions of Sections 1(c) and 1(d) shall not apply to a dividend payable solely in Common Stock to which the provisions of Section 5(f) hereof are applicable. 2. VOTING RIGHTS. (A) GENERAL RIGHTS. Each holder of shares of the Series A-1 Preferred shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series A-1 Preferred could be converted (pursuant to Section 5 hereof) immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent and shall have voting rights and powers equal to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the Company. Except as otherwise provided herein or as required by law, the Series A-1 Preferred shall vote together with the Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the Common Stock. (B) SEPARATE VOTE OF SERIES A-1 PREFERRED. For so long as at least 1,000,000 shares of Series A-1 Preferred (subject to adjustment for any stock split, reverse stock split or other similar event affecting the Series A-1 Preferred after the filing date hereof) remain 2. outstanding, in addition to any other vote or consent required herein or by law, the approval of the Board and the vote or written consent of the holders of at least a majority of the outstanding Series A-1 Preferred shall be necessary for effecting or validating the following actions (whether by merger, recapitalization or otherwise): (I) Any amendment, alteration, or repeal of any provision of the Certificate of Incorporation or the Bylaws of the Company (including any filing of a Certificate of Designation); (II) Any issuance of shares of Series A-1 Preferred or any other securities exercisable for or convertible into Series A-1 Preferred; (III) Any increase or decrease (other than by conversion) in the designated number of shares of Series A-1 Preferred; (IV) Any increase or decrease (other than by conversion) in the authorized number of shares of Common Stock or Preferred Stock; (V) Any authorization, designation or issuance, whether by recapitalization, reclassification or otherwise, of any class or series of equity securities or any other securities exercisable for or convertible into equity securities of the Company that has redemption rights or that ranks on a parity with or senior to the Series A-1 Preferred in right of liquidation preference, voting rights, dividend rights or any other rights, preferences or privileges, or any increase in the authorized or designated number of any such new class or series; (VI) Any redemption, repurchase, acquisition (or payment into or setting aside for a sinking fund for such purpose), payment or declaration of dividends or other distributions with respect to Common Stock or common stock equivalents (except for acquisitions of Common Stock by the Company permitted by Section 1(c)(i) hereof and except for payment and declaration of dividends on Series A Preferred or Series A-1 Preferred); (VII) Any agreement by the Company or its stockholders regarding an Asset Transfer or Acquisition (each as defined in Section 4 hereof); (VIII) Any dissolution, liquidation or winding up of the Company; (IX) Any increase or decrease in the authorized number of members of the Board; (X) Any sale, lease, assignment, transfer or other conveyance of, or any encumbrance granted upon, all or substantially all of the assets of the Company or any of its subsidiaries in one or more related transactions; (XI) Any reclassification, recapitalization or other change of any capital stock of the Company; 3. (XII) Any issuance of shares of Common Stock or Convertible Securities after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary other than pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board and the holders of a majority of the outstanding shares of Series A-1 Preferred; or (XIII) Any agreement, promise, commitment, obligation or undertaking to do any of the foregoing. 3. LIQUIDATION RIGHTS. (a) Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), the holders of Series A-1 Preferred shall be entitled to receive on a pari passu basis with the Series A Preferred (collectively, with Series A Preferred, the "SERIES PREFERRED") before any distribution or payment shall be made to the holders of any Common Stock and any other equity security not expressly made senior to or pari passu with the holders of Series Preferred (the "JUNIOR STOCK"), out of the assets of the Company legally available for distribution for each share of Series Preferred held by them, an amount per share of Series Preferred equal to the Original Issue Price plus (to the extent of current and/or retained earnings) all accrued and unpaid dividends and declared and unpaid dividends on the Series Preferred (or such lesser amount as is the maximum amount acceptable under applicable U.S. Small Business Administration and Securities and Exchange Commission rules and regulations). If, upon any such Liquidation Event, the assets of the Company shall be insufficient to make payment in full to all holders of Series Preferred of the liquidation preference set forth in this Section 3(a), then such assets (or consideration) shall be distributed among the holders of Series Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled. (b) After the payment of the full liquidation preference of the Series Preferred as set forth in Section 3(a) above and any other class or series of stock of the Company ranking upon liquidation senior or pari passu with the Series Preferred, the assets of the Company legally available for distribution in such Liquidation Event (or the consideration received by the Company or its stockholders in such Acquisition or Asset Transfer), if any, shall be distributed ratably to the holders of Junior Stock and Series Preferred on an as-if-converted to Common Stock basis. 4. ASSET TRANSFER OR ACQUISITION RIGHTS. (A) In the event that the Company is a party to an Acquisition or Asset Transfer (as hereinafter defined), then each holder of Series A-1 Preferred shall be entitled to receive, for each share of Series A-1 Preferred then held, out of the proceeds of such Acquisition or Asset Transfer, the greater of the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event pursuant to (i) Section 3(a) and 3(b) above or (ii) the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event with respect to such shares if such shares had been converted to Common Stock immediately prior to such Acquisition or Asset Transfer. 4. (B) For the purposes of this Section 4: (i) "ACQUISITION" shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred; provided that an Acquisition shall not include (x) any issuance of Series A-1 Preferred contemplated by the Amended and Restated Recapitalization Agreement, dated as of July 30, 2004, by and between the Company and Toucan Capital Fund II, L.P., as such agreement may be amended from time to time (the "Recapitalization Agreement"), the conversion of any of the Notes representing Bridge Funding, or exercise of any Bridge Warrants or Preferred Stock Warrants (each as defined in the Recapitalization Agreement) and (y) any transaction or series of transactions specifically deemed not to constitute an "Acquisition" by the vote or written consent of the holders of a majority of the outstanding shares of Series A-1 Preferred; and (ii) "ASSET TRANSFER" shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company. (C) In any Acquisition or Asset Transfer, if the consideration received is other than cash, the value of such consideration will be deemed its fair market value as determined in good faith by the Board, provided that any securities shall be valued as follows: (I) Securities not subject to investment letter or other similar restrictions on free marketability (which shall be covered by (ii) below): (A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing sale prices of the securities on such quotation system over the ten (10) day period ending three (3) days prior to the closing; (B) If actively traded over-the-counter, the value shall be deemed to be the average of the last reported sales price of the securities over the ten (10) day period ending three (3) days prior to the closing; and (C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board. (II) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (A), (B) or (C) to reflect the approximate fair market value thereof, as determined in good faith by the Board. 5. (III) Notwithstanding anything to the contrary in this Section 4, if the definitive transaction documents for an Acquisition or Asset Transfer provide for a different method of valuation, the method of valuation set forth in such documents shall control. 5. CONVERSION RIGHTS. The holders of the Series A-1 Preferred shall have the following rights with respect to the conversion of the Series A-1 Preferred into shares of Common Stock (the "CONVERSION RIGHTS"): (A) OPTIONAL CONVERSION. Subject to and in compliance with the provisions of this Section 5, any shares of Series A-1 Preferred may, at the option of the holder, be converted at any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series A Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "SERIES A-1 PREFERRED CONVERSION RATE" then in effect (determined as provided in Section 5(b)) by the number of shares of Series A-1 Preferred being converted. (B) SERIES A-1 PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A-1 Preferred (the "SERIES A-1 PREFERRED CONVERSION RATE") shall be the quotient obtained by dividing the Original Issue Price of the Series A-1 Preferred by the "Series A-1 Preferred Conversion Price," calculated as provided in Section 5(c). (C) SERIES A-1 PREFERRED CONVERSION PRICE. The conversion price for the Series A-1 Preferred shall initially be four cents ($0.04) (the "SERIES A-1 PREFERRED CONVERSION PRICE"). Such initial Series A-1 Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 5. All references to the Series A-1 Preferred Conversion Price herein shall mean the Series A-1 Preferred Conversion Price as so adjusted. (D) MECHANICS OF CONVERSION. Each holder of Series A-1 Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A-1 Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A-1 Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) in cash or, to the extent sufficient funds are not then legally available therefor or to the extent that the holder so elects, in Common Stock (at the Common Stock's fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends and accrued and unpaid dividends on the shares of Series A-1 Preferred being converted and (ii) in cash (at the Common Stock's fair market value determined by the Board as of the date of conversion) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A-1 Preferred. For the purposes of this Section 5(d), the fair market value of the Company's Common Stock shall be the last reported sales price reported on the NASD over-the-counter bulletin board (or if the 6. Common Stock is traded on another securities market, the last reported sales price of the Common Stock on such securities market) on the date of conversion. If the Common Stock is not publicly traded on the date of conversion, the fair market value of the Company's Common Stock for the purposes of this Section 5(d) shall be the fair market value as determined in good faith by the Board. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A-1 Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. (E) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any time or from time to time on or after the date that the first share of Series A-1 Preferred is issued (the "ORIGINAL ISSUE DATE") the Company effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A-1 Preferred, the Series A-1 Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if at any time or from time to time after the Original Issue Date the Company combines the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A-1 Preferred, the Series A-1 Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. (F) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If at any time or from time to time on or after the Original Issue Date the Company pays to holders of Common Stock a dividend or other distribution in additional shares of Common Stock without a corresponding dividend or other distribution to holders of Preferred Stock, the Series A-1 Preferred Conversion Price then in effect shall be decreased as of the time of such issuance, as provided below: (I) The Series A-1 Preferred Conversion Price shall be adjusted by multiplying the Series A-1 Preferred Conversion Price then in effect by a fraction equal to: (A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and (B) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution; (II) If the Company fixes a record date to determine which holders of Common Stock are entitled to receive such dividend or other distribution, the Series A-1 Preferred Conversion Price shall be fixed as of the close of business on such record date and the number of shares of Common Stock shall be calculated immediately prior to the close of business on such record date; and 7. (III) If such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A-1 Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A-1 Preferred Conversion Price shall be adjusted pursuant to this Section 5(f) to reflect the actual payment of such dividend or distribution. (G) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, SUBSTITUTION, REORGANIZATION, MERGER OR CONSOLIDATION. If at any time or from time to time on or after the Original Issue Date the Common Stock issuable upon the conversion of the Series A-1 Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, merger, consolidation or otherwise (other than an Acquisition or Asset Transfer as defined in Section 4 or a subdivision or combination of shares or stock dividend provided for elsewhere in this Section 5), in any such event each holder of Series A-1 Preferred shall then have the right to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, merger, consolidation or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A-1 Preferred could have been converted immediately prior to such recapitalization, reclassification, merger, consolidation or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of Series A-1 Preferred after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the Series A-1 Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A-1 Preferred) shall be applicable after that event and be as nearly equivalent as practicable. (H) SALE OF SHARES BELOW SERIES A-1 PREFERRED CONVERSION PRICE. (I) If at any time or from time to time on or after the Original Issue Date the Company issues or sells, or is deemed by the express provisions of this Section 5(h) to have issued or sold, Additional Shares of Common Stock (as defined below), other than as provided in Section 5(e), 5(f) or 5(g) above, for an Effective Price (as defined below) less than the then effective Series A-1 Preferred Conversion Price (a "QUALIFYING DILUTIVE ISSUANCE"), then and in each such case, the then existing Series A-1 Preferred Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price equal to such Effective Price. (II) For the purpose of making any adjustment required under this Section 5(h), the aggregate consideration received by the Company for any issue or sale of securities (the "AGGREGATE CONSIDERATION") shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as defined below) or rights or options to purchase either 8. Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options. (III) For the purpose of the adjustment required under this Section 5(h), if the Company issues or sells (x) Preferred Stock or other stock, options, warrants, purchase rights or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as "CONVERTIBLE SECURITIES") or (y) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Series A-1 Preferred Conversion Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus: (A) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and (B) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses. (C) If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities. (D) No further adjustment of the Series A-1 Preferred Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Series A-1 Preferred Conversion Price 9. as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Series A-1 Preferred Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior conversions of Series A-1 Preferred. (IV) For the purpose of making any adjustment to the Conversion Price of the Series A-1 Preferred required under this Section 5(h), "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 5(h) (including shares of Common Stock subsequently reacquired or retired by the Company), other than: (A) shares of Common Stock issued upon conversion of the Series A Preferred and Series A-1 Preferred; (B) shares of Common Stock or Convertible Securities issued after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary that are (i) issued pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board; and (ii) designated as excluded from the definition of "Additional Shares of Common Stock" by the vote or written consent of the holders of a majority of the outstanding shares of Series A-1 Preferred; (C) up to 35,000 shares of Common Stock issued pursuant to the exercise of options with an exercise price of $0.0001 per share that were outstanding on April 26, 2004 and held by members of the Board; (D) shares of Common Stock or Convertible Securities issued pursuant to the exercise of the Initial Bridge Warrants (as defined in the Recapitalization Agreement); and (E) such additional shares of Common Stock or Convertible Securities that are designated as excluded from the definition of "Additional Shares of Common Stock" by the vote or written consent of the holders of a majority of the outstanding shares of Series A-1 Preferred. References to Common Stock in the subsections of this clause (iv) above shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 5(h). The "EFFECTIVE PRICE" of Additional Shares of Common Stock shall mean the 10. quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 5(h), into the Aggregate Consideration received, or deemed to have been received by the Company for such issue under this Section 5(h), for such Additional Shares of Common Stock. In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable. (V) In the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance (the "FIRST DILUTIVE ISSUANCE"), then in the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive Issuance as a part of the same transaction or series of related transactions as the First Dilutive Issuance (a "SUBSEQUENT DILUTIVE ISSUANCE"), then and in each such case upon a Subsequent Dilutive Issuance the Series A-1 Preferred Conversion Price shall be reduced to the Series A-1 Preferred Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance. (I) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A-1 Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A-1 Preferred, if the Series A-1 Preferred is then convertible pursuant to this Section 5, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and shall, upon request, prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A-1 Preferred so requesting at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Series A-1 Preferred Conversion Price at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A-1 Preferred. Failure to request or provide such notice shall have no effect on any such adjustment. (J) NOTICES OF RECORD DATE. Upon (i) 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, or (ii) any Acquisition (as defined in Section 4) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 4), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A-1 Preferred at least ten (10) days prior to (x) the record date, if any, specified therein; or (y) if no record date is specified, the date upon which such action is to take effect (or, in either case, such shorter period approved by the holders of a majority of the 11. outstanding Series A-1 Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. (K) AUTOMATIC CONVERSION. (I) Each share of Series A-1 Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A-1 Preferred Conversion Price, at any time upon the affirmative election of the holders of at least two-thirds of the outstanding shares of the Series A-1 Preferred. Upon such automatic conversion, any declared and unpaid dividends and accrued and unpaid dividends shall be paid in accordance with the provisions of Section 5(d). (II) Upon the occurrence of the event specified in Section 5(k)(i) above, the outstanding shares of Series A-1 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A-1 Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A-1 Preferred, the holders of Series A-1 Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A-1 Preferred. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A-1 Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any declared and unpaid dividends and accrued and unpaid dividends shall be paid in accordance with the provisions of Section 5(d). (L) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A-1 Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A-1 Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the fair 12. market value of one share of Common Stock (as determined by the Board) on the date of conversion. (M) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A-1 Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A-1 Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A-1 Preferred, the Company will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (N) NOTICES. Any notice required by the provisions of this Section 5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. (O) PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A-1 Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A-1 Preferred so converted were registered. 6. NO REISSUANCE OF SERIES A-1 PREFERRED. No shares or shares of Series A-1 Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued. 7. AMENDMENTS. This Certificate of Designations may only be amended with the prior written consent of the holders of at least a majority of the outstanding Series A-1 Preferred; provided, however, that Section 5(k)(i) hereof and this Section 7 may only be amended with the prior written consent of the holders of at least two-thirds of the outstanding Series A-1 Preferred. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holders of at least a majority (or, in the case of actions prohibited or required to be performed by Section 5(k)(i) hereof or this Section 7, at least two-thirds) of the outstanding Series A-1 Preferred. 13. IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be duly executed as of the 17th day of April, 2006. NORTHWEST BIOTHERAPEUTICS, INC. /s/ Alton L. Boynton ---------------------------------------- Name: Alton L. Boynton Title: President 14. EX-10.2 5 v16023exv10w2.txt EXHIBIT 10.2 Exhibit 10.2 AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC. LOAN AGREEMENT, SECURITY AGREEMENT AND 10% SECURED PROMISSORY NOTE $250,000.00 APRIL 17, 2006 SECTION 1. GENERAL. For value received, NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "MAKER" or the "COMPANY"), hereby promises to pay to the order of Toucan Partners, LLC or its assigns (collectively, the "HOLDER"), the principal amount of Two Hundred Fifty Thousand Dollars ($250,000) upon written demand by Holder made at any time on or after the first anniversary of execution of the Original Issue Date (as defined below) of this Amended and Restated Loan Agreement, Security Agreement and 10% Secured Promissory Note (this "NOTE" or this "AGREEMENT"), or such earlier date as may be applicable under Sections 3 and 4 hereof (the "MATURITY DATE"). This Note amends and restates in its entirety that certain Northwest Biotherapeutics, Inc. Loan Agreement, Security Agreement and 10% Secured Promissory Note dated December 30, 2005 ("ORIGINAL ISSUE DATE") in the principal amount of $250,000 issued by the Maker in favor of Holder (the "ORIGINAL NOTE"). This Note shall not constitute a novation of the Original Note or an accord and satisfaction of the obligations of Maker evidence thereby. The Original Note is being amended and restated hereby in partial consideration for the Holder's agreement to consent to the Company's issuance of shares of Common Stock and warrants to purchase Common Stock to certain accredited investors in a private placement pursuant to that certain Note and Warrant Purchase Agreement dated as of March 30, 2006. Maker shall pay interest on the unpaid principal amount of this Note, accruing from and after the Original Issue Date at the rate of ten percent (10%) per annum, compounding annually (computed on the basis of a 365-day year and the actual number of days elapsed) (the "INTEREST RATE"). Accrued interest shall be payable upon the payment of the principal of this Note. The principal of, and interest on, this Note shall be payable in lawful currency of the United States of America by wire transfer in immediately available funds to the account of Holder, as provided in writing to Maker by Holder. All payments shall be applied first to fees, costs and charges relating to this Note (including, without limitation, any costs of collection), then to accrued and unpaid interest, and thereafter to principal. This loan is made by Holder to Maker in anticipation of an equity financing. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Recapitalization Agreement. SECTION 2. PRE-PAYMENT. This Note may be pre-paid in whole or in part prior to the Maturity Date; provided Maker provides Holder with 30 days prior written notice thereof, and provided further that Holder shall have the option to convert this note in accordance with Section 12 hereof by notifying Maker of Holder's election on or before the expiration of such thirty (30) day notice period. In the event of prepayment, Maker shall pay a penalty in the amount of 1% of the principal and accrued interest then outstanding under this Note, unless a greater or lesser penalty is established or approved by the U.S. Small Business Administration ("SBA"). Conversion of this Note shall not be deemed a prepayment. SECTION 3. DEFAULT INTEREST. Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid principal amount and accrued and unpaid interest shall bear interest payable on demand at the lesser of (i) fourteen percent (14%) per annum, (ii) the maximum rate permitted under applicable rules and regulations of the SBA, or (iii) the maximum rate allowed by law (the "DEFAULT INTEREST"). Such interest shall accrue, commencing upon the occurrence of an Event of Default and continuing until such Event of Default is cured or waived. SECTION 4. DEFAULTS. 4.1 Definitions. Each occurrence of any of the following events shall constitute an "EVENT OF DEFAULT": (a) if a default occurs in the payment of any principal of, interest on, or other obligation with respect to, this Note, whether at the due date thereof or upon acceleration thereof, and such default remains uncured for five (5) business days after written notice thereof from Holder; (b) if any representation or warranty of Maker made herein shall have been false or misleading in any material respect, or shall have contained any material omission, as of the date hereof; (c) if a default occurs in the due observance or performance of any covenant or agreement on the part of Maker to be observed or performed pursuant to the terms of this Note and such default remains uncured for five (5) business days after written notice thereof from Holder; (d) if a default occurs in Maker's performance of any of the terms and conditions of that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 and as amended on October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005 (the "RECAPITALIZATION AGREEMENT") or any Related Recapitalization Document; (e) if Maker shall (i) discontinue its business, (ii) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of Maker or any of its property, (iii) make a general assignment for the benefit of creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors, or take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation laws or statutes, or file an answer admitting the material allegations of 2 a petition filed against it in any proceeding under any such law, provided, however, that insolvency of Maker shall not constitute a default, or the basis for a default, during the Bridge Period; (f) if there shall be filed against Maker an involuntary petition seeking reorganization of Maker or the appointment of a receiver, trustee, custodian or liquidator of Maker or a substantial part of its assets, or an involuntary petition under any bankruptcy, reorganization or insolvency law of any jurisdiction, whether now or hereafter in effect (any of the foregoing petitions being hereinafter referred to as an "INVOLUNTARY PETITION") and such Involuntary Petition shall not have been dismissed within ninety (90) days after it was filed, provided, however, that insolvency of Maker shall not constitute a default, or the basis for a default, during the Bridge Period; (g) if final judgment(s) for the payment of money in excess of an aggregate of $25,000 (excluding any portion thereof that an insurance company of nationally recognized standing and creditworthiness has agreed to pay) shall be rendered against Maker and the same shall remain undischarged for a period of thirty (30) days; (h) if there occurs any event that may have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently currently conducted and/or as it is proposed to be conducted), or on any material assets or any Intellectual Property or other Collateral developed, owned, controlled, licensed, possessed, or used by Maker, or to which Maker has any right, option, entitlement or claim, provided, however, that ongoing weakening of Maker's financial condition due to ongoing expenditures and Maker's failure to obtain equity financing shall not constitute a default, or the basis for a default, during the Bridge Period; or (i) if Maker deviates, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Disclosure Schedule (as defined herein), or takes any action or makes any promise, undertaking or commitment that would result in Maker incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Holder, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Holder. 4.2 Cross-Default: Maker acknowledges that the financing contemplated by this Note is part of an integrated Recapitalization Plan, as set forth in the Recapitalization Agreement and the Related Recapitalization Documents. Maker further acknowledges and agrees that this Note is subject to all terms and conditions set forth in the Recapitalization Agreement and the Related Recapitalization Documents, and that the Recapitalization Agreement and the Related Recapitalization Documents are subject to all of the terms and conditions of this Note. Maker agrees that any default by Maker under any provision of this Note, the Recapitalization Agreement or any of the Related Recapitalization Documents will constitute a default under each other Related Recapitalization Document and the Recapitalization Agreement. 3 4.3 Remedies on Default. (a) Upon each and every such Event of Default and at any time thereafter during the continuance of such Event of Default: (i) any and all indebtedness of Maker to Holder under this Note or otherwise shall immediately become due and payable, both as to principal and interest (including any deferred interest and any accrued and unpaid interest and any Default Interest); and (ii) Holder may exercise all the rights of a creditor under applicable state and/or federal law. (b) In case any one or more Events of Default shall occur and be continuing, and acceleration of this Note or any other indebtedness of Maker to Holder shall have occurred, Holder may, inter alia, proceed to protect and enforce its rights by an action at law, suit in equity and/or other appropriate proceeding, whether for the specific performance of any agreement contained in this Note, or for an injunction against a violation of any of the terms hereof or thereof or in furtherance of the exercise of any power granted hereby or thereby or by law. No right conferred upon Holder by this Note shall be exclusive of any other right referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. SECTION 5. DEFENSES. 5.1 No Offsets. The obligations of Maker under this Note shall not be subject to reduction, limitation, impairment, termination, defense, set-off, counterclaim or recoupment for any reason. 5.2 Usury Limitations. It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Note or any other agreements or instruments between them, in no event shall such agreements or instruments require the payment or permit the collection of interest (which term, for purposes hereof, shall include any amount which, under applicable law, is deemed to be interest, whether or not such amount is characterized by the parties as interest) in excess of the maximum amount permitted by such laws. If any excess of interest is unintentionally contracted for, charged or received under the Note or under the terms of any other agreement or instrument between the parties, the effective rate of interest shall be automatically reduced to the maximum lawful rate of interest allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction thereof. SECTION 6. REPLACEMENT OF NOTE. Upon receipt by Maker of reasonable evidence of the loss, theft, destruction, or mutilation of this Note, Maker will deliver a new Note containing the same terms and conditions in lieu of this Note. Any Note delivered in accordance with the provisions of this Section 6 shall be dated as of the date of this Note. 4 SECTION 7. EXTENSION OF MATURITY. Should the principal of or interest on this Note become due and payable on other than a business day, the due date thereof shall be extended to the next succeeding business day, and, in the case of principal, interest shall be payable thereon at the rate per annum herein specified during such extension. For the purposes of the preceding sentence, a business day shall be any day that is not a Saturday, Sunday, or legal holiday in the State of Delaware. SECTION 8. ATTORNEYS' FEES AND COLLECTION FEES. Should the indebtedness evidenced by this Note or any part hereof be collected at law or in equity or in bankruptcy, receivership or other court proceedings, arbitration or mediation, or any settlement of any of the foregoing, Maker agrees to pay, in addition to principal and interest due and payable hereon, all costs of collection, including, without limitation, reasonable attorneys' fees and expenses, incurred by Holder in collecting or enforcing this Note. SECTION 9. WAIVERS; CONSENT TO JURISDICTION. 9.1 Waivers by Maker. Maker hereby waives presentment, demand for payment, notice of dishonor, notice of protest and all other notices or demands in connection with the delivery, acceptance, performance or default of this Note. 9.2 Actions of Holder not a Waiver. No delay by Holder in exercising any power or right hereunder shall operate as a waiver of any power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise; and no waiver or modification of the terms hereof shall be valid unless set forth in writing by Holder and then only to the extent set forth therein. 9.3 Consent to Jurisdiction. Maker hereby irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Delaware over any suit, action, or proceeding arising out of or relating to this Note or any other agreements or instruments with respect to Holder. Maker hereby irrevocably waives, to the fullest extent permitted by law, any objection that Maker may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon Maker and may be enforced in any court in which Maker is subject to jurisdiction by a suit upon such judgment, provided that service of process is effected upon Maker as provided in this Note or as otherwise permitted by applicable law. 9.4 Waiver of Jury Trial. MAKER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN MAKER AND HOLDER RELATING TO THE SUBJECT MATTER OF THIS NOTE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS NOTE, INCLUDING, 5 WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENT OR AGREEMENT RELATING TO THE LOAN. 9.5 Service of Process. Maker hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by delivery of a copy thereof by certified mail, postage prepaid, return receipt requested, to Maker, and/or by delivery of a copy thereof to a registered agent of Maker. Refusal to accept delivery, and/or avoidance of delivery, shall be deemed to constitute delivery. Maker irrevocably agrees that service in accordance with this Section 9.5 shall be deemed in every respect effective service of process upon Maker in any such suit, action or proceeding, and shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon Maker. Nothing in this Section 9.5 shall affect the right of Holder to serve process in any manner otherwise permitted by law or limit the right of Holder otherwise to bring proceedings against Maker in the courts of any jurisdiction or jurisdictions. SECTION 10. COVENANTS. 10.1 Affirmative Covenants. So long as this Note shall remain outstanding: (a) Office. Maker shall maintain its principal office, and the majority of its employees, assets and operations, in the United States. (b) Use of Proceeds. Maker will use the proceeds from this Note only for the following purposes: (i) General operating expenses, expenses for the development and protection of its intellectual property, and other usual and customary commercial and business expenses incurred in pursuing its business plan and strategy, on and after the effective date hereof; (ii) Audit expenses and regular and special SEC filing expenses, for audits and filings occurring on or after the effective date hereof, including, without limitation, SEC filings relating to solicitation of any shareholder consents to the recapitalization of Maker; and (iii) Expenses of accountants, attorneys, consultants and other professionals (including, without limitation, the expenses of Investor described in Section 4.11 of the Recapitalization Agreement) relating to the recapitalization of Maker, in each case only to the extent that both the nature and the amount of such expenses are in conformity with the budget approved in advance in writing by Holder and included in the Disclosure Schedule. Maker will not use the proceeds from this Note for any other purpose. Without limiting the generality of the foregoing, none of the proceeds will be used, without prior written agreement by the Holder, (i) to purchase or carry (or refinance any borrowing, the proceeds of which were used to purchase or carry) any "security" within the meaning of the Securities Act of 1933, as amended (the "SECURITIES ACT"), (ii) to repay any indebtedness or 6 discharge any obligation to an person or entity, other than trade payables incurred in the ordinary course of business on or after the effective date hereof, and consistent with Maker's operating plans and budgets fully disclosed to the Holder prior to the Closing, or (iii) to engage in business activities which would cause a violation of 13 CFR 107.720. This latter limitation prohibits, without limitation, the use of proceeds: (i) directly or indirectly, for providing funds to others; (ii) for the purchase or discounting of debt obligations; (iii) for factoring or long-term leasing of equipment with no provision for maintenance or repair; (iv) for engaging in real estate transactions such that Maker could reasonably be classified under Major Group 65 (Real Estate) of the SIC Manual; (v) for business activities wherein the assets of the business of Maker (the "BUSINESS") will be reduced or consumed, generally without replacement, as the life of the Business progresses, and the nature of the Business does not require that a stream of cash payments be made to the financing sources of the Business, on a basis associated with the continuing sale of assets (examples of such businesses would include real estate development projects, the financing and production of motion pictures, and oil and gas well exploration, development and production); (vi) for a foreign operation; (vii) to provide capital to a corporation licensed or sub-licensed under the Small Business Investment Act, (viii) to acquire farm land, (ix) to fund production of a single item or defined limited number of items generally over a defined production period, such production to constitute the majority, of the activities of Maker (examples include electric generating plants), or (x) for any purpose contrary to the public interest (including, but not limited to, activities which are in violation of law) or inconsistent with free competitive enterprise, in each case, within the meaning of Section 107.720 of Title 13 of the Code of Federal Regulations. (c) Seniority. Except as otherwise expressly provided, and except for security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11 of the Disclosure Schedule attached hereto as Exhibit B (the "DISCLOSURE SCHEDULE"), the indebtedness evidenced by this Note: (i) shall be senior in all respects to all other indebtedness or obligations of Maker of any kind, direct or indirect, contingent or otherwise, other than obligations of Maker owed directly to the state or federal government, and other than any other indebtedness or obligations of Maker to Holder; (ii) shall not be made subordinate or subject in right of payment to the prior payment of any other indebtedness or obligation of any kind, direct or indirect, contingent or otherwise, other than obligations of Maker owed directly to the state or federal government, and other than any other indebtedness or obligations of Maker to Holder. (d) No Conflicting Agreements. Maker shall not enter into any agreement that would materially impair, interfere or conflict with Maker's obligations hereunder. Without Holder's prior written consent, Maker shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way result in the creation of a security interest in any assets of Maker, including without limitation any Collateral (as defined in Exhibit A hereto). (e) Disclosure of Material Adverse Events. Within three (3) business days of Maker obtaining knowledge thereof, Maker will notify Holder in writing of any event that may have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently conducted and/or as it is proposed to be conducted), or on any material assets or any 7 Intellectual Property or other Collateral developed, owned, controlled, licensed, possessed, or used by Maker, or to which Maker has any right, option, entitlement or claim. Operating expenditures in the ordinary course of business and in accordance with operating budgets approved by Maker's Board of Directors and fully disclosed to Holder prior to the effective date hereof shall not be deemed to be material adverse events solely because they weaken Maker's financial condition in the absence of new equity financing of Maker. (f) Financial Information. So long as any principal and/or interest under this Note shall remain outstanding: (i) Promptly after the end of each fiscal year (but in any event prior to February 28 of each year) and at such other times as Holder may reasonably request, Maker shall deliver to Holder a written assessment, in form and substance satisfactory to Holder, of the economic impact of such Holder's financing hereunder, specifying the full-time equivalent jobs created or retained in connection with such investment, and the impact of the financing on Maker's business in terms of revenues and profits and on taxes paid by Maker and its employees. (ii) Maker shall provide on a timely basis to Holder all financial information requested from time to time by Holder, including without limitation its quarterly and annual balance sheet and income statement. Such financial information shall be certified by a member of Maker's senior management. Financial information required shall also include such information as would be necessary for Holder to file form 468 with the SBA, if it were applicable. (iii) In addition to the information specified in Section 10.1(f)(i) and (ii) above, upon request, Maker agrees promptly to provide Holder with sufficient additional information to provide any other information reasonably requested or required by any governmental agency asserting jurisdiction over Holder. (iv) Maker shall report its cash position and all expenditures and agreements, commitments or undertakings for expenditures to Holder on a bi-weekly basis. (g) Access. So long as any principal and/or interest under this Note shall remain outstanding, Maker shall permit Holder and its agents or representatives to visit and inspect Maker's properties, to examine its books of account and records and to discuss Maker's affairs, finances and accounts with its officers, all at such times during normal business hours as reasonably may be requested by Holder. (h) [Reserved] (i) Business Activity. As long as this Note shall remain outstanding, Maker shall make no change in its business activity that would make it or any of its business activities non-compliant with SBA regulations and guidelines. 8 10.2 Negative Covenants. So long as this Note shall remain outstanding: (a) Indebtedness. Maker shall not incur additional indebtedness, beyond the indebtedness already existing as of the date hereof, for borrowed money in excess of $10,000, in aggregate. (b) Liens. Maker shall not grant to any person or entity a security interest, lien, license, or other encumbrance of any kind, direct or indirect, contingent or otherwise, in, to or upon any assets of Maker, including, without limitation, any intellectual property of any kind, as defined in Exhibit A hereto (the "INTELLECTUAL PROPERTY"). (c) Sale or License of Assets. Maker shall not sell, lease, transfer, assign or otherwise dispose of or encumber (including, without limitation through licensing or partnering arrangements) or abandon, conceal, injure or destroy any material assets (whether tangible or intangible) of Maker (including, without limitation, any Collateral (as defined in Section 11)), other than with the prior written approval of Holder and in the ordinary course of business. (d) Issuance of Capital Stock. Except for (a) any transaction pursuant to an Unsolicited Proposal that Maker accepts in accordance with the fiduciary exception provided in Section 3.2 of the Recapitalization Agreement or (b) shares of capital stock issuable upon exercise or conversion of warrants or convertible securities outstanding prior to February 1, 2004, Maker shall not without Holder's prior written approval: (i) issue any shares of capital stock or other securities, or any instruments exercisable for or convertible into capital stock or other securities, or (ii) make any promises, commitments, undertakings, agreements or letters of intent for any of the issuances described in (i) hereof. (e) Distributions and Redemptions. Maker shall not declare or pay any dividends or make any distributions of cash, property or securities of Maker with respect to any shares of its common stock, preferred stock or any other class or series of its stock, or, directly or indirectly (except for repurchases of common stock by Maker in accordance with the terms of employee benefit plans or written agreement between Maker and any of its employees approved by the Board of Directors of Maker prior to February 1, 2004), redeem, purchase, or otherwise acquire for any consideration any shares of its common stock or any other class of its stock. (f) Hiring. Maker shall not hire, engage, retain, or agree to hire, engage or retain, any Personnel, except with Holder's express prior written approval, on a case by case basis. (g) Severance. Maker shall not enter into, increase, expand, extend, renew or reinstate any severance, separation, retention, change of control or similar agreement with any Personnel, or agree, promise, commit or undertake to do so, except with Holder's prior written approval, on a case by case basis. (h) Facilities. Maker shall not purchase, lease, hire, rent or otherwise acquire directly or indirectly any rights in or to any asset or facility outside of the ordinary course of business in an amount in excess of $10,000, in aggregate, or agree, promise or commit to do so, 9 except in accordance with the Maker's budget that has been approved by the Maker's board of directors and the Holder. (i) Expenses. Maker shall make no expenditures in excess of $10,000 in aggregate other than in accordance with a budget pre-approved by Holder. Maker shall not deviate, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Disclosure Schedule, nor take any action or make any promise, undertaking or commitment that would result in Maker incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Holder, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Holder. (j) Other Limitations. (i) Maker shall not change the nature of its business activity in a manner that would cause a violation of 13 C.F.R. Section 107.720 and/or Section 107.760(b) (including, without limitation, by undertaking real estate, film production or oil and gas exploration activities). In the event that Maker changes the nature of its business activity such that such change would render Maker ineligible for financing pursuant to applicable SBA rules and regulations, Maker agrees to use its best efforts to facilitate a transfer or redemption of any securities then held by Holder. (ii) Maker will at all times comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117. (iii) For a period of at least one year after the date of this Note, Maker will locate no more than 49 percent of the employees or tangible assets of Maker outside the United States. 10.3 Additional Covenant. Until the later of the expiration of the Standstill Period (as defined in Section 13 below) or the date on which this Note has been discharged in full, Maker shall not sell, license, loan or otherwise in any way transfer or distribute Maker's Tangential Flow Filtration ("TFF") devices or any similar device, or any specifications, diagrams, description or other information about the TFF devices, to any third party, or commit or promise or enter into any understanding of any kind, direct or indirect, contingent or otherwise, to do any of the foregoing in regard to Maker's TFF devices or any similar device, without the prior written consent of Holder in each case. SECTION 11. SECURITY INTEREST. 11.1 First Priority in All Collateral. To secure its obligations under this Note whether at stated maturity, by acceleration or otherwise, Maker hereby grants and pledges to Holder a first priority senior security interest in all of Maker's right, title and interest in, to and under all of Maker's tangible and intangible property, whether now owned, licensed or held or hereafter 10 acquired, licensed, developed, held or arising, as described in Exhibit A hereto (the "COLLATERAL"), and all proceeds of any kind from any disposition of any such Collateral. Such security interest shall be senior to any security interest in the Collateral granted the holders of the Management Notes pursuant to any subordination agreement between Holder, the holders of the Management Notes, Toucan Capital Fund II, L.P. or Maker, and shall be senior to any other security interest of any kind, direct or indirect, contingent or otherwise, in the Collateral except for the security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11 of the Disclosure Schedule (only to the amounts set forth on such schedule) and any other indebtedness or obligations of Maker to Holder. If certificates of title are now, or hereafter become, issued or outstanding with respect to any of the Collateral, Maker promptly shall cause the senior security interest of Holder to be properly noted thereon. Maker agrees that the security interest herein granted has attached and shall continue until Maker's obligations under this Note have been paid, performed and indefeasibly discharged in full. 11.2 Rights Cumulative. The rights and remedies of Holder with respect to the senior security interest granted hereby are in addition to those which are now or may hereafter be available to Holder as a matter of law or equity. Each right, power and remedy of Holder provided for herein, or now or hereafter existing at law or in equity, shall be cumulative and concurrent and shall be in addition to every right, power and remedy provided for herein, and the exercise by Holder of any one or more of the rights, powers and/or remedies provided for in this Note, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including a grantee, of any or all other rights, powers and/or remedies. 11.3 Documentation of Security Interest. Maker shall execute, deliver, file, amend, and re-file any financing statements, instruments (including without limitation stock certificates), continuation statements, assignments, or other security agreements that Holder may require from time to time to confirm the liens arising out of this Note with respect to the Collateral. Maker agrees to pay all reasonable costs associated with filing and/or re-filing of any financing statements, continuation statements or other security agreements required to perfect and to continue perfection of Holder's security interest in the Collateral and all reasonable costs required to evidence the first priority of the security interest, including, without limitation, reasonable attorneys' fees. Maker authorizes Holder to file financing statements under the UCC with respect to the security interest granted hereby and agrees, upon request of Holder, to promptly and duly execute and deliver any and all such further instruments and documents, and to take such further action, as Holder may reasonably deem necessary or desirable to obtain the full benefits of this grant of security interest. 11.4 No Conflicting Agreements. Maker shall not enter into any agreement on or after the effective date of this Note that would materially impair or conflict with Maker's obligations hereunder without Holder's prior written consent. Without Holder's prior written consent, Maker shall not permit the inclusion in any material contract to which it becomes a party on or after the effective date of this Note, of any provisions that could or might in any way prevent the creation, perfection and maintenance of a first priority security interest in Maker's rights and interest in any property included within the definition of the Collateral acquired under such contracts. Maker represents and warrants that, as of the effective date of this Note, there are no existing agreements or undertakings that would materially impair or conflict with Maker's obligations 11 hereunder or that could or might in any way prevent the creation, perfection and maintenance of a first priority security interest in Maker's rights and interest in any property included within the definition of the Collateral acquired under such contracts; except for existing equipment leases described in item 2 of Schedule 14.11 and the statutory liens described in items 3 and 4 of the Disclosure Schedule. 11.5 Notification Requirements. Within two (2) business days of any officer, director or employee of Maker obtaining knowledge thereof, Maker will promptly notify Holder in writing of any event that materially adversely affects the value of any material Collateral, the ability of Maker to dispose of any material Collateral, or the rights and remedies of Holder in relation thereto, including the levy of any legal process against any of the Collateral. 11.6 Foreclosure Remedy. Notwithstanding anything to the contrary herein or in the Recapitalization Agreement or any other agreement or document, in the event that Maker is unable to pay and discharge this Note in full on the Maturity Date, subject to the compliance with the requirements of the Delaware Uniform Commercial Code, nothing herein or in the Recapitalization Agreement or any other agreement or document shall be deemed to preclude, limit or restrict Holder from requiring the delivery of some or all of the Collateral in full or partial satisfaction of Maker's obligation under the Note. Alternatively, Holder may, in its sole discretion, elect to cause some or all of the Collateral to be sold, and the sale proceeds to be used to pay and discharge the Note in full. SECTION 12. CONVERSION. 12.1 Holder's Election. Notwithstanding any other provision of this Note or any applicable agreement or document, until, and/or in the absence of, purchases for cash of a minimum of $15 million of Convertible Preferred Stock, by Other Investors (as defined in the Recapitalization Agreement), on the terms and conditions set forth in the Recapitalization Agreement and the Convertible Preferred Stock Term Sheet, Holder may, in its sole discretion, elect to convert any or all of the principal and/or interest due under the Note into any Equity Security and/or Debt Security (each as defined below) and/or any combination thereof, in each case that Holder shall designate in Holder's sole discretion (the securities so elected being the "HOLDER DESIGNATED SECURITIES"). Holder may make such determinations from time to time and at any time before this Note has been discharged in full, and, as applicable, at any time on or before the expiration of the thirty (30) day notice period required under this Note in the event the Maker wishes to prepay this Note. For purposes hereof, (i) the term "Equity Security" means any class or series of equity security, or any combination of classes and/or series of equity securities, of the Maker that have been authorized under the Maker's certificate of incorporation, as amended and/or restated, including by any certificate of designation (the "Charter"), or any new class or series of equity security, or any combination of new and/or existing classes and/or series of equity securities, of the Maker for which the Maker has undertaken any agreement, obligation, promise, commitment or letter of intent to obtain such authorization and (ii) the term "Debt Security" means any evidence of indebtedness of the Maker that the Maker has authorized, created or incurred, or that the Maker has undertaken any agreement, obligation, promise, commitment or letter of intent to authorize, create or incur. 12 12.2 Automatic Conversion. The principal amount of, and accrued and unpaid interest on, this Note shall automatically convert into Convertible Preferred Stock, upon the terms and conditions set forth herein and in the Recapitalization Agreement, only in the event, and upon the closing of, the purchase in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments), on the terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a minimum of $15 million of Convertible Preferred Stock. 12.3 Information for Holder's Election. Maker shall provide to Holder, within two (2) business days after notice of each request by Holder, all information reasonably requested by Holder in connection with any Equity Securities and/or Debt Securities, to enable Holder to make decisions regarding one or more conversions. In the event that Maker seeks to prepay this Note, Maker shall deliver to Holder, simultaneously and together with the notice required under Section 2 of this Note of Maker's interest in prepaying the Note, a summary of all material information, terms and conditions relating to all Equity Securities and Debt Securities (including any "side" letters or agreements or separate agreements). 12.4 Conversion Price. The conversion price for any conversion pursuant to Section 12.2 shall be the lowest nominal or effective price per share paid by the Other Investors who acquire such Convertible Preferred Stock (with the exception of shares issuable upon exercise of the Initial Bridge Warrants). The conversion price for any conversion into any equity or debt security pursuant to Section 12.1 shall be the lowest of (i) the lowest nominal or effective price per share paid by any investor at any time on or after the date one year prior to the Effective Date (with the exception of (x) purchases of up to 35,000 shares of Common Stock pursuant to certain options to purchase, at a purchase price of $0.0001, that were outstanding on the Effective Date and held by members of the Board of Directors, as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and (y) shares issuable upon the exercise of the Initial Bridge Warrants, each of which shall be excluded from consideration under this section), (ii) the lowest nominal or effective price at which any investor is entitled to acquire shares (including, without limitation, through purchase, exchange, conversion or exercise) pursuant to any other security, instrument, or promise, undertaking, commitment, agreement or letter of intent of the Maker outstanding on or after the Effective Date or granted, issued, extended or otherwise made available by the Maker at any time on or after the date one year prior to the Effective Date (regardless of whether currently exercisable or convertible) (with the exception of (x) certain options to purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that were outstanding on the Effective Date and held by members of the Board of Directors as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and (y) the Initial Bridge Warrants, each of which shall be excluded from consideration under this section); and (iii) the lesser of $0.10 per share or 35% discount to the average closing price per share of the Common Stock during any twenty consecutive trading days (beginning with the twenty consecutive trading days prior to the Effective Date); provided, however, that in no event shall the price per share calculated pursuant to this clause (iii) be less than $.04 per share. The calculation required by clause (ii) hereof shall initially be based upon Schedule 2.7(d) to the Recapitalization Agreement. All other rights, preferences, privileges, terms and conditions received by Holder in connection with any conversion and/or any securities issued by the Maker to Holder upon 13 conversion, shall be no less favorable to Holder than the rights, preferences, privileges, terms and conditions any other investor in the Maker has received or is entitled to receive with respect to the security into which Holder is converting pursuant to any other security, instrument, promise, undertaking, commitment, agreement or letter of intent of the Maker, whether or not such rights, preferences, privileges, terms and conditions for any other investor are incorporated into the agreements or documents relating to any conversion or any issuance of the security or other instrument to that investor or are provided separately, at any time on or after one year prior to the Effective Date. In regard to each conversion hereunder, the Maker hereby agrees to take and/or arrange for all necessary corporate and related action to enable the execution of each such conversion elected by Holder. 12.5 No Impairment. Maker shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by Maker under and/or in connection with this Note, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to this Note and in taking all such action as may be necessary or appropriate to protect Holder's rights, preferences and privileges under and/or in connection with the Note against impairment. Holder's rights, preferences and privileges granted under and/or in connection with any Holder Designated Securities may not be amended, modified or waived without the Holder's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. SECTION 13. STANDSTILL, EXCLUSIVITY AND CONFIDENTIALITY. During the Bridge Period and the Equity Financing Period, as defined in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, but excluding the periods from February 18, 2004 through February 29, 2004 and from March 16, 2004 through the Effective Date (collectively, the "STANDSTILL PERIOD") the parties shall have worked together, and shall continue to work together, in good faith with best efforts to implement the terms of the Recapitalization Agreement, upon which the parties shall have reached binding agreement and which the parties shall have executed as a condition precedent to the execution and funding of this Note. Except as provided in the fiduciary exception set forth in Section 3.2 of the Recapitalization Agreement, during the Standstill Period, the Maker and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall work only with Investor and its agents, advisers and consultants, and shall have had, and shall continue to have, no discussions, negotiations and/or communications of any kind with any other parties, regardless of which party initiates or attempts to initiate any such contact or communication, in regard to any potential equity or debt financing of the Maker by parties other than Holder, and/or any joint venture, license, co-development or other business arrangement by or with parties other than Holder. Notwithstanding the fiduciary exception set forth in Section 3.2 of the Recapitalization Agreement, during the Standstill Period, the Maker and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall maintain confidentiality, and shall not have, and shall continue not to provide copies, excerpts, summaries, descriptions, or communicate in any way with any third parties, either directly or indirectly, as to any aspects of the recapitalization of Maker and/or any financing by Holder, including, without 14 limitation, the identity of the parties involved, any terms of the Recapitalization Agreement, this Note, the Related Recapitalization Documents, the Convertible Preferred Stock or any other matter relating to the recapitalization of Maker, or the progress or status of any activities or processes relating to the recapitalization of Maker; provided, however, nothing herein shall prohibit the Maker from filing this Note, the Recapitalization Agreement and any Related Recapitalization Document with the Securities and Exchange Commission (the "SEC"), if required by the regulations of the SEC (subject to the covenant in Section 2.5(a) of the Recapitalization Agreement). During the Standstill Period, the Maker shall not make any sales of equipment or other assets of any kind, including, without limitation, any non-essential laboratory equipment, and the Maker shall comply with Section 10.3 in regard to the TFF devices. SECTION 14. REPRESENTATIONS AND WARRANTIES. Except as expressly set forth (with reference to a section in this Note) in the Disclosure Schedules attached hereto as Exhibit B (as updated as of each closing contemplated by the Recapitalization Agreement and the Related Recapitalization Documents), and only to the extent such exceptions are acceptable to Holder in its sole discretion as of the date of this Note, and independently as of the date upon which each additional Note is issued to Holder, and as of the date of each closing, if any, of the Anticipated Equity Financing, Maker represents and warrants to the following: 14.1 Organization, Good Standing and Qualification. Maker is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business. Maker is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business, properties, operations, prospects or condition (financial or otherwise). 14.2 Authorization of Note, Etc. The execution, delivery and performance by Maker of this Note has been duly authorized by all requisite corporate action by Maker in accordance with Delaware law. This Note is a valid and binding obligation of Maker, enforceable against Maker in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of general application effecting enforcements of creditors' rights or general principles of equity. 14.3 No Conflicts. The execution, delivery, performance, issuance, sale and delivery of this Note and the Related Recapitalization Documents, and compliance with the provisions hereof by Maker, will not (a) to the knowledge of Maker, violate any provision of any law, statute, rule or regulation applicable to Maker or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to Maker or any of its properties or assets or (b) conflict with or result in any material breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of, any encumbrance upon any of the material assets of Maker under, the 15 Charter or Bylaws of Maker (as they may be amended to date) or any agreement or instrument to which Maker is a party. As used herein, "encumbrance" shall mean any liens, charges, encumbrances, equities, claims, options, proxies, pledges, security interests, licenses or other similar rights of any nature. 14.4 Compliance with Other Instruments. Maker is not in violation of any term of Maker's Charter, as amended, including any certificate of designation filed therewith, and/or Maker's Bylaws. Maker is not, in any material respect, in violation of any term of any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation to which Maker or any of such Collateral is subject. To the best of Maker's knowledge, no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a breach or violation, in any material respect, under any applicable judgments, orders, writs, decrees, federal, state and/or local laws, rules or regulations which would have a material adverse affect on the condition, financial or otherwise, or operations of Maker (as it is currently conducted and as it is proposed to be conducted) or on any material assets or any Intellectual Property or other Collateral owned, controlled, licensed, possessed, and/or used by Maker. To the best of its knowledge, Maker has avoided every condition, and has not performed any act, the occurrence of which would result in Maker's loss of any right granted under any license, distribution agreement or other agreement or Maker's loss of any rights in or to any Collateral. 14.5 Approvals. Maker has obtained all necessary permits, authorizations, waivers, consents and approvals of or by, and made all necessary notifications of and/or filings with, all applicable persons (governmental and private), in connection with the execution, delivery, performance, issuance, sale and/or delivery of this Note, the Recapitalization Agreement and the Related Recapitalization Documents, and consummation by Maker of the transactions contemplated hereby and thereby, except as listed in Schedule 14.5 14.6 Capitalization. The authorized capital stock of Maker consists of 300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the date hereof, 63,553,806 shares of Common Stock are issued and outstanding and 32,500,000 shares of Series A convertible preferred stock are issued and outstanding. No other shares of any class or series of Maker's capital stock are authorized and/or issued and outstanding. All issued and outstanding shares of capital stock of Maker have been duly authorized and validly issued, and are fully paid and non-assessable, and have been offered, sold and delivered by Maker in compliance with all applicable federal and state securities laws. Except as set forth in Schedule 14.6, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of Maker is authorized or outstanding, and there is no agreement, promise, commitment, undertaking or letter of intent of any kind (direct or indirect, contingent or otherwise) by Maker to issue any shares, subscriptions, warrants, options, convertible securities, or other such rights, or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in Schedule 14.6, Maker has no obligation of any kind (direct or indirect, contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Schedule 14.6 includes a true, accurate and complete statement describing the total number of shares of Maker outstanding as of the date of 16 this Note (on a fully diluted basis, including, without limitation, all warrants and options outstanding (whether or not currently exercisable), all convertible instruments of any kind (whether or not currently convertible), shares of all classes of stock, and any agreements, promises, commitments, undertakings or letters of intent to issue any of the foregoing. 14.7 Authorization of the Shares. Maker has authorized the issuance and sale of a sufficient number of shares of Convertible Preferred Stock, par value $0.001 per share, and Common Stock of the Maker to fully implement the Recapitalization Plan, while maintaining such additional authorized but unissued shares as reasonably determined by Holder to be appropriate. Of such authorized shares, a sufficient number of shares shall be reserved for issuance upon any exercise of the Bridge Warrants and/or Preferred Stock Warrants. If at any time the number of authorized but unissued shares of Convertible Preferred Stock and/or of Common Stock is not sufficient to effect the conversion of all then outstanding convertible Notes and other instruments, and the exercise of all then outstanding warrants, options and similar instruments, then, in addition to such other remedies as may be available to Holder, including, without limitation, the exercise of Holder's right of first refusal set forth in Section 2.7(f) of the Recapitalization Agreement, Maker shall take such corporate action as may be necessary to increase its authorized but unissued shares of Convertible Preferred Stock and/or Common Stock to such number of shares as will be sufficient for such purposes. Such corporate action shall include, without limitation, obtaining all requisite regulatory approvals and any requisite shareholder approval of any necessary amendment to Maker's Charter. 14.8 Litigation. Except as set forth in Schedule 14.8 of the Disclosure Schedule, there is no action, suit, proceeding or investigation pending or, to the knowledge of Maker, currently threatened against Maker, and/or its directors, officers, advisers, agents, properties, assets or business, in each case relating to Maker and/or its business, assets, operations or properties. Maker is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by Maker currently pending or which Maker intends to initiate. 14.9 No Liens. Except for liens for the benefit of Holder, created by this Note, and for the benefit of Toucan Partners, LLC created by the Recapitalization Agreement and/or any of the Related Recapitalization Documents, and except as set forth in Schedule 14.9 of the Disclosure Schedule, none of the material assets of Maker, including the Collateral, are subject to any existing lien, pledge, security interest or other encumbrance of any kind, direct or indirect, contingent or otherwise. 14.10 Full Disclosure. Notwithstanding any other provision of this Note, neither this Note, nor any exhibit hereto, nor any written report, certificate, instrument or other information furnished to Holder in connection with the transactions contemplated under and/or in connection with Note contain any material misstatement (including, without limitation, any material omission), or is misleading in any material respect. 14.11 No Other Security Interests or Other Encumbrances. Except as set forth in Schedule 14.11 (and only to the amounts set forth on such schedule), there are no existing security interests, pledges, liens or other encumbrances of any kind, direct or indirect, contingent 17 or otherwise (including without limitation any licensing or partnering arrangements or agreements), in or relating to any assets of Maker, including, without limitation, any Intellectual Property (as defined herein) or other Collateral. All existing security interests, pledges, liens or other encumbrances of any kind, other than those set forth in Schedule 14.11 hereto (and only to the amounts set forth on such schedule), are subordinate to the security interest established pursuant to Section 11 hereof, all necessary consents, subordination agreements and waivers, if any, have been obtained, and all amended filings and/or re-filings shall be made immediately upon execution of this Note. 14.12 "Small Business". (a) Small Business Status. Maker together with its "affiliates" (as that term is defined in Section 121.103 of Title 13 of Code of Federal Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including Section 121.301(c) of Title 13, Code of Federal Regulations. (b) Information for SBA Reports. Maker has delivered and/or will deliver to Holder certain information, set forth by and regarding the Maker and its affiliates in connection with this Note, on SBA Forms 480, 652 and Part A and B of Form 1031. This information delivered was true, accurate, complete and correct, and any information yet to be delivered will be true, accurate, complete and correct, and in form and substance acceptable to Holder. (c) Eligibility. Maker is eligible for financing by any Holder pursuant to Section 107.720 of Title 13 of the Federal Regulations and any other SBA regulations. 14.13 Intellectual Property. (d) Definitions. "Intellectual Property" means all foreign and domestic intangible property and rights, owned, licensed, sub-licensed or otherwise obtained by Maker, including, without limitation, (i) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations and applications therefor, including divisions, continuations, continuations-in-part, requests for continued examination, and renewal applications, and including renewals, extensions and reissues (collectively, "PATENTS"); (ii) confidential and proprietary information, trade secrets and know-how, including without limitation processes, schematics, formulae, drawings, prototypes, models, designs and customer lists (collectively, "TRADE SECRETS"); (iii) all data, slides, observations, and laboratory results, produced by, for or on behalf of Maker, or which Maker has rights to obtain (collectively, "DATA"); (iv) all FDA applications, registrations, filings and other rights (collectively, "FDA RIGHTS") and all data and documentation supporting or relating thereto; (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, "COPYRIGHTS"); (v) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress, assumed names, 18 fictitious names, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all extensions, modifications and renewals of same (collectively, "TRADEMARKS"); (vi) all other intellectual property or proprietary rights, including, without limitation, all claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including rights to recover for past, present and future violations thereof (collectively, "OTHER PROPRIETARY RIGHTS"). "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating to or affecting the Intellectual Property, including, without limitation, agreements granting rights to use the Licensed or Sub-Licensed Intellectual Property, agreements granting rights to use Owned Intellectual Property, confidentiality agreements, Trademark coexistence agreements, Trademark consent agreements and non-assertion agreements. "LICENSED or SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual Property that Maker is licensed, sub-licensed or otherwise permitted by other persons or entities to use. "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by Maker. "REGISTERED" means issued, registered, renewed or the subject of a pending application. (e) Schedule 14.13 ("INTELLECTUAL PROPERTY") sets forth a true and complete list and summary description of (A) all Registered or material Owned Intellectual Property (each identified as a Patent, Trademark, Trade Secret, Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or Sub Licensed Intellectual Property and (C) all Intellectual Property Contracts. (f) All Intellectual Property is valid, subsisting and enforceable. No Owned Intellectual Property has been canceled, suspended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting Maker's rights thereto. No Licensed or Sub-Licensed Intellectual Property has been canceled, suspended, not renewed or extended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting Maker's rights thereto. (g) The Owned Intellectual Property is owned exclusively by Maker and has been used with all patent, trademark, copyright, confidential, proprietary and other Intellectual Property notices and legends prescribed by law or otherwise permitted. (h) No suit, action, reissue, reexamination, public protest, interference, opposition, cancellation or other proceeding (collectively, "Suit") is pending or threatened concerning any claim or position: (i) that Maker, or another person or entity, has violated any Intellectual Property rights. To Maker's best knowledge, Maker is not violating and has not violated any intellectual property rights of any other party. 19 (ii) that Maker, or another person or entity, has breached any Intellectual Property Contract. There exists no event, condition or occurrence which, with the giving of notice or lapse of time, or both, would constitute a breach or default by Maker, or a breach or default by another person or entity, under any Intellectual Property Contract. No party to any Intellectual Property Contract has given Maker notice of its intention to cancel, terminate or fail to renew any Intellectual Property Contract. (iii) that the Intellectual Property has been violated or is invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or not owned exclusively by Maker. No such claim has been threatened or asserted. To Maker's best knowledge, no valid basis for any such Suits or claims exists. (i) To Maker's best knowledge, no other person or entity is violating, infringing upon or claiming rights incompatible with Maker's rights to any Intellectual Property. Maker has provided to Holder copies of all information reasonably available to it relevant to intellectual property rights claimed by third parties and possible infringement thereof including, without limitation, any freedom to practice or freedom to operate opinions. (j) Except as set forth on Schedule 14.13(j), Maker owns or otherwise holds valid rights to use all Intellectual Property used in its business. (k) Maker has timely made all filings and payments with the appropriate foreign and domestic agencies and other parties required to maintain in full force and effect all Intellectual Property. Except as set forth on Schedule 14.13, no due dates for filings or payments concerning the Intellectual Property (including, without limitation, office action responses, affidavits of use, affidavits of continuing use, renewals, requests for extension of time, maintenance fees, application fees and foreign convention priority filings) fall due within ninety (90) days prior to or after the closing, whether or not such due dates are extendable. Maker is in compliance with all applicable rules and regulations of such agencies and other parties with respect to the Intellectual Property. All documentation necessary to confirm and effect the Intellectual Property, if acquired from other persons or entities, has been recorded in the United States Patent and Trademark Office, the United States Copyright Office and other official offices. (l) Maker has undertaken and consistently implemented best efforts to protect the secrecy, confidentiality and value of all non-public Intellectual Property used in its business (including, without limitation, entering into appropriate confidentiality agreements with all officers, directors, employees and other persons or entities with access to such non-public Intellectual Property). Maker management has not disclosed any such non-public Intellectual Property to any persons or entities other than (i) Maker employees or Maker contractors who had a need to know and use such non-public Intellectual Property in the ordinary course of employment or contract performance, or (ii) prospective customers, and in each case who executed appropriate confidentiality agreements. 20 (m) Maker has taken all reasonable measures to confirm that no current or former Maker employee is or was a party to any confidentiality agreement or agreement not to compete that restricts or forbids, or restricted or forbade at any time during such employee's employment by Maker, such employee's performance of Maker's business, or any other activity that such employee was hired to perform or otherwise performed on behalf of or in connection with such employee's employment by Maker. 14.14 SEC Filings; Financial Statements. (a) Maker has delivered or made available to Holder accurate and complete copies of all registration statements, proxy statements and other statements, reports, schedules, forms and other documents filed by the Maker with the SEC since January 1, 2003, and all amendments thereto (the "MAKER SEC DOCUMENTS"). Except as set forth on Schedule 14.14(a), all statements, reports, schedules, forms and other documents required to have been filed by Maker with the SEC have been so filed on a timely basis. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Note, then on the date of such filing): (i) each of the Maker SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Maker SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The financial statements (including any related notes) contained in the Maker SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material in amount), and (iii) fairly present the consolidated financial position of Maker and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of Maker and its consolidated subsidiaries for the periods covered thereby. 14.15 Liabilities. As of the date hereof, Maker has the following accrued liabilities: (i) tax liabilities to the State of Washington in the approximate amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the date hereof, not in excess of $275,000 (excluding amounts payable to Cognate and Investor), of which (x) approximately $105,000 are currently due payables (including approximately $85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Disclosure Schedule through the first calendar quarter of 2006, decreasing 21 thereafter, the last of which is fully amortized in May 2007, and (z) $90,000 are accrued vacation and sick pay. 14.16 Compliance with All Standstill Provisions. Maker has complied in all respects with all standstill, exclusivity and confidentiality provisions of (a) this Note, the Recapitalization Agreement and the Related Recapitalization Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between Maker and Toucan Capital Fund II, L.P. dated as of February 2, 2004 and (c) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between Maker and Toucan Capital Fund II, L.P. dated as of March 1, 2004. 14.17 Recall of TFF Devices. Maker has recalled all units of Maker's TFF devices, and all specifications, diagrams, description or other information relating to such TFF devices or any similar devices, from all third parties who may previously have possessed any of the foregoing, and, as of the Effective Date of this note, no third party possesses any of the foregoing. SECTION 15. INDEMNIFICATION 15.1 Indemnification Agreement. (a) In addition to all rights and remedies available to Holder at law or in equity, Maker shall indemnify Holder and each subsequent holder of this Note, and their respective affiliates, stockholders, limited partners, general partners, officers, directors, managers, employees, agents, representatives, successors and assigns (collectively, the "INDEMNIFIED PERSONS") and save and hold each of them harmless against and pay on behalf of or reimburse such party as and when incurred for any loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or expense (other than any demand, claim, action or cause of action instituted by Maker), including interest, penalties, reasonable attorneys' fees and expenses, and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "LOSSES") which any such party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any material misrepresentation in, or material omission from, or breach of any of the representations, warranties, statements, schedules and/or exhibits hereto, certificates or other instruments or documents furnished to Holder by Maker in connection with this Note; or (ii) any material nonfulfillment or material breach of any covenant or agreement on the part of Maker under this Note. (b) Notwithstanding the foregoing, Maker shall not be liable for any portion of Losses resulting from the gross negligence or willful misconduct of Holder or a subsequent holder of this Note. (c) Within twenty (20) days after receipt of notice of commencement of any action or the assertion of any claim by a third party, Holder shall give Maker written notice 22 thereof together with a copy of such claim, process or other legal pleading of such claim. Maker shall have the right to assist in the defense thereof by representation of its own choosing. 15.2 Survival. All indemnification rights hereunder shall survive the execution and delivery of this Note and the consummation of the transactions contemplated hereby (i) for a period of two years with respect to representations and warranties made by Maker, and (ii) until fully performed with respect to covenants and agreements made by Maker, regardless of any investigation, inquiry or examination made for or on behalf of, or any knowledge of Holder and/or any of the Indemnified Persons, or the acceptance by Holder of any certificate or opinion. 15.3 Payment. Any indemnification of Holder or any other Indemnified Person by Maker pursuant to this Section 15 shall be effected by wire transfer of immediately available funds from Maker to an account designated by Holder or such other Indemnified Person within fifteen (15) days after the determination thereof. SECTION 16. INTEGRATION WITH RECAPITALIZATION PLAN Maker acknowledges and agrees that the funding provided by Holder pursuant to this Note is only being provided as part of an integrated Recapitalization Plan, as set forth in the Recapitalization Agreement. Maker further acknowledges and agrees that this Note is subject to all terms and conditions set forth in the Recapitalization Agreement. SECTION 17. MISCELLANEOUS. 17.1 Notices. All notices, demands and requests of any kind to be delivered to any party in connection with this Note shall be in writing and shall be deemed to be effective upon delivery if (i) personally delivered, (ii) sent by confirmed facsimile with a copy sent by nationally recognized overnight courier, (iii) sent by nationally recognized overnight courier, or (iv) sent by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to Maker: Northwest Biotherapeutics, Inc. 18701 120th Avenue, NE, Suite 101 Bothell, WA 98011 Fax: (425) 608 3146 Attn: Alton Boynton if to Holder: Toucan Partners, LLC 7600 Wisconsin Avenue Suite 700 Bethesda, MD 20814 Fax: (240) 497-4060 Attention: Linda F. Powers or to such other address as the party to whom notice is to be given may have furnished to the other parties hereto in writing in accordance with the provisions of this Section. 23 17.2 Parties In Interest. This Note shall bind and inure to the benefit of Holder, Maker and their respective successors and permitted assigns. Maker shall not transfer or assign this Note without the prior written consent of Holder. Holder may transfer and assign this note without the prior consent of Maker. 17.3 Entire Agreement. This Note together with the Disclosure Schedules, Exhibits attached hereto and the Recapitalization Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties with respect thereto. 17.4 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to principles of conflicts of laws of the State of Delaware or any other state). 17.5 Headings. The section and paragraph headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note. 17.6 Amendments. No provision of this Note may be amended or waived without the express written consent of both Maker and Holder, provided, however, that Holder may waive any provision hereof that inures to the benefit of Holder without the prior written consent of Maker. Also notwithstanding anything to the contrary, this Note shall be amended as and to the extent necessary to comply with the Small Business Investment Act and all regulations, advice, direction and guidance applicable to SBIC's. 17.7 Nature of Obligation. This Note is being made for business and investment purposes, and not for household or other purposes. 17.8 Expenses. Maker shall pay, reimburse or otherwise satisfy, upon demand of Holder, all fees, costs and expenses incurred and/or undertaken, and to be incurred and/or undertaken, by Holder relating to the preparation for, development of and implementation of the Recapitalization Plan set forth in the Recapitalization Agreement, including, without limitation, all due diligence expenses and all expenses relating to the Bridge Funding, the Anticipated Equity Financing and the transactions contemplated thereby and the documentation of the foregoing (including, without limitation all legal fees and expenses and costs incurred and to be incurred in connection with any SBA filings), which shall be satisfied by Maker upon Holder's demand, including but without limitation upon each closing of the Bridge Funding or Anticipated Equity Financing. This obligation shall apply regardless of whether or not all of the transactions contemplated in the Recapitalization Agreement close. At each closing of Bridge Funding and/or Anticipated Equity Financing, at Holder's sole discretion, and with respect to any or all of such fees, costs and expenses accrued through such closing, Maker shall (a) pay Holder in cash concurrently with such closing (or at Holder's sole discretion, Holder may withhold such amount from the wire of investment proceeds), (b) issue a Note in the form hereof in principal amount equal to such fees, costs and expenses (which at Holder's option may instead be evidenced as an increase in the principal amount of any Note issued in connection with such closing); or (c) treat 24 such fees, costs and expenses as an unsecured payable. At any time following such closing, Holder may require any amounts that it elected to have Maker treat as unsecured amounts payable to be paid in cash or satisfied by issuance of a Note in the principal amount of some or all of such unsecured obligation. 25 IN WITNESS WHEREOF, Maker has caused this Note to be duly executed by its duly authorized person(s) as of the date first written above. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton Boynton Title: President CONSENT AND AGREEMENT Toucan Partners, LLC consents to the loan and security interest granted by Maker in the foregoing Note. HOLDER: TOUCAN PARTNERS, LLC By: ------------------------------------ Name: Linda Powers Title: Managing Member 26 EXHIBIT A DESCRIPTION OF COLLATERAL The "Collateral" consists of all of Maker's right, title and interest (in each case, whether now owned or hereafter acquired) in and to the following: (a) All intellectual property of any kind, whether owned, licensed or otherwise permitted to be used, and whether now held or hereafter acquired or developed (the "Intellectual Property"). Such Intellectual Property shall include, without limitation, all foreign and domestic intangible property and rights, owned, licensed or otherwise obtained by Maker, including, without limitation, (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registration for the foregoing, and all goodwill associated therewith and symbolized thereby, including all extensions, modifications and renewals of same, including without limitation those items reference on Appendix 1 hereto (collectively, "Trademarks"); (ii) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations and applications therefor, including divisions, continuations, continuations-in-part, requests for continued examination, and renewal applications, and including renewals, extensions and reissues, including without limitation those items reference on Appendix 2 hereto (collectively, "Patents"); (iii) confidential and proprietary information, trade secrets and know-how, including, without limitation, processes, schematics, formulae, drawings, prototypes, models, designs and customer lists (collectively, "Trade Secrets"); (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, "Copyrights"); (v) all FDA applications, registrations, filings and other rights (collectively, "FDA Rights and Materials"); (vi) all results, information and data arising from, or obtained in connection with, research, development, pre-clinical work and/or clinical trials (collectively, "Data"); and (vii) all other intellectual property or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including rights to recover for past, present and future violations thereof (collectively, "Other Proprietary Rights"). (b) All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located. (c) All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Maker's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing an any documents of title representing any of the above. 27 (d) All contract rights, general intangibles and intellectual property, now owned or hereafter acquired, including, without limitation, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, computer code, copyrights, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind. (e) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Maker arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Maker, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefore, as well as all merchandise returned to or reclaimed by Maker. (f) All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Maker's books relating to the foregoing. (g) Each item of equipment, or personal property whether now owned or hereafter acquired, together with all substitutions, renewals or replacements of and additions, improvements, and accessions to any and all of the foregoing, and all proceeds from sales, renewals, releases or other dispositions thereof. (h) All Maker's books relating to the foregoing and any and all claims, rights and interests in any of the above, whether now owned or hereafter acquired, and all substitutions for, additions and accessions to and proceeds thereof. Notwithstanding the foregoing, to the extent any of Maker's licensed Intellectual Property prohibits the transfer or encumbrance of such licensed Intellectual Property (the "Restricted Intellectual Property") without prior consent of the owner or licensor thereof, such Restricted Intellectual Property is hereby conditionally included within the definition of Collateral, subject to receipt, by or on behalf of Maker, of any required consents. If requested by Holder, Maker shall use its best efforts to obtain the required consents under any Restricted Intellectual Property within thirty (30) days of such request. 28 APPENDIX 1 TRADEMARKS 29 APPENDIX 2 PATENTS 30 EXHIBIT B DISCLOSURE SCHEDULE TO AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC. LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 17, 2006 This Disclosure Schedule is made and given pursuant to Section 14 of the above referenced agreement and updates the representations and warranties of Maker made in notes issued to Toucan Capital Fund II, L.P. ("TOUCAN") on April 26, 2004, June 11, 2004, July 30, 2004, October 22, 2004, November 10, 2004, December 27, 2004, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005, respectively, and made in a notes issued to Toucan Partners, LLC ("TOUCAN PARTNERS") on November 14, 2005, December 30, 2005 and March 9, 2006, and also updates all Disclosure Schedules delivered by Maker to Toucan and Toucan Partners in connection with such notes. Nothing in this Disclosure Schedule constitutes an admission of any liability or obligation of Maker to any third party, nor an admission to any third party against Maker's interests. 31 SCHEDULE 14.5 CONSENTS None SCHEDULE 14.6 CAPITALIZATION, FULLY DILUTED(1) Common Stock as of 3/14/06 (per Mellon Investors Services) 58,545,939 Stock Options Outstanding as of 04/17/06 743,111 Management Converted Bridge Loan 2,687,719 Management Bridge Warrants 3,553,480 All other warrants 22,089,168 ---------- Total fully diluted shares 87,619,417 (1) Table excludes securities issued or issuable to Toucan. SCHEDULE 14.8 LITIGATION On February 3, 2006, Soma Partners, LLC filed another notice of appeal with the Supreme Court of the State of New York. As of the date of this agreement, the Supreme Court of New York has yet to act on this matter. On December 30, 2005, the Notice of Petition to Vacate Arbitration Award with the Supreme Court of the State of New York, requested that the May 24, 2005 and December 30, 2005 findings of the arbitrator be vacated. SCHEDULE 14.9 NO LIENS 1. The Equipment Lessors listed below have security interests in equipment subject to their respective leases (amounts due are as of February 14, 2006).

CAPITAL LEASES: AMOUNT CAPITAL LEASES: AMOUNT CitiCapital $34,229 VWR Centrifuge 6R, Refrigerated $2,354 IOS Capital $21,789 Canon IR5000N 8,720 ------- Total $11,074

2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company, LLC, under its premises lease has a statutory landlord lien. This is a statutory lien of general application for all landlords and covers up to two months' rent. This lien would be triggered upon a default in payment of rent. Maker is not delinquent as to any rent due under its premises lease. 3. The State of Washington has a statutory tax lien for real property and personal property excise taxes that are unpaid in the approximate amount of $345,000. This is a statutory lien of general application to all taxpayers. These tax liens would be triggered upon a default in payment of these taxes. Maker is not delinquent in the payment of any real property or personal property excise tax. 4. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes, dated April 26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 30, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated October 22, 2004 and November 10, 2004, respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12, 2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005, July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005, a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated March 9, 2006, as amended, respectively; plus accrued interest thereon, and secured by a security interest in Maker's assets issued to Toucan. 5. A License Agreement dated July 1, 2003 with Dako Cytomation for worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen (PSMA), Clone IG3. SCHEDULE 14.11 NO OTHER SECURITY INTERESTS OR ENCUMBRANCES 1. (a) The Equipment Lessors listed below have security interests in equipment subject to their respective leases (amounts due are as of February 14, 2006).

CAPITAL LEASES: AMOUNT CAPITAL LEASES: AMOUNT CitiCapital $34,229 VWR Centrifuge 6R, Refrigerated $2,354 IOS Capital $21,789 Canon IR5000N 8,720 ------- Total $11,074

(b) A License Agreement dated July 1, 2003 with Dako Cytomation for worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen (PSMA), Clone IG3. 2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company, LLC, under its premises lease has a statutory landlord lien. This is a statutory lien of general application for all landlords and covers up to two months' rent. This lien would be triggered upon a default in payment of rent. Maker is not delinquent as to any rent due under its premises lease. 4. The State of Washington has a statutory tax lien for real property and personal property excise taxes that are unpaid in the approximate amount of $345,000. This is a statutory lien of general application to all taxpayers. These tax liens would be triggered upon a default in payment of these taxes. Maker is not delinquent in the payment of any real property or personal property excise tax. 5. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes, dated April 26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 30, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated October 22, 2004 and November 10, 2004, respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12, 2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005, July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005, a $250,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes dated March 9, 2006, as restated and amended, respectively; plus accrued interest thereon, and secured by a security interest in Maker's assets issued to Toucan. * All the holders of the 10% Convertible Secured Notes are parties to a Subordination Agreement with Toucan executed concurrent with the Recapitalization Agreement. SCHEDULE 14.14(A) SEC FILINGS 1. Maker did not file on a timely basis its annual report on Form 10-K with the SEC for its fiscal year ended December 31, 2003 and 2005. SCHEDULE 14.15 LIABILITIES As of the date hereof, Maker has the following accrued liabilities: (i) tax liabilities to the State of Washington in the approximate amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the date hereof , not in excess of $275,000 (excluding amounts payable to Cognate and Investor), of which (x) approximately $105,000 are currently due payables (including approximately $85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Disclosure Schedule through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $90,000 are accrued vacation and sick pay. EX-10.3 6 v16023exv10w3.txt EXHIBIT 10.3 Exhibit 10.3 AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC. LOAN AGREEMENT, SECURITY AGREEMENT AND 10% SECURED PROMISSORY NOTE $300,000.00 APRIL 17, 2006 SECTION 1. GENERAL. For value received, NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "MAKER" or the "COMPANY"), hereby promises to pay to the order of Toucan Partners, LLC or its assigns (collectively, the "HOLDER"), the principal amount of Three Hundred Thousand Dollars ($300,000) upon written demand by Holder made at any time on or after the first anniversary of execution of the Original Issue Date (as defined below) of this Amended and Restated Loan Agreement, Security Agreement and 10% Secured Promissory Note (this "NOTE" or this "AGREEMENT"), or such earlier date as may be applicable under Sections 3 and 4 hereof (the "MATURITY DATE"). This Note amends and restates in its entirety that certain Northwest Biotherapeutics, Inc. Loan Agreement, Security Agreement and 10% Secured Promissory Note dated March 9, 2006 ("ORIGINAL ISSUE DATE") in the principal amount of $300,000 issued by the Maker in favor of Holder (the "ORIGINAL NOTE"). This Note shall not constitute a novation of the Original Note or an accord and satisfaction of the obligations of Maker evidence thereby. The Original Note is being amended and restated hereby in partial consideration for the Holder's agreement to consent to the Company's issuance of shares of Common Stock and warrants to purchase Common Stock to certain accredited investors in a private placement pursuant to that certain Note and Warrant Purchase Agreement dated as of March 30, 2006. Maker shall pay interest on the unpaid principal amount of this Note, accruing from and after the Original Issue Date at the rate of ten percent (10%) per annum, compounding annually (computed on the basis of a 365-day year and the actual number of days elapsed) (the "INTEREST RATE"). Accrued interest shall be payable upon the payment of the principal of this Note. The principal of, and interest on, this Note shall be payable in lawful currency of the United States of America by wire transfer in immediately available funds to the account of Holder, as provided in writing to Maker by Holder. All payments shall be applied first to fees, costs and charges relating to this Note (including, without limitation, any costs of collection), then to accrued and unpaid interest, and thereafter to principal. This loan is made by Holder to Maker in anticipation of an equity financing. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Recapitalization Agreement. SECTION 2. PRE-PAYMENT. This Note may be pre-paid in whole or in part prior to the Maturity Date; provided Maker provides Holder with 30 days prior written notice thereof, and provided further that Holder shall have the option to convert this note in accordance with Section 12 hereof by notifying Maker of Holder's election on or before the expiration of such thirty (30) day notice period. In the event of prepayment, Maker shall pay a penalty in the amount of 1% of the principal and accrued interest then outstanding under this Note, unless a greater or lesser penalty is established or approved by the U.S. Small Business Administration ("SBA"). Conversion of this Note shall not be deemed a prepayment. SECTION 3. DEFAULT INTEREST. Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid principal amount and accrued and unpaid interest shall bear interest payable on demand at the lesser of (i) fourteen percent (14%) per annum, (ii) the maximum rate permitted under applicable rules and regulations of the SBA, or (iii) the maximum rate allowed by law (the "DEFAULT INTEREST"). Such interest shall accrue, commencing upon the occurrence of an Event of Default and continuing until such Event of Default is cured or waived. SECTION 4. DEFAULTS. 4.1 Definitions. Each occurrence of any of the following events shall constitute an "EVENT OF DEFAULT": (a) if a default occurs in the payment of any principal of, interest on, or other obligation with respect to, this Note, whether at the due date thereof or upon acceleration thereof, and such default remains uncured for five (5) business days after written notice thereof from Holder; (b) if any representation or warranty of Maker made herein shall have been false or misleading in any material respect, or shall have contained any material omission, as of the date hereof; (c) if a default occurs in the due observance or performance of any covenant or agreement on the part of Maker to be observed or performed pursuant to the terms of this Note and such default remains uncured for five (5) business days after written notice thereof from Holder; (d) if a default occurs in Maker's performance of any of the terms and conditions of that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 and as amended on October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005 (the "RECAPITALIZATION AGREEMENT") or any Related Recapitalization Document; (e) if Maker shall (i) discontinue its business, (ii) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of Maker or any of its property, (iii) make a general assignment for the benefit of creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors, or take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation laws or statutes, or file an answer admitting the material allegations of 2 a petition filed against it in any proceeding under any such law, provided, however, that insolvency of Maker shall not constitute a default, or the basis for a default, during the Bridge Period; (f) if there shall be filed against Maker an involuntary petition seeking reorganization of Maker or the appointment of a receiver, trustee, custodian or liquidator of Maker or a substantial part of its assets, or an involuntary petition under any bankruptcy, reorganization or insolvency law of any jurisdiction, whether now or hereafter in effect (any of the foregoing petitions being hereinafter referred to as an "INVOLUNTARY PETITION") and such Involuntary Petition shall not have been dismissed within ninety (90) days after it was filed, provided, however, that insolvency of Maker shall not constitute a default, or the basis for a default, during the Bridge Period; (g) if final judgment(s) for the payment of money in excess of an aggregate of $25,000 (excluding any portion thereof that an insurance company of nationally recognized standing and creditworthiness has agreed to pay) shall be rendered against Maker and the same shall remain undischarged for a period of thirty (30) days; (h) if there occurs any event that may have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently currently conducted and/or as it is proposed to be conducted), or on any material assets or any Intellectual Property or other Collateral developed, owned, controlled, licensed, possessed, or used by Maker, or to which Maker has any right, option, entitlement or claim, provided, however, that ongoing weakening of Maker's financial condition due to ongoing expenditures and Maker's failure to obtain equity financing shall not constitute a default, or the basis for a default, during the Bridge Period; or (i) if Maker deviates, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Disclosure Schedule (as defined herein), or takes any action or makes any promise, undertaking or commitment that would result in Maker incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Holder, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Holder. 4.2 Cross-Default: Maker acknowledges that the financing contemplated by this Note is part of an integrated Recapitalization Plan, as set forth in the Recapitalization Agreement and the Related Recapitalization Documents. Maker further acknowledges and agrees that this Note is subject to all terms and conditions set forth in the Recapitalization Agreement and the Related Recapitalization Documents, and that the Recapitalization Agreement and the Related Recapitalization Documents are subject to all of the terms and conditions of this Note. Maker agrees that any default by Maker under any provision of this Note, the Recapitalization Agreement or any of the Related Recapitalization Documents will constitute a default under each other Related Recapitalization Document and the Recapitalization Agreement. 3 4.3 Remedies on Default. (a) Upon each and every such Event of Default and at any time thereafter during the continuance of such Event of Default: (i) any and all indebtedness of Maker to Holder under this Note or otherwise shall immediately become due and payable, both as to principal and interest (including any deferred interest and any accrued and unpaid interest and any Default Interest); and (ii) Holder may exercise all the rights of a creditor under applicable state and/or federal law. (b) In case any one or more Events of Default shall occur and be continuing, and acceleration of this Note or any other indebtedness of Maker to Holder shall have occurred, Holder may, inter alia, proceed to protect and enforce its rights by an action at law, suit in equity and/or other appropriate proceeding, whether for the specific performance of any agreement contained in this Note, or for an injunction against a violation of any of the terms hereof or thereof or in furtherance of the exercise of any power granted hereby or thereby or by law. No right conferred upon Holder by this Note shall be exclusive of any other right referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. SECTION 5. DEFENSES. 5.1 No Offsets. The obligations of Maker under this Note shall not be subject to reduction, limitation, impairment, termination, defense, set-off, counterclaim or recoupment for any reason. 5.2 Usury Limitations. It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Note or any other agreements or instruments between them, in no event shall such agreements or instruments require the payment or permit the collection of interest (which term, for purposes hereof, shall include any amount which, under applicable law, is deemed to be interest, whether or not such amount is characterized by the parties as interest) in excess of the maximum amount permitted by such laws. If any excess of interest is unintentionally contracted for, charged or received under the Note or under the terms of any other agreement or instrument between the parties, the effective rate of interest shall be automatically reduced to the maximum lawful rate of interest allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction thereof. SECTION 6. REPLACEMENT OF NOTE. Upon receipt by Maker of reasonable evidence of the loss, theft, destruction, or mutilation of this Note, Maker will deliver a new Note containing the same terms and conditions in lieu of this Note. Any Note delivered in accordance with the provisions of this Section 6 shall be dated as of the date of this Note. 4 SECTION 7. EXTENSION OF MATURITY. Should the principal of or interest on this Note become due and payable on other than a business day, the due date thereof shall be extended to the next succeeding business day, and, in the case of principal, interest shall be payable thereon at the rate per annum herein specified during such extension. For the purposes of the preceding sentence, a business day shall be any day that is not a Saturday, Sunday, or legal holiday in the State of Delaware. SECTION 8. ATTORNEYS' FEES AND COLLECTION FEES. Should the indebtedness evidenced by this Note or any part hereof be collected at law or in equity or in bankruptcy, receivership or other court proceedings, arbitration or mediation, or any settlement of any of the foregoing, Maker agrees to pay, in addition to principal and interest due and payable hereon, all costs of collection, including, without limitation, reasonable attorneys' fees and expenses, incurred by Holder in collecting or enforcing this Note. SECTION 9. WAIVERS; CONSENT TO JURISDICTION. 9.1 Waivers by Maker. Maker hereby waives presentment, demand for payment, notice of dishonor, notice of protest and all other notices or demands in connection with the delivery, acceptance, performance or default of this Note. 9.2 Actions of Holder not a Waiver. No delay by Holder in exercising any power or right hereunder shall operate as a waiver of any power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise; and no waiver or modification of the terms hereof shall be valid unless set forth in writing by Holder and then only to the extent set forth therein. 9.3 Consent to Jurisdiction. Maker hereby irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Delaware over any suit, action, or proceeding arising out of or relating to this Note or any other agreements or instruments with respect to Holder. Maker hereby irrevocably waives, to the fullest extent permitted by law, any objection that Maker may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon Maker and may be enforced in any court in which Maker is subject to jurisdiction by a suit upon such judgment, provided that service of process is effected upon Maker as provided in this Note or as otherwise permitted by applicable law. 9.4 Waiver of Jury Trial. MAKER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN MAKER AND HOLDER RELATING TO THE SUBJECT MATTER OF THIS NOTE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS NOTE, INCLUDING, 5 WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENT OR AGREEMENT RELATING TO THE LOAN. 9.5 Service of Process. Maker hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by delivery of a copy thereof by certified mail, postage prepaid, return receipt requested, to Maker, and/or by delivery of a copy thereof to a registered agent of Maker. Refusal to accept delivery, and/or avoidance of delivery, shall be deemed to constitute delivery. Maker irrevocably agrees that service in accordance with this Section 9.5 shall be deemed in every respect effective service of process upon Maker in any such suit, action or proceeding, and shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon Maker. Nothing in this Section 9.5 shall affect the right of Holder to serve process in any manner otherwise permitted by law or limit the right of Holder otherwise to bring proceedings against Maker in the courts of any jurisdiction or jurisdictions. SECTION 10. COVENANTS. 10.1 Affirmative Covenants. So long as this Note shall remain outstanding: (a) Office. Maker shall maintain its principal office, and the majority of its employees, assets and operations, in the United States. (b) Use of Proceeds. Maker will use the proceeds from this Note only for the following purposes: (i) General operating expenses, expenses for the development and protection of its intellectual property, and other usual and customary commercial and business expenses incurred in pursuing its business plan and strategy, on and after the effective date hereof; (ii) Audit expenses and regular and special SEC filing expenses, for audits and filings occurring on or after the effective date hereof, including, without limitation, SEC filings relating to solicitation of any shareholder consents to the recapitalization of Maker; and (iii) Expenses of accountants, attorneys, consultants and other professionals (including, without limitation, the expenses of Investor described in Section 4.11 of the Recapitalization Agreement) relating to the recapitalization of Maker, in each case only to the extent that both the nature and the amount of such expenses are in conformity with the budget approved in advance in writing by Holder and included in the Disclosure Schedule. Maker will not use the proceeds from this Note for any other purpose. Without limiting the generality of the foregoing, none of the proceeds will be used, without prior written agreement by the Holder, (i) to purchase or carry (or refinance any borrowing, the proceeds of which were used to purchase or carry) any "security" within the meaning of the Securities Act of 1933, as amended (the "SECURITIES ACT"), (ii) to repay any indebtedness or 6 discharge any obligation to an person or entity, other than trade payables incurred in the ordinary course of business on or after the effective date hereof, and consistent with Maker's operating plans and budgets fully disclosed to the Holder prior to the Closing, or (iii) to engage in business activities which would cause a violation of 13 CFR 107.720. This latter limitation prohibits, without limitation, the use of proceeds: (i) directly or indirectly, for providing funds to others; (ii) for the purchase or discounting of debt obligations; (iii) for factoring or long-term leasing of equipment with no provision for maintenance or repair; (iv) for engaging in real estate transactions such that Maker could reasonably be classified under Major Group 65 (Real Estate) of the SIC Manual; (v) for business activities wherein the assets of the business of Maker (the "BUSINESS") will be reduced or consumed, generally without replacement, as the life of the Business progresses, and the nature of the Business does not require that a stream of cash payments be made to the financing sources of the Business, on a basis associated with the continuing sale of assets (examples of such businesses would include real estate development projects, the financing and production of motion pictures, and oil and gas well exploration, development and production); (vi) for a foreign operation; (vii) to provide capital to a corporation licensed or sub-licensed under the Small Business Investment Act, (viii) to acquire farm land, (ix) to fund production of a single item or defined limited number of items generally over a defined production period, such production to constitute the majority, of the activities of Maker (examples include electric generating plants), or (x) for any purpose contrary to the public interest (including, but not limited to, activities which are in violation of law) or inconsistent with free competitive enterprise, in each case, within the meaning of Section 107.720 of Title 13 of the Code of Federal Regulations. (c) Seniority. Except as otherwise expressly provided, and except for security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11 of the Disclosure Schedule attached hereto as Exhibit B (the "DISCLOSURE SCHEDULE"), the indebtedness evidenced by this Note: (i) shall be senior in all respects to all other indebtedness or obligations of Maker of any kind, direct or indirect, contingent or otherwise, other than obligations of Maker owed directly to the state or federal government, and other than any other indebtedness or obligations of Maker to Holder; (ii) shall not be made subordinate or subject in right of payment to the prior payment of any other indebtedness or obligation of any kind, direct or indirect, contingent or otherwise, other than obligations of Maker owed directly to the state or federal government, and other than any other indebtedness or obligations of Maker to Holder. (d) No Conflicting Agreements. Maker shall not enter into any agreement that would materially impair, interfere or conflict with Maker's obligations hereunder. Without Holder's prior written consent, Maker shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way result in the creation of a security interest in any assets of Maker, including without limitation any Collateral (as defined in Exhibit A hereto). (e) Disclosure of Material Adverse Events. Within three (3) business days of Maker obtaining knowledge thereof, Maker will notify Holder in writing of any event that may have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently conducted and/or as it is proposed to be conducted), or on any material assets or any 7 Intellectual Property or other Collateral developed, owned, controlled, licensed, possessed, or used by Maker, or to which Maker has any right, option, entitlement or claim. Operating expenditures in the ordinary course of business and in accordance with operating budgets approved by Maker's Board of Directors and fully disclosed to Holder prior to the effective date hereof shall not be deemed to be material adverse events solely because they weaken Maker's financial condition in the absence of new equity financing of Maker. (f) Financial Information. So long as any principal and/or interest under this Note shall remain outstanding: (i) Promptly after the end of each fiscal year (but in any event prior to February 28 of each year) and at such other times as Holder may reasonably request, Maker shall deliver to Holder a written assessment, in form and substance satisfactory to Holder, of the economic impact of such Holder's financing hereunder, specifying the full-time equivalent jobs created or retained in connection with such investment, and the impact of the financing on Maker's business in terms of revenues and profits and on taxes paid by Maker and its employees. (ii) Maker shall provide on a timely basis to Holder all financial information requested from time to time by Holder, including without limitation its quarterly and annual balance sheet and income statement. Such financial information shall be certified by a member of Maker's senior management. Financial information required shall also include such information as would be necessary for Holder to file form 468 with the SBA, if it were applicable. (iii) In addition to the information specified in Section 10.1(f)(i) and (ii) above, upon request, Maker agrees promptly to provide Holder with sufficient additional information to provide any other information reasonably requested or required by any governmental agency asserting jurisdiction over Holder. (iv) Maker shall report its cash position and all expenditures and agreements, commitments or undertakings for expenditures to Holder on a bi-weekly basis. (g) Access. So long as any principal and/or interest under this Note shall remain outstanding, Maker shall permit Holder and its agents or representatives to visit and inspect Maker's properties, to examine its books of account and records and to discuss Maker's affairs, finances and accounts with its officers, all at such times during normal business hours as reasonably may be requested by Holder. (h) [Reserved] (i) Business Activity. As long as this Note shall remain outstanding, Maker shall make no change in its business activity that would make it or any of its business activities non-compliant with SBA regulations and guidelines. 8 10.2 Negative Covenants. So long as this Note shall remain outstanding: (a) Indebtedness. Maker shall not incur additional indebtedness, beyond the indebtedness already existing as of the date hereof, for borrowed money in excess of $10,000, in aggregate. (b) Liens. Maker shall not grant to any person or entity a security interest, lien, license, or other encumbrance of any kind, direct or indirect, contingent or otherwise, in, to or upon any assets of Maker, including, without limitation, any intellectual property of any kind, as defined in Exhibit A hereto (the "INTELLECTUAL PROPERTY"). (c) Sale or License of Assets. Maker shall not sell, lease, transfer, assign or otherwise dispose of or encumber (including, without limitation through licensing or partnering arrangements) or abandon, conceal, injure or destroy any material assets (whether tangible or intangible) of Maker (including, without limitation, any Collateral (as defined in Section 11)), other than with the prior written approval of Holder and in the ordinary course of business. (d) Issuance of Capital Stock. Except for (a) any transaction pursuant to an Unsolicited Proposal that Maker accepts in accordance with the fiduciary exception provided in Section 3.2 of the Recapitalization Agreement or (b) shares of capital stock issuable upon exercise or conversion of warrants or convertible securities outstanding prior to February 1, 2004, Maker shall not without Holder's prior written approval: (i) issue any shares of capital stock or other securities, or any instruments exercisable for or convertible into capital stock or other securities, or (ii) make any promises, commitments, undertakings, agreements or letters of intent for any of the issuances described in (i) hereof. (e) Distributions and Redemptions. Maker shall not declare or pay any dividends or make any distributions of cash, property or securities of Maker with respect to any shares of its common stock, preferred stock or any other class or series of its stock, or, directly or indirectly (except for repurchases of common stock by Maker in accordance with the terms of employee benefit plans or written agreement between Maker and any of its employees approved by the Board of Directors of Maker prior to February 1, 2004), redeem, purchase, or otherwise acquire for any consideration any shares of its common stock or any other class of its stock. (f) Hiring. Maker shall not hire, engage, retain, or agree to hire, engage or retain, any Personnel, except with Holder's express prior written approval, on a case by case basis. (g) Severance. Maker shall not enter into, increase, expand, extend, renew or reinstate any severance, separation, retention, change of control or similar agreement with any Personnel, or agree, promise, commit or undertake to do so, except with Holder's prior written approval, on a case by case basis. (h) Facilities. Maker shall not purchase, lease, hire, rent or otherwise acquire directly or indirectly any rights in or to any asset or facility outside of the ordinary course of business in an amount in excess of $10,000, in aggregate, or agree, promise or commit to do so, 9 except in accordance with the Maker's budget that has been approved by the Maker's board of directors and the Holder. (i) Expenses. Maker shall make no expenditures in excess of $10,000 in aggregate other than in accordance with a budget pre-approved by Holder. Maker shall not deviate, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Disclosure Schedule, nor take any action or make any promise, undertaking or commitment that would result in Maker incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Holder, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Holder. (j) Other Limitations. (i) Maker shall not change the nature of its business activity in a manner that would cause a violation of 13 C.F.R. Section 107.720 and/or Section 107.760(b) (including, without limitation, by undertaking real estate, film production or oil and gas exploration activities). In the event that Maker changes the nature of its business activity such that such change would render Maker ineligible for financing pursuant to applicable SBA rules and regulations, Maker agrees to use its best efforts to facilitate a transfer or redemption of any securities then held by Holder. (ii) Maker will at all times comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117. (iii) For a period of at least one year after the date of this Note, Maker will locate no more than 49 percent of the employees or tangible assets of Maker outside the United States. 10.3 Additional Covenant. Until the later of the expiration of the Standstill Period (as defined in Section 13 below) or the date on which this Note has been discharged in full, Maker shall not sell, license, loan or otherwise in any way transfer or distribute Maker's Tangential Flow Filtration ("TFF") devices or any similar device, or any specifications, diagrams, description or other information about the TFF devices, to any third party, or commit or promise or enter into any understanding of any kind, direct or indirect, contingent or otherwise, to do any of the foregoing in regard to Maker's TFF devices or any similar device, without the prior written consent of Holder in each case. SECTION 11. SECURITY INTEREST. 11.1 First Priority in All Collateral. To secure its obligations under this Note whether at stated maturity, by acceleration or otherwise, Maker hereby grants and pledges to Holder a first priority senior security interest in all of Maker's right, title and interest in, to and under all of Maker's tangible and intangible property, whether now owned, licensed or held or hereafter 10 acquired, licensed, developed, held or arising, as described in Exhibit A hereto (the "COLLATERAL"), and all proceeds of any kind from any disposition of any such Collateral. Such security interest shall be senior to any security interest in the Collateral granted the holders of the Management Notes pursuant to any subordination agreement between Holder, the holders of the Management Notes, Toucan Capital Fund II, L.P. or Maker, and shall be senior to any other security interest of any kind, direct or indirect, contingent or otherwise, in the Collateral except for the security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11 of the Disclosure Schedule (only to the amounts set forth on such schedule) and any other indebtedness or obligations of Maker to Holder. If certificates of title are now, or hereafter become, issued or outstanding with respect to any of the Collateral, Maker promptly shall cause the senior security interest of Holder to be properly noted thereon. Maker agrees that the security interest herein granted has attached and shall continue until Maker's obligations under this Note have been paid, performed and indefeasibly discharged in full. 11.2 Rights Cumulative. The rights and remedies of Holder with respect to the senior security interest granted hereby are in addition to those which are now or may hereafter be available to Holder as a matter of law or equity. Each right, power and remedy of Holder provided for herein, or now or hereafter existing at law or in equity, shall be cumulative and concurrent and shall be in addition to every right, power and remedy provided for herein, and the exercise by Holder of any one or more of the rights, powers and/or remedies provided for in this Note, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including a grantee, of any or all other rights, powers and/or remedies. 11.3 Documentation of Security Interest. Maker shall execute, deliver, file, amend, and re-file any financing statements, instruments (including without limitation stock certificates), continuation statements, assignments, or other security agreements that Holder may require from time to time to confirm the liens arising out of this Note with respect to the Collateral. Maker agrees to pay all reasonable costs associated with filing and/or re-filing of any financing statements, continuation statements or other security agreements required to perfect and to continue perfection of Holder's security interest in the Collateral and all reasonable costs required to evidence the first priority of the security interest, including, without limitation, reasonable attorneys' fees. Maker authorizes Holder to file financing statements under the UCC with respect to the security interest granted hereby and agrees, upon request of Holder, to promptly and duly execute and deliver any and all such further instruments and documents, and to take such further action, as Holder may reasonably deem necessary or desirable to obtain the full benefits of this grant of security interest. 11.4 No Conflicting Agreements. Maker shall not enter into any agreement on or after the effective date of this Note that would materially impair or conflict with Maker's obligations hereunder without Holder's prior written consent. Without Holder's prior written consent, Maker shall not permit the inclusion in any material contract to which it becomes a party on or after the effective date of this Note, of any provisions that could or might in any way prevent the creation, perfection and maintenance of a first priority security interest in Maker's rights and interest in any property included within the definition of the Collateral acquired under such contracts. Maker represents and warrants that, as of the effective date of this Note, there are no existing agreements or undertakings that would materially impair or conflict with Maker's obligations 11 hereunder or that could or might in any way prevent the creation, perfection and maintenance of a first priority security interest in Maker's rights and interest in any property included within the definition of the Collateral acquired under such contracts; except for existing equipment leases described in item 2 of Schedule 14.11 and the statutory liens described in items 3 and 4 of the Disclosure Schedule. 11.5 Notification Requirements. Within two (2) business days of any officer, director or employee of Maker obtaining knowledge thereof, Maker will promptly notify Holder in writing of any event that materially adversely affects the value of any material Collateral, the ability of Maker to dispose of any material Collateral, or the rights and remedies of Holder in relation thereto, including the levy of any legal process against any of the Collateral. 11.6 Foreclosure Remedy. Notwithstanding anything to the contrary herein or in the Recapitalization Agreement or any other agreement or document, in the event that Maker is unable to pay and discharge this Note in full on the Maturity Date, subject to the compliance with the requirements of the Delaware Uniform Commercial Code, nothing herein or in the Recapitalization Agreement or any other agreement or document shall be deemed to preclude, limit or restrict Holder from requiring the delivery of some or all of the Collateral in full or partial satisfaction of Maker's obligation under the Note. Alternatively, Holder may, in its sole discretion, elect to cause some or all of the Collateral to be sold, and the sale proceeds to be used to pay and discharge the Note in full. SECTION 12. CONVERSION. 12.1 Holder's Election. Notwithstanding any other provision of this Note or any applicable agreement or document, until, and/or in the absence of, purchases for cash of a minimum of $15 million of Convertible Preferred Stock, by Other Investors (as defined in the Recapitalization Agreement), on the terms and conditions set forth in the Recapitalization Agreement and the Convertible Preferred Stock Term Sheet, Holder may, in its sole discretion, elect to convert any or all of the principal and/or interest due under the Note into any Equity Security and/or Debt Security (each as defined below) and/or any combination thereof, in each case that Holder shall designate in Holder's sole discretion (the securities so elected being the "HOLDER DESIGNATED SECURITIES"). Holder may make such determinations from time to time and at any time before this Note has been discharged in full, and, as applicable, at any time on or before the expiration of the thirty (30) day notice period required under this Note in the event the Maker wishes to prepay this Note. For purposes hereof, (i) the term "Equity Security" means any class or series of equity security, or any combination of classes and/or series of equity securities, of the Maker that have been authorized under the Maker's certificate of incorporation, as amended and/or restated, including by any certificate of designation (the "Charter"), or any new class or series of equity security, or any combination of new and/or existing classes and/or series of equity securities, of the Maker for which the Maker has undertaken any agreement, obligation, promise, commitment or letter of intent to obtain such authorization and (ii) the term "Debt Security" means any evidence of indebtedness of the Maker that the Maker has authorized, created or incurred, or that the Maker has undertaken any agreement, obligation, promise, commitment or letter of intent to authorize, create or incur. 12 12.2 Automatic Conversion. The principal amount of, and accrued and unpaid interest on, this Note shall automatically convert into Convertible Preferred Stock, upon the terms and conditions set forth herein and in the Recapitalization Agreement, only in the event, and upon the closing of, the purchase in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments), on the terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a minimum of $15 million of Convertible Preferred Stock. 12.3 Information for Holder's Election. Maker shall provide to Holder, within two (2) business days after notice of each request by Holder, all information reasonably requested by Holder in connection with any Equity Securities and/or Debt Securities, to enable Holder to make decisions regarding one or more conversions. In the event that Maker seeks to prepay this Note, Maker shall deliver to Holder, simultaneously and together with the notice required under Section 2 of this Note of Maker's interest in prepaying the Note, a summary of all material information, terms and conditions relating to all Equity Securities and Debt Securities (including any "side" letters or agreements or separate agreements). 12.4 Conversion Price. The conversion price for any conversion pursuant to Section 12.2 shall be the lowest nominal or effective price per share paid by the Other Investors who acquire such Convertible Preferred Stock (with the exception of shares issuable upon exercise of the Initial Bridge Warrants). The conversion price for any conversion into any equity or debt security pursuant to Section 12.1 shall be the lowest of (i) the lowest nominal or effective price per share paid by any investor at any time on or after the date one year prior to the Effective Date (with the exception of (x) purchases of up to 35,000 shares of Common Stock pursuant to certain options to purchase, at a purchase price of $0.0001, that were outstanding on the Effective Date and held by members of the Board of Directors, as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and (y) shares issuable upon the exercise of the Initial Bridge Warrants, each of which shall be excluded from consideration under this section), (ii) the lowest nominal or effective price at which any investor is entitled to acquire shares (including, without limitation, through purchase, exchange, conversion or exercise) pursuant to any other security, instrument, or promise, undertaking, commitment, agreement or letter of intent of the Maker outstanding on or after the Effective Date or granted, issued, extended or otherwise made available by the Maker at any time on or after the date one year prior to the Effective Date (regardless of whether currently exercisable or convertible) (with the exception of (x) certain options to purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that were outstanding on the Effective Date and held by members of the Board of Directors as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and (y) the Initial Bridge Warrants, each of which shall be excluded from consideration under this section); and (iii) the lesser of $0.10 per share or 35% discount to the average closing price per share of the Common Stock during any twenty consecutive trading days (beginning with the twenty consecutive trading days prior to the Effective Date); provided, however, that in no event shall the price per share calculated pursuant to this clause (iii) be less than $.04 per share. The calculation required by clause (ii) hereof shall initially be based upon Schedule 2.7(d) to the Recapitalization Agreement. All other rights, preferences, privileges, terms and conditions received by Holder in connection with any conversion and/or any securities issued by the Maker to Holder upon 13 conversion, shall be no less favorable to Holder than the rights, preferences, privileges, terms and conditions any other investor in the Maker has received or is entitled to receive with respect to the security into which Holder is converting pursuant to any other security, instrument, promise, undertaking, commitment, agreement or letter of intent of the Maker, whether or not such rights, preferences, privileges, terms and conditions for any other investor are incorporated into the agreements or documents relating to any conversion or any issuance of the security or other instrument to that investor or are provided separately, at any time on or after one year prior to the Effective Date. In regard to each conversion hereunder, the Maker hereby agrees to take and/or arrange for all necessary corporate and related action to enable the execution of each such conversion elected by Holder. 12.5 No Impairment. Maker shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by Maker under and/or in connection with this Note, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to this Note and in taking all such action as may be necessary or appropriate to protect Holder's rights, preferences and privileges under and/or in connection with the Note against impairment. Holder's rights, preferences and privileges granted under and/or in connection with any Holder Designated Securities may not be amended, modified or waived without the Holder's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. SECTION 13. STANDSTILL, EXCLUSIVITY AND CONFIDENTIALITY. During the Bridge Period and the Equity Financing Period, as defined in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, but excluding the periods from February 18, 2004 through February 29, 2004 and from March 16, 2004 through the Effective Date (collectively, the "STANDSTILL PERIOD") the parties shall have worked together, and shall continue to work together, in good faith with best efforts to implement the terms of the Recapitalization Agreement, upon which the parties shall have reached binding agreement and which the parties shall have executed as a condition precedent to the execution and funding of this Note. Except as provided in the fiduciary exception set forth in Section 3.2 of the Recapitalization Agreement, during the Standstill Period, the Maker and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall work only with Investor and its agents, advisers and consultants, and shall have had, and shall continue to have, no discussions, negotiations and/or communications of any kind with any other parties, regardless of which party initiates or attempts to initiate any such contact or communication, in regard to any potential equity or debt financing of the Maker by parties other than Holder, and/or any joint venture, license, co-development or other business arrangement by or with parties other than Holder. Notwithstanding the fiduciary exception set forth in Section 3.2 of the Recapitalization Agreement, during the Standstill Period, the Maker and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall maintain confidentiality, and shall not have, and shall continue not to provide copies, excerpts, summaries, descriptions, or communicate in any way with any third parties, either directly or indirectly, as to any aspects of the recapitalization of Maker and/or any financing by Holder, including, without 14 limitation, the identity of the parties involved, any terms of the Recapitalization Agreement, this Note, the Related Recapitalization Documents, the Convertible Preferred Stock or any other matter relating to the recapitalization of Maker, or the progress or status of any activities or processes relating to the recapitalization of Maker; provided, however, nothing herein shall prohibit the Maker from filing this Note, the Recapitalization Agreement and any Related Recapitalization Document with the Securities and Exchange Commission (the "SEC"), if required by the regulations of the SEC (subject to the covenant in Section 2.5(a) of the Recapitalization Agreement). During the Standstill Period, the Maker shall not make any sales of equipment or other assets of any kind, including, without limitation, any non-essential laboratory equipment, and the Maker shall comply with Section 10.3 in regard to the TFF devices. SECTION 14. REPRESENTATIONS AND WARRANTIES. Except as expressly set forth (with reference to a section in this Note) in the Disclosure Schedules attached hereto as Exhibit B (as updated as of each closing contemplated by the Recapitalization Agreement and the Related Recapitalization Documents), and only to the extent such exceptions are acceptable to Holder in its sole discretion as of the date of this Note, and independently as of the date upon which each additional Note is issued to Holder, and as of the date of each closing, if any, of the Anticipated Equity Financing, Maker represents and warrants to the following: 14.1 Organization, Good Standing and Qualification. Maker is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business. Maker is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business, properties, operations, prospects or condition (financial or otherwise). 14.2 Authorization of Note, Etc. The execution, delivery and performance by Maker of this Note has been duly authorized by all requisite corporate action by Maker in accordance with Delaware law. This Note is a valid and binding obligation of Maker, enforceable against Maker in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of general application effecting enforcements of creditors' rights or general principles of equity. 14.3 No Conflicts. The execution, delivery, performance, issuance, sale and delivery of this Note and the Related Recapitalization Documents, and compliance with the provisions hereof by Maker, will not (a) to the knowledge of Maker, violate any provision of any law, statute, rule or regulation applicable to Maker or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to Maker or any of its properties or assets or (b) conflict with or result in any material breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of, any encumbrance upon any of the material assets of Maker under, the 15 Charter or Bylaws of Maker (as they may be amended to date) or any agreement or instrument to which Maker is a party. As used herein, "encumbrance" shall mean any liens, charges, encumbrances, equities, claims, options, proxies, pledges, security interests, licenses or other similar rights of any nature. 14.4 Compliance with Other Instruments. Maker is not in violation of any term of Maker's Charter, as amended, including any certificate of designation filed therewith, and/or Maker's Bylaws. Maker is not, in any material respect, in violation of any term of any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation to which Maker or any of such Collateral is subject. To the best of Maker's knowledge, no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a breach or violation, in any material respect, under any applicable judgments, orders, writs, decrees, federal, state and/or local laws, rules or regulations which would have a material adverse affect on the condition, financial or otherwise, or operations of Maker (as it is currently conducted and as it is proposed to be conducted) or on any material assets or any Intellectual Property or other Collateral owned, controlled, licensed, possessed, and/or used by Maker. To the best of its knowledge, Maker has avoided every condition, and has not performed any act, the occurrence of which would result in Maker's loss of any right granted under any license, distribution agreement or other agreement or Maker's loss of any rights in or to any Collateral. 14.5 Approvals. Maker has obtained all necessary permits, authorizations, waivers, consents and approvals of or by, and made all necessary notifications of and/or filings with, all applicable persons (governmental and private), in connection with the execution, delivery, performance, issuance, sale and/or delivery of this Note, the Recapitalization Agreement and the Related Recapitalization Documents, and consummation by Maker of the transactions contemplated hereby and thereby, except as listed in Schedule 14.5 14.6 Capitalization. The authorized capital stock of Maker consists of 300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the date hereof, 63,553,806 shares of Common Stock are issued and outstanding and 32,500,000 shares of Series A convertible preferred stock are issued and outstanding. No other shares of any class or series of Maker's capital stock are authorized and/or issued and outstanding. All issued and outstanding shares of capital stock of Maker have been duly authorized and validly issued, and are fully paid and non-assessable, and have been offered, sold and delivered by Maker in compliance with all applicable federal and state securities laws. Except as set forth in Schedule 14.6, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of Maker is authorized or outstanding, and there is no agreement, promise, commitment, undertaking or letter of intent of any kind (direct or indirect, contingent or otherwise) by Maker to issue any shares, subscriptions, warrants, options, convertible securities, or other such rights, or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in Schedule 14.6, Maker has no obligation of any kind (direct or indirect, contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Schedule 14.6 includes a true, accurate and complete statement describing the total number of shares of Maker outstanding as of the date of 16 this Note (on a fully diluted basis, including, without limitation, all warrants and options outstanding (whether or not currently exercisable), all convertible instruments of any kind (whether or not currently convertible), shares of all classes of stock, and any agreements, promises, commitments, undertakings or letters of intent to issue any of the foregoing. 14.7 Authorization of the Shares. Maker has authorized the issuance and sale of a sufficient number of shares of Convertible Preferred Stock, par value $0.001 per share, and Common Stock of the Maker to fully implement the Recapitalization Plan, while maintaining such additional authorized but unissued shares as reasonably determined by Holder to be appropriate. Of such authorized shares, a sufficient number of shares shall be reserved for issuance upon any exercise of the Bridge Warrants and/or Preferred Stock Warrants. If at any time the number of authorized but unissued shares of Convertible Preferred Stock and/or of Common Stock is not sufficient to effect the conversion of all then outstanding convertible Notes and other instruments, and the exercise of all then outstanding warrants, options and similar instruments, then, in addition to such other remedies as may be available to Holder, including, without limitation, the exercise of Holder's right of first refusal set forth in Section 2.7(f) of the Recapitalization Agreement, Maker shall take such corporate action as may be necessary to increase its authorized but unissued shares of Convertible Preferred Stock and/or Common Stock to such number of shares as will be sufficient for such purposes. Such corporate action shall include, without limitation, obtaining all requisite regulatory approvals and any requisite shareholder approval of any necessary amendment to Maker's Charter. 14.8 Litigation. Except as set forth in Schedule 14.8 of the Disclosure Schedule, there is no action, suit, proceeding or investigation pending or, to the knowledge of Maker, currently threatened against Maker, and/or its directors, officers, advisers, agents, properties, assets or business, in each case relating to Maker and/or its business, assets, operations or properties. Maker is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by Maker currently pending or which Maker intends to initiate. 14.9 No Liens. Except for liens for the benefit of Holder, created by this Note, and for the benefit of Toucan Partners, LLC created by the Recapitalization Agreement and/or any of the Related Recapitalization Documents, and except as set forth in Schedule 14.9 of the Disclosure Schedule, none of the material assets of Maker, including the Collateral, are subject to any existing lien, pledge, security interest or other encumbrance of any kind, direct or indirect, contingent or otherwise. 14.10 Full Disclosure. Notwithstanding any other provision of this Note, neither this Note, nor any exhibit hereto, nor any written report, certificate, instrument or other information furnished to Holder in connection with the transactions contemplated under and/or in connection with Note contain any material misstatement (including, without limitation, any material omission), or is misleading in any material respect. 14.11 No Other Security Interests or Other Encumbrances. Except as set forth in Schedule 14.11 (and only to the amounts set forth on such schedule), there are no existing security interests, pledges, liens or other encumbrances of any kind, direct or indirect, contingent 17 or otherwise (including without limitation any licensing or partnering arrangements or agreements), in or relating to any assets of Maker, including, without limitation, any Intellectual Property (as defined herein) or other Collateral. All existing security interests, pledges, liens or other encumbrances of any kind, other than those set forth in Schedule 14.11 hereto (and only to the amounts set forth on such schedule), are subordinate to the security interest established pursuant to Section 11 hereof, all necessary consents, subordination agreements and waivers, if any, have been obtained, and all amended filings and/or re-filings shall be made immediately upon execution of this Note. 14.12 "Small Business". (a) Small Business Status. Maker together with its "affiliates" (as that term is defined in Section 121.103 of Title 13 of Code of Federal Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including Section 121.301(c) of Title 13, Code of Federal Regulations. (b) Information for SBA Reports. Maker has delivered and/or will deliver to Holder certain information, set forth by and regarding the Maker and its affiliates in connection with this Note, on SBA Forms 480, 652 and Part A and B of Form 1031. This information delivered was true, accurate, complete and correct, and any information yet to be delivered will be true, accurate, complete and correct, and in form and substance acceptable to Holder. (c) Eligibility. Maker is eligible for financing by any Holder pursuant to Section 107.720 of Title 13 of the Federal Regulations and any other SBA regulations. 14.13 Intellectual Property. (d) Definitions. "Intellectual Property" means all foreign and domestic intangible property and rights, owned, licensed, sub-licensed or otherwise obtained by Maker, including, without limitation, (i) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations and applications therefor, including divisions, continuations, continuations-in-part, requests for continued examination, and renewal applications, and including renewals, extensions and reissues (collectively, "PATENTS"); (ii) confidential and proprietary information, trade secrets and know-how, including without limitation processes, schematics, formulae, drawings, prototypes, models, designs and customer lists (collectively, "TRADE SECRETS"); (iii) all data, slides, observations, and laboratory results, produced by, for or on behalf of Maker, or which Maker has rights to obtain (collectively, "DATA"); (iv) all FDA applications, registrations, filings and other rights (collectively, "FDA RIGHTS") and all data and documentation supporting or relating thereto; (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, "COPYRIGHTS"); (v) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress, assumed names, 18 fictitious names, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all extensions, modifications and renewals of same (collectively, "TRADEMARKS"); (vi) all other intellectual property or proprietary rights, including, without limitation, all claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including rights to recover for past, present and future violations thereof (collectively, "OTHER PROPRIETARY RIGHTS"). "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating to or affecting the Intellectual Property, including, without limitation, agreements granting rights to use the Licensed or Sub-Licensed Intellectual Property, agreements granting rights to use Owned Intellectual Property, confidentiality agreements, Trademark coexistence agreements, Trademark consent agreements and non-assertion agreements. "LICENSED or SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual Property that Maker is licensed, sub-licensed or otherwise permitted by other persons or entities to use. "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by Maker. "REGISTERED" means issued, registered, renewed or the subject of a pending application. (e) Schedule 14.13 ("INTELLECTUAL PROPERTY") sets forth a true and complete list and summary description of (A) all Registered or material Owned Intellectual Property (each identified as a Patent, Trademark, Trade Secret, Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or Sub Licensed Intellectual Property and (C) all Intellectual Property Contracts. (f) All Intellectual Property is valid, subsisting and enforceable. No Owned Intellectual Property has been canceled, suspended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting Maker's rights thereto. No Licensed or Sub-Licensed Intellectual Property has been canceled, suspended, not renewed or extended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting Maker's rights thereto. (g) The Owned Intellectual Property is owned exclusively by Maker and has been used with all patent, trademark, copyright, confidential, proprietary and other Intellectual Property notices and legends prescribed by law or otherwise permitted. (h) No suit, action, reissue, reexamination, public protest, interference, opposition, cancellation or other proceeding (collectively, "Suit") is pending or threatened concerning any claim or position: (i) that Maker, or another person or entity, has violated any Intellectual Property rights. To Maker's best knowledge, Maker is not violating and has not violated any intellectual property rights of any other party. 19 (ii) that Maker, or another person or entity, has breached any Intellectual Property Contract. There exists no event, condition or occurrence which, with the giving of notice or lapse of time, or both, would constitute a breach or default by Maker, or a breach or default by another person or entity, under any Intellectual Property Contract. No party to any Intellectual Property Contract has given Maker notice of its intention to cancel, terminate or fail to renew any Intellectual Property Contract. (iii) that the Intellectual Property has been violated or is invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or not owned exclusively by Maker. No such claim has been threatened or asserted. To Maker's best knowledge, no valid basis for any such Suits or claims exists. (i) To Maker's best knowledge, no other person or entity is violating, infringing upon or claiming rights incompatible with Maker's rights to any Intellectual Property. Maker has provided to Holder copies of all information reasonably available to it relevant to intellectual property rights claimed by third parties and possible infringement thereof including, without limitation, any freedom to practice or freedom to operate opinions. (j) Except as set forth on Schedule 14.13(j), Maker owns or otherwise holds valid rights to use all Intellectual Property used in its business. (k) Maker has timely made all filings and payments with the appropriate foreign and domestic agencies and other parties required to maintain in full force and effect all Intellectual Property. Except as set forth on Schedule 14.13, no due dates for filings or payments concerning the Intellectual Property (including, without limitation, office action responses, affidavits of use, affidavits of continuing use, renewals, requests for extension of time, maintenance fees, application fees and foreign convention priority filings) fall due within ninety (90) days prior to or after the closing, whether or not such due dates are extendable. Maker is in compliance with all applicable rules and regulations of such agencies and other parties with respect to the Intellectual Property. All documentation necessary to confirm and effect the Intellectual Property, if acquired from other persons or entities, has been recorded in the United States Patent and Trademark Office, the United States Copyright Office and other official offices. (l) Maker has undertaken and consistently implemented best efforts to protect the secrecy, confidentiality and value of all non-public Intellectual Property used in its business (including, without limitation, entering into appropriate confidentiality agreements with all officers, directors, employees and other persons or entities with access to such non-public Intellectual Property). Maker management has not disclosed any such non-public Intellectual Property to any persons or entities other than (i) Maker employees or Maker contractors who had a need to know and use such non-public Intellectual Property in the ordinary course of employment or contract performance, or (ii) prospective customers, and in each case who executed appropriate confidentiality agreements. 20 (m) Maker has taken all reasonable measures to confirm that no current or former Maker employee is or was a party to any confidentiality agreement or agreement not to compete that restricts or forbids, or restricted or forbade at any time during such employee's employment by Maker, such employee's performance of Maker's business, or any other activity that such employee was hired to perform or otherwise performed on behalf of or in connection with such employee's employment by Maker. 14.14 SEC Filings; Financial Statements. (a) Maker has delivered or made available to Holder accurate and complete copies of all registration statements, proxy statements and other statements, reports, schedules, forms and other documents filed by the Maker with the SEC since January 1, 2003, and all amendments thereto (the "MAKER SEC DOCUMENTS"). Except as set forth on Schedule 14.14(a), all statements, reports, schedules, forms and other documents required to have been filed by Maker with the SEC have been so filed on a timely basis. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Note, then on the date of such filing): (i) each of the Maker SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Maker SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The financial statements (including any related notes) contained in the Maker SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material in amount), and (iii) fairly present the consolidated financial position of Maker and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of Maker and its consolidated subsidiaries for the periods covered thereby. 14.15 Liabilities. As of the date hereof, Maker has the following accrued liabilities: (i) tax liabilities to the State of Washington in the approximate amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the date hereof, not in excess of $275,000 (excluding amounts payable to Cognate and Investor), of which (x) approximately $105,000 are currently due payables (including $85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Disclosure Schedule through the first calendar quarter of 2006, decreasing 21 thereafter, the last of which is fully amortized in May 2007, and (z) $90,000 are accrued vacation and sick pay. 14.16 Compliance with All Standstill Provisions. Maker has complied in all respects with all standstill, exclusivity and confidentiality provisions of (a) this Note, the Recapitalization Agreement and the Related Recapitalization Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between Maker and Toucan Capital Fund II, L.P. dated as of February 2, 2004 and (c) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between Maker and Toucan Capital Fund II, L.P. dated as of March 1, 2004. 14.17 Recall of TFF Devices. Maker has recalled all units of Maker's TFF devices, and all specifications, diagrams, description or other information relating to such TFF devices or any similar devices, from all third parties who may previously have possessed any of the foregoing, and, as of the Effective Date of this note, no third party possesses any of the foregoing. SECTION 15. INDEMNIFICATION 15.1 Indemnification Agreement. (a) In addition to all rights and remedies available to Holder at law or in equity, Maker shall indemnify Holder and each subsequent holder of this Note, and their respective affiliates, stockholders, limited partners, general partners, officers, directors, managers, employees, agents, representatives, successors and assigns (collectively, the "INDEMNIFIED PERSONS") and save and hold each of them harmless against and pay on behalf of or reimburse such party as and when incurred for any loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or expense (other than any demand, claim, action or cause of action instituted by Maker), including interest, penalties, reasonable attorneys' fees and expenses, and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "LOSSES") which any such party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any material misrepresentation in, or material omission from, or breach of any of the representations, warranties, statements, schedules and/or exhibits hereto, certificates or other instruments or documents furnished to Holder by Maker in connection with this Note; or (ii) any material nonfulfillment or material breach of any covenant or agreement on the part of Maker under this Note. (b) Notwithstanding the foregoing, Maker shall not be liable for any portion of Losses resulting from the gross negligence or willful misconduct of Holder or a subsequent holder of this Note. (c) Within twenty (20) days after receipt of notice of commencement of any action or the assertion of any claim by a third party, Holder shall give Maker written notice 22 thereof together with a copy of such claim, process or other legal pleading of such claim. Maker shall have the right to assist in the defense thereof by representation of its own choosing. 15.2 Survival. All indemnification rights hereunder shall survive the execution and delivery of this Note and the consummation of the transactions contemplated hereby (i) for a period of two years with respect to representations and warranties made by Maker, and (ii) until fully performed with respect to covenants and agreements made by Maker, regardless of any investigation, inquiry or examination made for or on behalf of, or any knowledge of Holder and/or any of the Indemnified Persons, or the acceptance by Holder of any certificate or opinion. 15.3 Payment. Any indemnification of Holder or any other Indemnified Person by Maker pursuant to this Section 15 shall be effected by wire transfer of immediately available funds from Maker to an account designated by Holder or such other Indemnified Person within fifteen (15) days after the determination thereof. SECTION 16. INTEGRATION WITH RECAPITALIZATION PLAN Maker acknowledges and agrees that the funding provided by Holder pursuant to this Note is only being provided as part of an integrated Recapitalization Plan, as set forth in the Recapitalization Agreement. Maker further acknowledges and agrees that this Note is subject to all terms and conditions set forth in the Recapitalization Agreement. SECTION 17. MISCELLANEOUS. 17.1 Notices. All notices, demands and requests of any kind to be delivered to any party in connection with this Note shall be in writing and shall be deemed to be effective upon delivery if (i) personally delivered, (ii) sent by confirmed facsimile with a copy sent by nationally recognized overnight courier, (iii) sent by nationally recognized overnight courier, or (iv) sent by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to Maker: Northwest Biotherapeutics, Inc. 18701 120th Avenue, NE, Suite 101 Bothell, WA 98011 Fax: (425) 608 3146 Attn: Alton Boynton if to Holder: Toucan Partners, LLC 7600 Wisconsin Avenue Suite 700 Bethesda, MD 20814 Fax: (240) 497-4060 Attention: Linda F. Powers or to such other address as the party to whom notice is to be given may have furnished to the other parties hereto in writing in accordance with the provisions of this Section. 23 17.2 Parties In Interest. This Note shall bind and inure to the benefit of Holder, Maker and their respective successors and permitted assigns. Maker shall not transfer or assign this Note without the prior written consent of Holder. Holder may transfer and assign this note without the prior consent of Maker. 17.3 Entire Agreement. This Note together with the Disclosure Schedules, Exhibits attached hereto and the Recapitalization Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties with respect thereto. 17.4 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to principles of conflicts of laws of the State of Delaware or any other state). 17.5 Headings. The section and paragraph headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note. 17.6 Amendments. No provision of this Note may be amended or waived without the express written consent of both Maker and Holder, provided, however, that Holder may waive any provision hereof that inures to the benefit of Holder without the prior written consent of Maker. Also notwithstanding anything to the contrary, this Note shall be amended as and to the extent necessary to comply with the Small Business Investment Act and all regulations, advice, direction and guidance applicable to SBIC's. 17.7 Nature of Obligation. This Note is being made for business and investment purposes, and not for household or other purposes. 17.8 Expenses. Maker shall pay, reimburse or otherwise satisfy, upon demand of Holder, all fees, costs and expenses incurred and/or undertaken, and to be incurred and/or undertaken, by Holder relating to the preparation for, development of and implementation of the Recapitalization Plan set forth in the Recapitalization Agreement, including, without limitation, all due diligence expenses and all expenses relating to the Bridge Funding, the Anticipated Equity Financing and the transactions contemplated thereby and the documentation of the foregoing (including, without limitation all legal fees and expenses and costs incurred and to be incurred in connection with any SBA filings), which shall be satisfied by Maker upon Holder's demand, including but without limitation upon each closing of the Bridge Funding or Anticipated Equity Financing. This obligation shall apply regardless of whether or not all of the transactions contemplated in the Recapitalization Agreement close. At each closing of Bridge Funding and/or Anticipated Equity Financing, at Holder's sole discretion, and with respect to any or all of such fees, costs and expenses accrued through such closing, Maker shall (a) pay Holder in cash concurrently with such closing (or at Holder's sole discretion, Holder may withhold such amount from the wire of investment proceeds), (b) issue a Note in the form hereof in principal amount equal to such fees, costs and expenses (which at Holder's option may instead be evidenced as an increase in the principal amount of any Note issued in connection with such closing); or (c) treat 24 such fees, costs and expenses as an unsecured payable. At any time following such closing, Holder may require any amounts that it elected to have Maker treat as unsecured amounts payable to be paid in cash or satisfied by issuance of a Note in the principal amount of some or all of such unsecured obligation. 25 IN WITNESS WHEREOF, Maker has caused this Note to be duly executed by its duly authorized person(s) as of the date first written above. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton Boynton Title: President CONSENT AND AGREEMENT Toucan Partners, LLC consents to the loan and security interest granted by Maker in the foregoing Note. TOUCAN PARTNERS, LLC By: ------------------------------------ Name: Linda Powers Title: Managing Member 26 EXHIBIT A DESCRIPTION OF COLLATERAL The "Collateral" consists of all of Maker's right, title and interest (in each case, whether now owned or hereafter acquired) in and to the following: (a) All intellectual property of any kind, whether owned, licensed or otherwise permitted to be used, and whether now held or hereafter acquired or developed (the "Intellectual Property"). Such Intellectual Property shall include, without limitation, all foreign and domestic intangible property and rights, owned, licensed or otherwise obtained by Maker, including, without limitation, (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registration for the foregoing, and all goodwill associated therewith and symbolized thereby, including all extensions, modifications and renewals of same, including without limitation those items reference on Appendix 1 hereto (collectively, "Trademarks"); (ii) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations and applications therefor, including divisions, continuations, continuations-in-part, requests for continued examination, and renewal applications, and including renewals, extensions and reissues, including without limitation those items reference on Appendix 2 hereto (collectively, "Patents"); (iii) confidential and proprietary information, trade secrets and know-how, including, without limitation, processes, schematics, formulae, drawings, prototypes, models, designs and customer lists (collectively, "Trade Secrets"); (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, "Copyrights"); (v) all FDA applications, registrations, filings and other rights (collectively, "FDA Rights and Materials"); (vi) all results, information and data arising from, or obtained in connection with, research, development, pre-clinical work and/or clinical trials (collectively, "Data"); and (vii) all other intellectual property or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including rights to recover for past, present and future violations thereof (collectively, "Other Proprietary Rights"). (b) All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located. (c) All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Maker's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing an any documents of title representing any of the above. 27 (d) All contract rights, general intangibles and intellectual property, now owned or hereafter acquired, including, without limitation, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, computer code, copyrights, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind. (e) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Maker arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Maker, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefore, as well as all merchandise returned to or reclaimed by Maker. (f) All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Maker's books relating to the foregoing. (g) Each item of equipment, or personal property whether now owned or hereafter acquired, together with all substitutions, renewals or replacements of and additions, improvements, and accessions to any and all of the foregoing, and all proceeds from sales, renewals, releases or other dispositions thereof. (h) All Maker's books relating to the foregoing and any and all claims, rights and interests in any of the above, whether now owned or hereafter acquired, and all substitutions for, additions and accessions to and proceeds thereof. Notwithstanding the foregoing, to the extent any of Maker's licensed Intellectual Property prohibits the transfer or encumbrance of such licensed Intellectual Property (the "Restricted Intellectual Property") without prior consent of the owner or licensor thereof, such Restricted Intellectual Property is hereby conditionally included within the definition of Collateral, subject to receipt, by or on behalf of Maker, of any required consents. If requested by Holder, Maker shall use its best efforts to obtain the required consents under any Restricted Intellectual Property within thirty (30) days of such request. 28 APPENDIX 1 TRADEMARKS 29 APPENDIX 2 PATENTS 30 EXHIBIT B DISCLOSURE SCHEDULE TO AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC. LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 17, 2006 This Disclosure Schedule is made and given pursuant to Section 14 of the above referenced agreement and updates the representations and warranties of Maker made in notes issued to Toucan Capital Fund II, L.P. ("TOUCAN") on April 26, 2004, June 11, 2004, July 30, 2004, October 22, 2004, November 10, 2004, December 27, 2004, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005, respectively, and made in a notes issued to Toucan Partners, LLC ("TOUCAN PARTNERS") on November 14, 2005, December 30, 2005 and March 9, 2006, and also updates all Disclosure Schedules delivered by Maker to Toucan and Toucan Partners in connection with such notes. Nothing in this Disclosure Schedule constitutes an admission of any liability or obligation of Maker to any third party, nor an admission to any third party against Maker's interests. 31 SCHEDULE 14.5 CONSENTS None SCHEDULE 14.6 CAPITALIZATION, FULLY DILUTED(1) Common Stock as of 3/14/06 (per Mellon Investors Services) 58,545,939 Stock Options Outstanding as of 04/17/06 743,111 Management Converted Bridge Loan 2,687,719 Management Bridge Warrants 3,553,480 All other warrants 22,089,168 ---------- Total fully diluted shares 87,619,417 (1) Table excludes securities issued or issuable to Toucan. SCHEDULE 14.8 LITIGATION On February 3, 2006, Soma Partners, LLC filed another notice of appeal with the Supreme Court of the State of New York. As of the date of this agreement, the Supreme Court of New York has yet to act on this matter. On December 30, 2005, the Notice of Petition to Vacate Arbitration Award with the Supreme Court of the State of New York, requested that the May 24, 2005 and December 30, 2005 findings of the arbitrator be vacated. SCHEDULE 14.9 NO LIENS 1. The Equipment Lessors listed below have security interests in equipment subject to their respective leases (amounts due are as of February 14, 2006).

CAPITAL LEASES: AMOUNT CAPITAL LEASES: AMOUNT CitiCapital $34,229 VWR Centrifuge 6R, Refrigerated $2,354 IOS Capital $21,789 Canon IR5000N 8,720 ------- Total $11,074

2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company, LLC, under its premises lease has a statutory landlord lien. This is a statutory lien of general application for all landlords and covers up to two months' rent. This lien would be triggered upon a default in payment of rent. Maker is not delinquent as to any rent due under its premises lease. 3. The State of Washington has a statutory tax lien for real property and personal property excise taxes that are unpaid in the approximate amount of $345,000. This is a statutory lien of general application to all taxpayers. These tax liens would be triggered upon a default in payment of these taxes. Maker is not delinquent in the payment of any real property or personal property excise tax. 4. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes, dated April 26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 30, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated October 22, 2004 and November 10, 2004, respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12, 2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005, July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005, a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated March 9, 2006, as amended, respectively; plus accrued interest thereon, and secured by a security interest in Maker's assets issued to Toucan. 5. A License Agreement dated July 1, 2003 with Dako Cytomation for worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen (PSMA), Clone IG3. SCHEDULE 14.11 NO OTHER SECURITY INTERESTS OR ENCUMBRANCES 1. (a) The Equipment Lessors listed below have security interests in equipment subject to their respective leases (amounts due are as of February 14, 2006).

CAPITAL LEASES: AMOUNT CAPITAL LEASES: AMOUNT CitiCapital $34,229 VWR Centrifuge 6R, Refrigerated $2,354 IOS Capital $21,789 Canon IR5000N 8,720 ------- Total $11,074

(b) A License Agreement dated July 1, 2003 with Dako Cytomation for worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen (PSMA), Clone IG3. 2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company, LLC, under its premises lease has a statutory landlord lien. This is a statutory lien of general application for all landlords and covers up to two months' rent. This lien would be triggered upon a default in payment of rent. Maker is not delinquent as to any rent due under its premises lease. 4. The State of Washington has a statutory tax lien for real property and personal property excise taxes that are unpaid in the approximate amount of $345,000. This is a statutory lien of general application to all taxpayers. These tax liens would be triggered upon a default in payment of these taxes. Maker is not delinquent in the payment of any real property or personal property excise tax. 5. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes, dated April 26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 30, 2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated October 22, 2004 and November 10, 2004, respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12, 2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005, July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005, a $250,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes dated March 9, 2006, as restated and amended, respectively; plus accrued interest thereon, and secured by a security interest in Maker's assets issued to Toucan. * All the holders of the 10% Convertible Secured Notes are parties to a Subordination Agreement with Toucan executed concurrent with the Recapitalization Agreement. SCHEDULE 14.14(A) SEC FILINGS 1. Maker did not file on a timely basis its annual report on Form 10-K with the SEC for its fiscal year ended December 31, 2003 and 2005. SCHEDULE 14.15 LIABILITIES As of the date hereof, Maker has the following accrued liabilities: (i) tax liabilities to the State of Washington in the approximate amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the date hereof , not in excess of $275,000 (excluding amounts payable to Cognate and Investor), of which (x) approximately $105,000 are currently due payables (including approximately $85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Disclosure Schedule through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $90,000 are accrued vacation and sick pay. EX-10.4 7 v16023exv10w4.txt EXHIBIT 10.4 Exhibit 10.4 NORTHWEST BIOTHERAPEUTICS, INC. AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT NORTHWEST BIOTHERAPEUTICS, INC. AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of the 17th day of April, 2006, by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "Company") and TOUCAN CAPITAL FUND II, L.P. (the "Investor"). RECITALS WHEREAS, the Investor purchased shares of the Company's Series A Preferred Stock (the "Series A Stock") pursuant to that certain Securities Purchase Agreement (the "Purchase Agreement") dated as of January 26, 2005 and the Investor is acquiring shares of the Company's Series A-1 Preferred Stock (the "Series A-1 Stock" and together with Series A Stock, the "Preferred Stock") pursuant to that certain Note Conversion Agreement (the "Conversion Agreement") dated of even date herewith; WHEREAS, pursuant to the Purchase Agreement the Company and the Investor entered into that certain Investor Rights Agreement (the "ORIGINAL AGREEMENT"); WHEREAS, the Conversion Agreement is conditioned upon the execution and delivery of this Agreement; and WHEREAS, in connection with the consummation of the Conversion Agreement, the parties desire to enter into this Agreement in order to amend and restate the Original Agreement and to provide Investor with the registration and other rights as set forth below. NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. GENERAL. 1.1 DEFINITIONS. As used in this Agreement the following terms shall have the following respective meanings: (A) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (B) "FORM S-3" means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (C) "HOLDER" means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.11 hereof. (D) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. (E) "REGISTRABLE SECURITIES" means (a) Common Stock of the Company issuable or issued upon conversion of the Shares and (b) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144, (ii) sold in a private transaction in which the transferor's rights under Section 2 of this Agreement are not assigned or (iii) held by a Holder (together with its affiliates) if, as reflected on the Company's list of stockholders, such Holder (together with its affiliates) holds less than 1% of the Company's outstanding Common Stock (treating all shares of Preferred Stock on an as converted basis), the Company has completed its Initial Offering and all shares of Common Stock of the Company issuable or issued upon conversion of the Shares held by and issuable to such Holder (and its affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period. (F) "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares of the Company's Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities. (G) "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in complying with Sections 2.2, 2.4 and 2.6 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements not to exceed one hundred thousand dollars ($100,000) of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). (H) "SEC" or "COMMISSION" means the Securities and Exchange Commission. (I) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. (J) "SELLING EXPENSES" shall mean all underwriting discounts and selling commissions applicable to the sale. (K) "SHARES" shall mean the Company's Series A Stock issued pursuant to the Purchase Agreement and Series A-1 Stock issued pursuant to the Conversion Agreement held from time to time by the Investor and its permitted assigns and the Capital Stock issuable upon exercise of the Warrants. (L) "SPECIAL REGISTRATION STATEMENT" shall mean (i) a registration statement relating to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, any registration statements related to the EXHIBIT 10.4 issuance or resale of securities issued in such a transaction or (iii) a registration related to stock issued upon conversion of debt securities. (M) "WARRANTS" shall mean those certain warrants to purchase capital stock held by the Investor dated April 26, 2004, June 11, 2004, July 30, 2004, October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005. SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER. 2.1 RESTRICTIONS ON TRANSFER. (A) Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until: (I) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (II) (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. The Company will not require any transferee pursuant to Rule 144 to be bound by the terms of this Agreement if the shares so transferred do not remain Registrable Securities hereunder following such transfer. (B) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to an affiliate, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, (D) an individual transferring to the Holder's family member or trust for the benefit of an individual Holder; (E) any other party permitted under applicable federal and state securities laws, provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder. (C) Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY. (D) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder. (E) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. 2.2 DEMAND REGISTRATION. (A) If, at any time after the initial purchase of the Preferred Stock, holders of at least 20% of the Registrable Securities issued or issuable upon conversion of the Preferred Stock (the "INITIATING HOLDERS") request that the Company file a registration statement on Form SB-2 or Form S-1 (the "REGISTRATION STATEMENT") covering at least 10% of the Registrable Securities issued or issuable upon conversion of the Preferred Stock (or any lesser percentage if the anticipated aggregate offering price would exceed $2,000,000), the Company shall cause the Registrable Securities attributable to the Preferred Stock to be registered. (B) If the Investor intends to distribute the Registrable Securities covered by their request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities held by all Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration. (C) The Company shall not be required to effect a registration pursuant to this Section 2.2: (I) if the Company has effected two (2) registrations pursuant to this Section 2.2 in the preceding twelve (12) months, and such registrations have been declared or ordered effective; (IV) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.4 below and the Company undertakes promptly to file such Form S-3; or 2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of Registrable Securities in writing at least fifteen (15) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. (A) UNDERWRITING. If the registration statement of which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to include Registrable Securities in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter reasonably determines, in good faith, that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders; and third, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration in accordance with the immediately preceding clause. In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single "Holder," and any pro rata reduction with respect to such "Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Holder," as defined in this sentence. 2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (A) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and (B) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4: (I) if Form S-3 is not available for such offering by the Holders, or (II) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than one million dollars ($1,000,000), or (C) Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the requests of the Holders. Registrations effected pursuant to this Section 2.4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2. 2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.3, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to deem such registration to have been effected as of the date of such withdrawal for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) to undertake any subsequent registration, in which event such right shall be forfeited by all Holders). If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested. If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then such registration shall not be deemed to have been effected for purposes of determining whether the Company shall be obligated pursuant to Section 2.2 to undertake any subsequent registration. 2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (A) prepare and file within sixty (60) days of the receipt of a request for registration of Registrable Securities with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective within one hundred twenty (120) days of such request, and keep such registration statement effective until the Holder or Holders have completed the distribution related thereto; (B) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above. (C) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (D) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (E) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (F) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (G) Use its best efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters. 2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION. (A) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. (B) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. (C) The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or Section 2.4 if the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in Section 2.2 or Section 2.4, whichever is applicable. 2.8 LIQUIDATED DAMAGES. In the event that the Company shall fail to cause the Registration Statement to be timely filed, timely declared effective, as provided herein) as provided herein, the Company shall pay as liquidated damages the amount of 1% per month of the aggregate purchase price for the securities to be sold pursuant to the Registration Statement (or such lesser amount that is the maximum permitted under applicable rules and regulations of the U.S. Small Business Administration ("SBA")) provided, however, that in no event shall the aggregate liquidated damages exceed ten percent (10%) of the aggregate purchase price of the Registrable Securities proposed to be included in the Registration Statement. 2.9 INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under Sections 2.2, 2.3 or 2.4: (A) To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "VIOLATION") by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder. (B) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) other than consequential losses of any kind, to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act (collectively, a "HOLDER VIOLATION"), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.9 exceed the net proceeds from the offering received by such Holder. (C) Promptly after receipt by an indemnified party under this Section 2.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.9 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.9. (D) If the indemnification provided for in this Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. (E) The obligations of the Company and Holders under this Section 2.9 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.9 would apply that is covered by a registration filed before termination of this Agreement, such termination. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (F) Notwithstanding any of the foregoing provisions of this Section 2.9, no party shall be entitled to indemnification against any consequential damages. 2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that (a) is a subsidiary, parent, general partner, limited partner, retired partner, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company, (b) is a Holder's family member or trust for the benefit of an individual Holder, (c) acquires at least one million (1,000,000) shares of Registrable Securities (as adjusted for stock splits and combinations); (d) is an entity affiliated by common control (or other related entity) with such Holder or (e) is any other permitted assignee or transferee under applicable federal and state securities laws, provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement. 2.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Other than as provided in Section 5.10, after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to demand the registration of shares of the Company's capital stock, or to include such shares in a registration statement that would reduce the number of shares includable by the Holders. 2.12 AGREEMENT TO FURNISH INFORMATION. If requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company's securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 2.12 shall not apply to a Special Registration Statement. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said day period. Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by this Section 2.12. The underwriters of the Company's stock are intended third party beneficiaries of this Section 2.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. 2.13 RULE 144 REPORTING. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to: (A) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public; (B) File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and (C) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration. SECTION 3. COVENANTS OF THE COMPANY. 3.1 RESERVATION OF COMMON STOCK. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion. 3.2 DIRECTOR AND OFFICER INSURANCE. The Company will use its best efforts to obtain and maintain in full force and effect director and officer liability insurance in the amount of Ten Million Dollars ($10,000,000). 3.3 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall require all employees and consultants to execute and deliver a Proprietary Information and Inventions Agreement substantially in a form approved by the Company's counsel or Board of Directors. 3.4 APPROVAL. The Company shall not without the approval of a majority of the Board of Directors, with all non-interested Directors voting and the approval at least one of the Directors designated by holders of the Preferred Stock (if any are in office), authorize or enter into any transactions with any director or officer, or any member of such director's or officer's immediate family. 3.5 QUALIFIED SMALL BUSINESS. The Company will use best efforts to comply with the reporting and recordkeeping requirements of Section 1202 of the Internal Revenue Code of 1986, as amended (the "Code"), any regulations promulgated thereunder and any similar state laws and regulations and agrees not to repurchase any stock of the Company if such repurchase would cause the Shares not to so qualify as "Qualified Small Business Stock," so long as the Company's Board of Directors determines that it is in the best interests of and not unduly burden some to the Company to comply with the provisions of Section 1202 of the Code. 3.6 TERMINATION OF COVENANTS. All covenants of the Company contained in Section 3 of this Agreement other than the provision of Section 3.2 shall expire and terminate as to each Investor upon an "ACQUISITION" as defined in the Company's Certificate of Incorporation as in effect as of the date hereof. 3.7 CERTAIN COVENANTS RELATING TO SBA MATTERS. (A) USE OF PROCEEDS. The Company has used, and shall continue to use, the proceeds from the sale of the Preferred Stock (the "Proceeds") for its growth, modernization or expansion. The Company shall provide each Investor which is a licensed Small Business Investment Company (an "SBIC INVESTOR") and the SBA reasonable access to the Company's books and records for the purpose of confirming the use of Proceeds. (B) BUSINESS ACTIVITY. For so long as any SBIC Inventor holds any securities of the Company, the Company shall not change the nature of its business activity if such change would render the Company ineligible as provided in 13 C.F.R. Section 107.720. (C) COMPLIANCE. So long as any SBIC Investor holds any securities of the Company, the Company will at all times comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117. (D) INFORMATION FOR SBIC INVESTOR. Within forty five (45) days after the end of each fiscal year and at such other times as an SBIC Investor may reasonably request, the Company shall deliver to such SBIC Investor a written assessment, in form and substance reasonably satisfactory to such SBIC Investor, of the economic impact of such SBIC Investor's financing specifying the full-time equivalent jobs created or retained in connection with such investment, and the impact of the financing on the Company's business in terms of profits and on taxes paid by the Company and its employees. Upon request, the Company agrees to promptly provide each SBIC Investor with sufficient information to permit such Investor to comply with their obligations under the Small Business Investment Act of 1958, as amended, and the regulations promulgated thereunder and related thereto; provided, however, each SBIC Investor agrees that it will protect any information which the Company labels as confidential to the extent permitted by law. Any submission of any financial information under this Section shall include a certificate of the Company's president, chief executive officer, treasurer or chief financial officer. (E) NUMBER OF HOLDERS OF VOTING SECURITIES. So long as any SBIC Investor holds any securities purchased pursuant to the Purchase Agreement or issued by the Company with respect thereto, the Company shall notify each SBIC Investor (i) at least fifteen (15) days prior to taking any action after which the number of record holders of the Company's voting securities would be increased from fewer than fifty (50) to fifty (50) or more, and (ii) of any other action or occurrence after which the number of record holders of the Company's voting securities was increased (or would increase) from fewer than fifty (50) to fifty (50) or more, as soon as practicable after the Company becomes aware that such other action or occurrence has occurred or is proposed to occur. SECTION 4. RIGHTS OF FIRST REFUSAL. 4.1 SUBSEQUENT OFFERINGS. Subject to applicable securities laws, the Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.7 hereof. The Investor's pro rata share is equal to the ratio of (a) the number of shares of the Company's Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares or upon the exercise of outstanding warrants or options) of which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company's outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities. The term "EQUITY SECURITIES" shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security directly or indirectly convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right directly or indirectly to subscribe to or purchase any Common Stock, Preferred Stock or other security or (iv) any such warrant or right. 4.2 PRE-EMPTIVE RIGHTS. If the Company proposes to issue any Equity Securities, it shall give the Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. The Investor shall have 45 days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to the Investor if the Investor would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale and there is no other way to avoid such violation. 4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the Investor does not elect to purchase its pro rata share of the Equity Securities, then the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Investor's rights were not exercised, at a price not lower and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company's notice to the Investor pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Investor in the manner provided above. 4.4 TERMINATION AND WAIVER OF PRE-EMPTIVE RIGHTS AND RIGHTS OF FIRST REFUSAL. The pre-emptive rights and rights of first refusal established by this Section 4 shall not apply to, and shall terminate upon an Acquisition. Notwithstanding Section 5.5 hereof, the rights of first refusal established by this Section 4 may be amended, or any provision waived with and only with the written consent of the Company and the Investor. 4.5 ASSIGNMENT OF PRE-EMPTIVE RIGHTS AND RIGHTS OF FIRST REFUSAL. The pre-emptive rights and rights of first refusal of each Investor under this Section 4 may be assigned in whole or in part, at any time or times, to any party permitted under applicable federal and state securities laws. 4.6 EXCLUDED SECURITIES. The rights of first refusal established by this Section 4 shall have no application to any of the following Equity Securities: (A) Shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like after the date hereof) issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to customary employee incentive stock purchase or stock option plans or other arrangements that are approved by the Board of Directors; (B) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination approved by the Board of Directors; (C) any Equity Securities issued in connection with any stock split, stock dividend or recapitalization by the Company; (D) any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including, without limitation (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein has been approved by the Company's Board of Directors and provided further that such transaction is not substantially for financing purposes. SECTION 5. MISCELLANEOUS. 5.1 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of DELAWARE in all respects as such laws are applied to agreements among Delaware residents entered into and to be performed entirely within Delaware, without reference to conflicts of laws or principles thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in the County of Wilmington, Delaware. 5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price. 5.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement. 5.4 SEVERABILITY. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 5.5 AMENDMENT AND WAIVER. (A) Except as otherwise expressly provided, this Agreement may be amended or modified, and the obligations of the Company and the rights of the Holders under this Agreement may be waived, only upon the written consent of the Company and the holders of at least a majority of the then-outstanding Registrable Securities. (B) For the purposes of determining the number of Holders entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company. 5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party's part of any breach, default or noncompliance under the Agreement or any waiver on such party's part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative. 5.7 NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or at such other address or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto. 5.8 TITLES AND SUBTITLES. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 5.9 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Preferred Stock pursuant to the Purchase Agreement or the Conversion Agreement, any purchaser of such shares of Preferred Stock shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an "INVESTOR," a "Holder" and a party hereunder. Notwithstanding anything to the contrary contained herein, if the Company shall issue Equity Securities in accordance with Section 4.7 (c) or (e) of this Agreement, any purchaser of such Equity Securities may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an "INVESTOR," a "HOLDER" and a party hereunder. 5.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 5.11 AGGREGATION OF STOCK. All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 5.12 PRONOUNS. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. 5.13 TERMINATION. This Agreement shall terminate and be of no further force or effect upon an Acquisition. [Signature Page Follows] IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof. COMPANY: INVESTOR: NORTHWEST BIOTHERAPEUTICS, INC. TOUCAN CAPITAL FUND II, L.P. 18701 120th Avenue, NE 7600 Wisconsin Avenue Suite 101 Suite 700 Bothell, WA 98011 Bethesda, MD 20814 By: By: --------------------------------- ------------------------------------ Title: --------------------------------- [SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT] EX-10.21 8 v16023exv10w21.txt EXHIBIT 10.21 Exhibit 10.21 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. NORTHWEST BIOTHERAPEUTICS, INC. WARRANT NO. BW-14 APRIL 17,2006 THIS CERTIFIES THAT, for value received, TOUCAN PARTNERS, LLC, with its principal office at 7600 Wisconsin Avenue, Suite 700, Bethesda, MD 20814, and/or its assigns (collectively, the "HOLDER"), is entitled to subscribe for and purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation, with its principal office at 18701 120th Avenue, NE, Suite 101, Bothell, Washington 98011 (the "COMPANY"), such number of Exercise Shares as provided herein at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued pursuant to the terms of the Amended and Restated Recapitalization Agreement, dated July 30, 2004, as amended on October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005, by and among the Company and Toucan Capital Fund II, L.P. (the "RECAPITALIZATION AGREEMENT") and in partial consideration for the Holder's agreement to consent to the Company's issuance of shares of Common Stock and warrants to purchase Common Stock to certain accredited investors in a private placement pursuant to that certain Note and Warrant Purchase Agreement dated as of March 30, 2006. 1. DEFINITIONS. Capitalized terms used but not defined herein shall have the meanings set forth in the Recapitalization Agreement or Related Recapitalization Document, as applicable. As used herein, the following terms shall have the following respective meanings: (A) "CAPITAL STOCK" shall mean the securities for which this Warrant is exercisable as provided in Section 2.2 hereof. (B) "DENOMINATOR SHARE PRICE" shall mean $0.10. (C) "EXERCISE PERIOD" shall mean the period commencing on the date of issuance of this Warrant and ending on seven (7) years after the date of issuance of this Warrant. (D) "EXERCISE PRICE" shall mean $0.04 (subject to adjustment pursuant to Section 5). (E) "EXERCISE SHARES" shall mean a number of shares of Capital Stock equal to the quotient of (i) 100% (i.e., 1.0) multiplied by the Note Amount, divided by (ii) the 1. Denominator Share Price, which in this case equals 2,500,000 shares of Capital Stock, subject to adjustment pursuant to the terms herein. (F) "NOTE AMOUNT" shall mean $250,000. 2. EXERCISE OF WARRANT. 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; (B) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness; and (C) This Warrant. 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 persons affiliated with the Holder, if the Holder so designates, 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. 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. 2.1 NET 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: Y (A-B) X = ------- A Where X = the number of Exercise Shares to be issued to the Holder 2. 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 2.1 in connection with the Company's initial public offering of its Common Stock after the deregistration of the Company's Common Stock under the Securities Exchange Act of 1934, the fair market value per share shall be the product of (i) the per share offering price to the public of the Company's initial public offering, and (ii) the number of shares of Common Stock into which each Exercise Share is convertible at the time of such exercise. 2.2 SECURITIES FOR WHICH WARRANT IS EXERCISABLE. In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, then, subject to Section 5 hereof, this Warrant shall be exercisable solely for such Convertible Preferred Stock. However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, this Warrant shall be exercisable for any Equity Security and/or Debt Security and/or any combination thereof, in each case that Holder shall designate in Holder's sole discretion. 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 nonassessable, 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 the series of equity securities comprising the Exercise Shares and the Company's Common Stock to provide for the exercise of the rights represented by this Warrant and the subsequent conversion of the Exercise Shares. If at any time during the Exercise Period the number of authorized but 3. unissued shares of such series of the Company's equity securities or the Company's Common Stock shall not be sufficient to permit exercise of this Warrant or the subsequent conversion of the Exercise Shares, then, in addition to such other remedies as may be available to Holder, including, without limitation, the exercise of Holder's right of first refusal set forth in Section 2.7(f) of the Recapitalization Agreement, the Company will take such corporate action as shall be necessary to increase its authorized but unissued shares of such series of the Company's equity securities or the Company's Common Stock, as appropriate, 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 date specified herein, 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 Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with this Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to this Warrant and in taking all such action as may be necessary or appropriate to protect Holder's rights, preferences and privileges under and/or in connection with this Warrant against 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, and the documentation providing for such rights, preferences and privileges will specifically provide as such. 3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying Shares (as defined below) shall be "registrable securities" (or terms of similar impact) under the Investor Rights Agreement dated as of April __, 2006 by and between the Company and Toucan Capital Fund II, L.P. and any agreement executed by the Company as part of the Anticipated Equity Financing, or any other agreement executed by the Company in lieu of, and/or in addition to, the Anticipated Equity Financing, in each case, for purposes of providing registration rights under the Act to holders of shares of Capital Stock, and the Company shall ensure that any such agreement conforms with the requirements of this Section 3.4. Such registration rights may not be amended, modified or waived without the prior written consent of the Holder. 4. REPRESENTATIONS OF HOLDER. 4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents and warrants that it is acquiring the Warrant, the Exercise Shares and the shares of Common Stock issuable upon conversion of the Exercise Shares (the "UNDERLYING SHARES") solely for its account for investment and not with a view to or for sale or distribution of said Warrant, Exercise Shares or Underlying Shares, or any part thereof except in compliance with applicable federal and state securities laws. The Holder also represents that the entire legal and beneficial interests of the Warrant, the Exercise Shares and the Underlying Shares the Holder is acquiring is being acquired for, and will be held for, its account only. 4. 4.2 SECURITIES ARE NOT REGISTERED. (A) The Holder understands that the Warrant, the Exercise Shares and the Underlying Shares have not been registered under the Securities Act of 1933, as amended (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 has no such present intention. (B) The Holder recognizes that the Warrant, the Exercise Shares and the Underlying Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available; provided, however, the parties acknowledge and agree that the Company has an obligation to register the Underlying Shares as provided in the Recapitalization Agreement and the Convertible Preferred Stock Term Sheet. (C) The Holder is aware that neither the Warrant, the Exercise Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, 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, EXERCISE SHARES AND UNDERLYING SHARES. (A) The Holder further agrees not to make any disposition of all or any part of the Warrant, the Exercise Shares or the Underlying Shares in any event unless and until: (I) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition; (II) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or (III) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and such disposition shall not be contrary to any applicable federal and/or state securities laws. (B) The Holder understands and agrees that 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 5. 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. 5.1 CHANGES IN SECURITIES. In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of 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. For purposes of this Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the aggregate Exercise Price payable in connection with the exercise in full 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. 5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all outstanding shares of the series of equity securities comprising the Exercise Shares into Common Stock, if applicable, this Warrant shall become exercisable for that number of shares of Common Stock of the Company into which the Exercise Shares would then be convertible, so long as such shares, if this Warrant had been exercised prior to such offering, would have been converted into shares of the Company's Common Stock pursuant to the Company's Certificate of Incorporation. In such case, all references to "EXERCISE SHARES" shall mean shares of the Company's Common Stock issuable upon exercise of this Warrant, as appropriate. 5.3 DILUTIVE ISSUANCES. If at any time prior to exercise of this Warrant, the Company issues or sells, or is deemed to have issued or sold, additional shares of Capital Stock for a nominal or effective price less than the then effective Exercise Price (a "DILUTIVE ISSUANCE"), then and in each such case, the then existing Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, to the price at which such shares are issued or sold, or deemed to be issued or sold. For purposes of this Section 5.3, the Company will be deemed to have issued or sold additional shares of Capital Stock if it issues any security or instrument convertible, exercisable or exchangeable for Capital Stock, or if it promises, undertakes, commits, agrees or enters into any letter of intent to do so. Notwithstanding the foregoing, (i) no further adjustment of the Exercise Price shall be made as a result of the actual issuance of shares of Capital Stock upon the conversion, exercise or exchange of any such instrument or in satisfaction of any such undertaking, commitment, agreement or letter of intent, and (ii) no adjustment of the Exercise Price shall be made as a result of the actual issuance of any shares of Common Stock pursuant to either (X) the exercise of those certain options to purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 per share that were 6. outstanding on April 26, 2004 and held by members of the Board of Directors of the Company; or (Y) the exercise of the Initial Bridge Warrants. 5.4 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the Exercise Price and/or Exercise Shares, the Company shall promptly notify the Holder in writing and furnish the Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. 6. 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, 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. 7. 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. The transferee shall sign a customary investment letter in form and substance reasonably satisfactory to the Company. 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 9. AMENDMENT. Any term of this Warrant may be amended or waived only with the written consent of the Company and the Holder. 10. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given upon actual 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 ten (10) days advance written notice to the other parties hereto. 11. 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 as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware without giving effect to conflicts of laws principles. [SIGNATURE PAGE FOLLOWS] 7. 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: Alton Boynton Title: President Address: 18701 120th Avenue, NE Suite 101 Bothell, WA 98011 Fax: (425) 608-3146 ACKNOWLEDGED AND AGREED: TOUCAN PARTNERS, LLC By: --------------------------------- Name: Linda Powers Title: Managing Member Address: 7600 Wisconsin Avenue Suite 700 Bethesda, MD 20814 Fax: (240) 497-4060 [SIGNATURE PAGE TO WARRANT NO. BW-14] NOTICE OF EXERCISE TO: NORTHWEST BIOTHERAPEUTICS, INC. (1) [ ] The undersigned hereby elects to purchase ________ shares of ___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the "COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. [ ] The undersigned hereby elects to purchase ________ shares of __________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the "COMPANY") pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below: ________________________ (Name) ________________________ ________________________ (Address) (3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, except in accordance with applicable federal and state securities laws; (ii) the undersigned is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned's own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition or unless such transaction is in compliance with applicable federal and state securities laws. - ------------------------------------- ---------------------------------------- (Date) (Signature) ---------------------------------------- (Print name) 1. ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to Name:___________________________________________________________________________ (Please Print) Address: _______________________________________________________________________ (Please Print) Dated: __________, 20__ Holder's Signature: -------------------------- Holder's Address: ---------------------------- NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 2. EX-10.22 9 v16023exv10w22.txt EXHIBIT 10.22 Exhibit 10.22 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. NORTHWEST BIOTHERAPEUTICS, INC. WARRANT NO. BW-15 APRIL 17, 2006 THIS CERTIFIES THAT, for value received, TOUCAN PARTNERS, LLC, with its principal office at 7600 Wisconsin Avenue, Suite 700, Bethesda, MD 20814, and/or its assigns (collectively, the "HOLDER"), is entitled to subscribe for and purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation, with its principal office at 18701 120th Avenue, NE, Suite 101, Bothell, Washington 98011 (the "COMPANY"), such number of Exercise Shares as provided herein at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued pursuant to the terms of the Amended and Restated Recapitalization Agreement, dated July 30, 2004, as amended on October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005, by and among the Company and Toucan Capital Fund II, L.P. (the "RECAPITALIZATION AGREEMENT") and in partial consideration for the Holder's agreement to consent to the Company's issuance of shares of Common Stock and warrants to purchase Common Stock to certain accredited investors in a private placement pursuant to that certain Note and Warrant Purchase Agreement dated as of March 30, 2006. 1. DEFINITIONS. Capitalized terms used but not defined herein shall have the meanings set forth in the Recapitalization Agreement or Related Recapitalization Document, as applicable. As used herein, the following terms shall have the following respective meanings: (A) "CAPITAL STOCK" shall mean the securities for which this Warrant is exercisable as provided in Section 2.2 hereof. (B) "DENOMINATOR SHARE PRICE" shall mean $0.10. (C) "EXERCISE PERIOD" shall mean the period commencing on the date of issuance of this Warrant and ending on seven (7) years after the date of issuance of this Warrant. (D) "EXERCISE PRICE" shall mean $0.04 (subject to adjustment pursuant to Section 5). (E) "EXERCISE SHARES" shall mean a number of shares of Capital Stock equal to the quotient of (i) 100% (i.e., 1.0) multiplied by the Note Amount, divided by (ii) the 1. Denominator Share Price, which in this case equals 3,000,000 shares of Capital Stock, subject to adjustment pursuant to the terms herein. (F) "NOTE AMOUNT" shall mean $300,000. 2. EXERCISE OF WARRANT. 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; (B) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness; and (C) This Warrant. 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 persons affiliated with the Holder, if the Holder so designates, 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. 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. 2.1 NET 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: Y (A-B) X = ------- A Where X = the number of Exercise Shares to be issued to the Holder 2. 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 2.1 in connection with the Company's initial public offering of its Common Stock after the deregistration of the Company's Common Stock under the Securities Exchange Act of 1934, the fair market value per share shall be the product of (i) the per share offering price to the public of the Company's initial public offering, and (ii) the number of shares of Common Stock into which each Exercise Share is convertible at the time of such exercise. 2.2 SECURITIES FOR WHICH WARRANT IS EXERCISABLE. In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, then, subject to Section 5 hereof, this Warrant shall be exercisable solely for such Convertible Preferred Stock. However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth in the Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet, this Warrant shall be exercisable for any Equity Security and/or Debt Security and/or any combination thereof, in each case that Holder shall designate in Holder's sole discretion. 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 nonassessable, 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 the series of equity securities comprising the Exercise Shares and the Company's Common Stock to provide for the exercise of the rights represented by this Warrant and the subsequent conversion of the Exercise Shares. If at any time during the Exercise Period the number of authorized but 3. unissued shares of such series of the Company's equity securities or the Company's Common Stock shall not be sufficient to permit exercise of this Warrant or the subsequent conversion of the Exercise Shares, then, in addition to such other remedies as may be available to Holder, including, without limitation, the exercise of Holder's right of first refusal set forth in Section 2.7(f) of the Recapitalization Agreement, the Company will take such corporate action as shall be necessary to increase its authorized but unissued shares of such series of the Company's equity securities or the Company's Common Stock, as appropriate, 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 date specified herein, 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 Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with this Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to this Warrant and in taking all such action as may be necessary or appropriate to protect Holder's rights, preferences and privileges under and/or in connection with this Warrant against 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, and the documentation providing for such rights, preferences and privileges will specifically provide as such. 3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying Shares (as defined below) shall be "registrable securities" (or terms of similar impact) under the Investor Rights Agreement dated as of April __, 2006 by and between the Company and Toucan Capital Fund II, L.P. and any agreement executed by the Company as part of the Anticipated Equity Financing, or any other agreement executed by the Company in lieu of, and/or in addition to, the Anticipated Equity Financing, in each case, for purposes of providing registration rights under the Act to holders of shares of Capital Stock, and the Company shall ensure that any such agreement conforms with the requirements of this Section 3.4. Such registration rights may not be amended, modified or waived without the prior written consent of the Holder. 4. REPRESENTATIONS OF HOLDER. 4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents and warrants that it is acquiring the Warrant, the Exercise Shares and the shares of Common Stock issuable upon conversion of the Exercise Shares (the "UNDERLYING SHARES") solely for its account for investment and not with a view to or for sale or distribution of said Warrant, Exercise Shares or Underlying Shares, or any part thereof except in compliance with applicable federal and state securities laws. The Holder also represents that the entire legal and beneficial interests of the Warrant, the Exercise Shares and the Underlying Shares the Holder is acquiring is being acquired for, and will be held for, its account only. 4. 4.2 SECURITIES ARE NOT REGISTERED. (A) The Holder understands that the Warrant, the Exercise Shares and the Underlying Shares have not been registered under the Securities Act of 1933, as amended (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 has no such present intention. (B) The Holder recognizes that the Warrant, the Exercise Shares and the Underlying Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available; provided, however, the parties acknowledge and agree that the Company has an obligation to register the Underlying Shares as provided in the Recapitalization Agreement and the Convertible Preferred Stock Term Sheet. (C) The Holder is aware that neither the Warrant, the Exercise Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, 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, EXERCISE SHARES AND UNDERLYING SHARES. (A) The Holder further agrees not to make any disposition of all or any part of the Warrant, the Exercise Shares or the Underlying Shares in any event unless and until: (I) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition; (II) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or (III) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and such disposition shall not be contrary to any applicable federal and/or state securities laws. (B) The Holder understands and agrees that 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 5. 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. 5.1 CHANGES IN SECURITIES. In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of 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. For purposes of this Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the aggregate Exercise Price payable in connection with the exercise in full 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. 5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all outstanding shares of the series of equity securities comprising the Exercise Shares into Common Stock, if applicable, this Warrant shall become exercisable for that number of shares of Common Stock of the Company into which the Exercise Shares would then be convertible, so long as such shares, if this Warrant had been exercised prior to such offering, would have been converted into shares of the Company's Common Stock pursuant to the Company's Certificate of Incorporation. In such case, all references to "EXERCISE SHARES" shall mean shares of the Company's Common Stock issuable upon exercise of this Warrant, as appropriate. 5.3 DILUTIVE ISSUANCES. If at any time prior to exercise of this Warrant, the Company issues or sells, or is deemed to have issued or sold, additional shares of Capital Stock for a nominal or effective price less than the then effective Exercise Price (a "DILUTIVE ISSUANCE"), then and in each such case, the then existing Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, to the price at which such shares are issued or sold, or deemed to be issued or sold. For purposes of this Section 5.3, the Company will be deemed to have issued or sold additional shares of Capital Stock if it issues any security or instrument convertible, exercisable or exchangeable for Capital Stock, or if it promises, undertakes, commits, agrees or enters into any letter of intent to do so. Notwithstanding the foregoing, (i) no further adjustment of the Exercise Price shall be made as a result of the actual issuance of shares of Capital Stock upon the conversion, exercise or exchange of any such instrument or in satisfaction of any such undertaking, commitment, agreement or letter of intent, and (ii) no adjustment of the Exercise Price shall be made as a result of the actual issuance of any shares of Common Stock pursuant to either (X) the exercise of those certain options to purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 per share that were 6. outstanding on April 26, 2004 and held by members of the Board of Directors of the Company; or (Y) the exercise of the Initial Bridge Warrants. 5.4 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the Exercise Price and/or Exercise Shares, the Company shall promptly notify the Holder in writing and furnish the Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. 6. 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, 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. 7. 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. The transferee shall sign a customary investment letter in form and substance reasonably satisfactory to the Company. 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 9. AMENDMENT. Any term of this Warrant may be amended or waived only with the written consent of the Company and the Holder. 10. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given upon actual 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 ten (10) days advance written notice to the other parties hereto. 11. 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 as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware without giving effect to conflicts of laws principles. [SIGNATURE PAGE FOLLOWS] 7. 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: Alton Boynton Title: President Address: 18701 120th Avenue, NE Suite 101 Bothell, WA 98011 Fax: (425) 608-3146 ACKNOWLEDGED AND AGREED: TOUCAN PARTNERS, LLC By: ------------------------------------ Name: Linda Powers Title: Managing Member Address: 7600 Wisconsin Avenue Suite 700 Bethesda, MD 20814 Fax: (240) 497-4060 [SIGNATURE PAGE TO WARRANT NO. BW-15] NOTICE OF EXERCISE TO: NORTHWEST BIOTHERAPEUTICS, INC. (1) [ ] The undersigned hereby elects to purchase ________ shares of ___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the "COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. [ ] The undersigned hereby elects to purchase ________ shares of __________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the "COMPANY") pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below: ________________________________________ (Name) ________________________________________ ________________________________________ (Address) (3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, except in accordance with applicable federal and state securities laws; (ii) the undersigned is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned's own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition or unless such transaction is in compliance with applicable federal and state securities laws. - ------------------------------------- ---------------------------------------- (Date) (Signature) ---------------------------------------- (Print name) 1. ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to Name: __________________________________________________________________________ (Please Print) Address: _______________________________________________________________________ (Please Print) Dated: __________, 20__ Holder's Signature: -------------------------- Holder's Address: ---------------------------- NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 2. EX-10.23 10 v16023exv10w23.txt EXHIBIT 10.23 Exhibit 10.23 NORTHWEST BIOTHERAPEUTICS AMENDED AND RESTATED RECAPITALIZATION AGREEMENT This AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AGREEMENT") is made by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, the "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814, effective as of July 30, 2004 (the "RESTATEMENT DATE"). WHEREAS, the Company is in the business of developing cancer therapeutics, the Company's products are still in clinical and pre-clinical development, the Company does not yet have any revenue-generating products, and the Company needs substantial amounts of additional funding to resume development of its potential products; WHEREAS, the Company has sought to raise equity financing for nearly two years, with assistance from two investment banks, but to date has not succeeded in obtaining any binding commitment for, or closing on, any such funding; WHEREAS, the Company has taken all reasonable steps to reduce its expenditures during this period, including terminating clinical trials, reducing staff, ceasing GMP manufacturing, exiting from its GMP facility, moving the Company to smaller and less expensive offices and lab space, and other such steps; WHEREAS, the Company has also taken all reasonable actions during this period to try to raise funds through any means other than equity financing, including selling off certain future royalty rights, selling certain non-essential equipment, obtaining bridge funding from management, and other such steps; WHEREAS, the Company also needs substantial funds in order to fulfill regulatory requirements for FDA approval to re-start its prostate cancer clinical trial, to persuade trial sites and other necessary parties to participate in a re-start of the prostate trial, and to resume any clinical and/or pre-clinical development of other products beyond the prostate cancer vaccine; WHEREAS, in January 2004, the Company was within one week of having to cease operations and commence liquidation, the Company had no investors ready to close on any funding, and no investors who had made material progress into due diligence. Although the Company was still vigorously pursuing all other funding possibilities, there were no alternative sources of funding available to the Company, either, at that time or soon enough for the Company to avoid ceasing operations and commencing liquidation; WHEREAS, Investor was interested in commencing due diligence on the Company, to determine whether an investment in the Company would be viable. However, as of that time, the necessary due diligence materials had not been pulled together into organized, comprehensive binders or investor packages that could be readily reviewed by prospective investors. It was 1. necessary for Investor to work jointly with the Company to assemble these necessary materials, and develop the necessary analyses, to enable a due diligence assessment to be made; WHEREAS, since the Company did not have any operating funds to enable it to continue operating during a due diligence process, such a process was only feasible if Investor provided operating funds for the Company for this period; WHEREAS, Investor provided such operating funds to the Company in two bridge notes of $50,000 each, covering the period from late January through the date of this Agreement. Such bridge (debt) financing was extremely high risk; WHEREAS, the Company's situation and prospects were highly complex, and a large volume of information was required to be gathered and analyzed to make a due diligence assessment. For Investor, it took a team of two partners, four associates, and numerous outside advisors (e.g., legal, regulatory, IP) a period of two months to pull together and evaluate most of the necessary information; WHEREAS, the due diligence to date has made clear that, in order for recapitalization and restart of the Company to be viable, a number of critical steps must occur first, for both of the Company's two lead programs and overall; WHEREAS, a further (third) bridge period is necessary in order to try to accomplish as many as possible of the key steps that must occur before a recapitalization and restart may be viable, and this bridge period may take up to one hundred eighty (180) days and the Company believes that an additional bridge and recapitalization will create more value for its stockholders and creditors than could be achieved through a liquidation of the Company at this time; WHEREAS, at this time there can be no assurance as to whether the key steps required to make recapitalization and restart of the Company viable can be achieved, nor what amount of time and expense will be required to achieve them if they are achievable, nor whether prospective co-investors will then be willing to close on sufficient funding to enable the Company to continue in business; WHEREAS, the Company does not have adequate funds for operations, nor for additional expenses related to corporate governance, regulatory filings, or preparations for recapitalization and restart of the Company, during this further bridge period, and the Company has requested that Investor provide such bridge funding; WHEREAS, the amount of funds the Company will need in order to continue operations during the additional bridge period of up to one hundred eighty (180) days will be much larger than the Company has needed for the two bridge periods to date, and will be as much as $500,000 for the first thirty (30) days alone; WHEREAS, Investor has already undertaken extensive risk and work during the first two bridge periods, Investor will undertake substantially greater risk with substantially more capital and perform further work during the further (third) bridge period contemplated under this Agreement, and Investor is willing to provide the necessary funds for operations and certain other expenses of the Company during a further bridge period, but only as part of a 2. comprehensive recapitalization agreement, with binding agreement between the parties, prior to such further bridge funding, as to all material terms of the comprehensive recapitalization, as set forth herein, all parts of which constitute essential terms and conditions; WHEREAS, Investor, the Company and its Board of Directors have undertaken extensive discussions and negotiations over a number of weeks about the terms, conditions and structure of an overall recapitalization of the Company, and have explored numerous approaches to fit the circumstances and meet the needs of both the Company and Investor; WHEREAS, on April 26, 2004 the parties hereto entered into that certain Recapitalization Agreement (the "PRIOR AGREEMENT"), effective as of April 26, 2004 (the "EFFECTIVE DATE"), by and between the Company and Investor, whereby among other things Investor loaned $500,000 to the Company (in addition to the issuance of additional convertible promissory notes to Investor in the aggregate principal amount of $100,000 in return for the cancellation of notes held by Investor having the same principal amounts); WHEREAS, on June 11, 2004 Investor loaned an additional $500,000 to the Company pursuant to the terms of the Prior Agreement; WHEREAS, Investor desires to make a further loan to the Company in the amount of $2,000,000, and the Company desires to receive such further loan from Investor pursuant to this Agreement, and to amend the Prior Agreement in such other respects as set forth herein; WHEREAS, Section 4.13(f) of the Prior Agreement provides that the Prior Agreement may be amended pursuant to a written agreement signed by Investor and the Company; and WHEREAS, the parties hereto wish to amend and restate in its entirety the Prior Agreement as set forth herein. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1: RECAPITALIZATION PLAN 1.1 Recapitalization Plan: The Company is being recapitalized in two stages (the "RECAPITALIZATION PLAN"), consisting of (i) a bridge period (the "BRIDGE PERIOD") which began on February 1, 2004 and shall end one hundred eighty (180) days after the Effective Date, unless earlier terminated or further extended as provided in Section 2.6 of this Agreement, and (ii) an anticipated equity financing of the Company, through the issuance of Convertible Preferred Stock (as defined in the Convertible Preferred Stock Term Sheet attached hereto as Exhibit B) in accordance with this Agreement (the "ANTICIPATED EQUITY FINANCING"). Investor shall serve as the lead in the Bridge Funding and Bridge Period Activities, as defined herein. Investor has also elected to serve as the lead investor in the Anticipated Equity Financing as provided herein. 1.2 Recapitalization Documents and Agreements: The terms and conditions of the Recapitalization Plan are set forth in this Agreement, and shall be further set forth in the following other documents and agreements (collectively, the "RELATED RECAPITALIZATION DOCUMENTS"): (a) (i) the three Loan Agreement, Security Agreement and 10% Convertible, 3. Secured Promissory Notes dated April 26, 2004 attached hereto as Exhibits A-1, A-2 and A-3, (ii) the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated June 11, 2004 attached hereto as Exhibit A-4 and (iii) the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 30, 2004 attached hereto as Exhibit A-5 (each a "NOTE," and collectively, the "Notes"), (b) the binding Convertible Preferred Stock Term Sheet, attached hereto as Exhibit B, (c) warrants in the form attached hereto as Exhibit C and Exhibit C-1 (each an "INITIAL BRIDGE WARRANT" and collectively, the "INITIAL BRIDGE WARRANTS"); (d) a Preferred Stock Warrant in the form attached hereto as Exhibit D, (e) a Convertible Stock Purchase Agreement, Investor Rights Agreement, Certificate of Designation (or Amended and Restated Certificate of Incorporation, as appropriate), and Voting Agreement, all of which shall be drafted, executed and filed, as necessary, in accordance with this Agreement and the binding Convertible Stock Term Sheet attached hereto as Exhibit B, as promptly as practicable after the Effective Date, (f) a Subsequent Bridge Warrant (as defined below) in the form attached hereto as Exhibit J (and collectively with the Initial Bridge Warrants, the "BRIDGE WARRANTS"), and (g) such other documents and agreements as may be necessary or desirable, in Investor's sole discretion, to effectuate the transactions contemplated in this Agreement and designated by Investor as a "Related Recapitalization Document." All such Related Recapitalization Documents are and shall be incorporated into this Agreement by reference. 1.3 Integrated Plan; All Terms and Conditions Essential: The Recapitalization Plan comprises a single integrated plan. All terms and conditions set forth in this Agreement and the Related Recapitalization Documents are an essential part of the transaction. The Company acknowledges and agrees that Investor is only willing to undertake the Recapitalization Plan and this Agreement, and the consideration to Investor for undertaking the Recapitalization Plan and this Agreement is only adequate, if the entire Recapitalization Plan and this Agreement are implemented on an integrated basis, including all terms and conditions thereof. The Company also acknowledges and agrees that, in view of the resources needed to restart its business and to maintain and build that business on a sustainable basis, it is in the best interests of the Company for the entire Recapitalization Plan to be implemented on an integrated basis. Notwithstanding anything in this Section 1.3 or anything in the remainder of this Agreement or any Related Recapitalization Document to the contrary, any Note, Bridge Warrant, Preferred Stock Warrant or other equity or debt security issued hereunder or under the terms of any Related Recapitalization Document shall continue to be outstanding regardless of whether the Recapitalization Plan is ever fully implemented, and the failure of the Company to fully implement the Recapitalization Plan shall not in any way limit any rights of the Investor under the terms of this Agreement, any Related Capitalization Document or any such security. 1.4 Notwithstanding anything in Section 1.3 or the remainder of this Agreement or any Related Recapitalization Document to the contrary, and for the purposes of clarity, other than the Initial Bridge Funding and the Subsequent Bridge Funding (each as defined below), Investor shall not be obligated to provide any financing to the Company on the terms described herein or therein, or on any other terms, and each decision, if any, by Investor to provide any such additional financing shall be at Investor's sole discretion and shall not be deemed to create any obligation on the part of Investor to provide any future financing to the Company. SECTION 2: BRIDGE PERIOD AND FUNDING 4. 2.1 Activities During Bridge Period: During the Bridge Period, the parties shall cooperate and use best efforts to complete certain material actions (collectively, the "BRIDGE PERIOD ACTIVITIES") necessary or desirable for the recapitalization of the Company, restart of the Company's development programs, and the Anticipated Equity Financing. Investor shall lead these Bridge Period Activities, after consultation with the Company. Such Bridge Period Activities shall include, without limitation: (a) Negotiation and execution of contract manufacturing arrangements for GMP sourcing and handling of dendritic cells. (b) Analysis of the intellectual property of the Company. (c) Identification and pursuit of additional antigens to establish a product pipeline for the Company, through negotiation and execution of binding letter(s) of intent or agreement(s) for one or more licensing and/or M&A transactions. (d) Evaluation of the antigen for the Company's prostate cancer clinical trial and related production and regulatory issues. (e) Clarification and analysis of licensing terms and costs for license of IL-4, in case it is not feasible or not desirable (e.g., because regulatory requirements are too lengthy and/or costly) to change the dendritic cell production method to use the Tangential Flow Filtration ("TFF") devices in the prostate cancer clinical trial re-start. (f) Preparation of an updated business plan, budgets, regulatory plan (including plans for pre-IND animal and in vitro studies for FDA re-approval of the prostate cancer clinical trial), Gantt charts, manufacturing plans, intellectual property analyses, and the like. (g) Preparation of an investor package and due diligence binders, to facilitate review and due diligence by prospective equity investors. (h) Evaluation of potential structures for the Anticipated Equity Financing and preparations for implementation of the transaction selected, including, without limitation, Investor consent and regulatory filings. (i) Analysis and determination, satisfactory to Investor, of what reverse stock split should be undertaken by the Company (including terms, conditions and timing), and preparations for implementation of the transaction decided upon, including, without limitation, Investor consent and regulatory filings. (j) Planning for syndication of the Anticipated Equity Financing, and determination of the amounts and timing of such financing. 2.2 Form, Seniority and Security of Bridge Funding: (a) Funding provided by Investor for the Bridge Period shall be provided in the form of senior secured convertible debt (the "BRIDGE FUNDING") in one or more tranches, in 5. Investor's sole discretion. The Bridge Funding shall be evidenced by execution of the Notes in the forms attached hereto as Exhibits A-1 through A-5. (b) As more fully provided in the forms of Note evidencing each tranche of Bridge Funding, and except as otherwise expressly provided in the Notes or herein, the Bridge Funding: (i) shall be senior in all respects to all other indebtedness or obligations of the Company of any kind, direct or indirect, contingent or otherwise, other than obligations of the Company owed directly to the state or federal government, obligations to those creditors listed on Schedule 2.2 hereto (and only to the amounts set forth on such schedule), and other than any other obligations of the Company to Investor; and (ii) shall not be made subordinate or subject in right of payment to the prior payment of any other indebtedness or obligation of any kind, direct or indirect, contingent or otherwise, other than obligations of the Company owed directly to the state or federal government, obligations to those creditors listed on Schedule 2.2 hereto (and only to the amounts set forth on such schedule), and other than any other obligations of the Company to Investor. (c) As more fully provided in the forms of Note evidencing the Bridge Funding and except as otherwise expressly set forth in the Notes or herein, the Company's obligations under each such Note shall be secured by a first priority senior security interest in all of the Company's right, title and interest in, to and under all of the Company's tangible and intangible property, whether now owned, licensed or held or hereafter acquired, licensed, developed, held or arising, (the "COLLATERAL"). The rights and remedies of Investor with respect to the senior security interest are in addition to all other rights, powers and remedies that may be available to as a matter of law or equity, and shall be cumulative and concurrent. The exercise by Investor of any one or more of the rights, powers and/or remedies provided for in the Notes, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including a grantee, of any or all rights, powers and/or remedies. (d) Notwithstanding anything to the contrary in this Agreement or any other agreement or document, in the event that the Company is unable to pay and discharge any Note in full on the applicable Maturity Date, subject to compliance with any applicable requirements of the Delaware Uniform Commercial Code, nothing herein or in any Related Recapitalization Document shall be deemed to preclude, limit or restrict Investor from requiring the delivery of some or all of the Collateral in full or partial satisfaction of the Company's obligations under the Notes. Alternatively, Investor may, in its sole discretion, elect to cause some or all of the Collateral to be sold, and the sale proceeds to be used to pay and discharge the Note in full. 2.3 Amount and Timing of Bridge Funding: (a) The initial amounts of Bridge Funding provided by Investor include (i) $100,000 already provided by Investor prior to the Effective Date, for which the applicable notes have been cancelled and re-issued in the forms as attached hereto as Exhibits A-1 and A-2, (ii) $500,000 provided by Investor on the Effective Date, for which a Note in the form of Exhibit A-3 was issued to Investor, (iii) $500,000 provided by Investor on June 11, 2004, for which a Note in the form of Exhibit A-4 was issued to Investor (collectively, the "INITIAL BRIDGE FUNDING"). The Initial Bridge Funding was to cover general operating expenses and certain other expenses 6. of the Company from the commencement of the Bridge Period through the Amendment Date, as more fully provided herein and in the Notes evidencing the Initial Bridge Funding. (b) On the Restatement Date, Investor is providing an additional $2,000,000 of Bridge Funding (the "SUBSEQUENT BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the remaining Bridge Period following the period covered by the Initial Bridge Funding. The Subsequent Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-5 and shall be provided on the terms and conditions set forth herein. The Subsequent Bridge Funding shall be used only for the purposes and in the amounts set forth in the budget included in the Schedule of Exceptions. As provided under Section 2.5 hereof in regard to all Notes, any expenditures of Subsequent Bridge Note funds, and/or any action, promise, undertaking or commitment which would result in the Company incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Investor, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Investor, shall constitute an Event of Default under the Notes. (c) The amounts and timing of any further Bridge Funding after the Subsequent Bridge Funding, if any, shall be determined by mutual agreement between the Company and Investor. Investor's agreement to any such further Bridge Funding shall be in its sole discretion. 2.4 Conditions to Bridge Funding and Recapitalization Plan: Notwithstanding anything to the contrary, and, in each case, unless expressly waived in writing in advance by Investor (any such waiver by Investor shall be applicable only as to such closing and shall not be deemed a waiver of such condition as to future closings, if any), and only to the extent expressly waived, at the first closing of Bridge Funding following the Effective Date and, independently, at any subsequent closing of Bridge Funding, Investor's provision of Bridge Funding and/or any other element of the Recapitalization Plan shall be conditional upon and subject to the satisfaction or waiver of each of the following conditions precedent, with each such satisfaction or waiver to be determined by Investor in its sole discretion (including, without limitation, the acceptability to Investor of any exception set forth in a disclosure schedule), on or before the applicable closing date. Investor shall make all such determinations in its sole discretion. The conditions precedent to all closings of Bridge Funding and/or any other element of the Recapitalization Plan shall include the following, unless waived by Investor in its sole discretion: (a) the Company to execute this Agreement and all Related Recapitalization Documents, and all such documents and agreements to be in form and in substance satisfactory to Investor; (b) the Company to be in compliance with all terms and conditions of this Agreement and all Related Recapitalization Documents that are being or have been executed as of such closing (whether originally executed in connection with such closing or a prior closing), including, without limitation, the confidentiality and exclusivity requirements set forth in Sections 4.1 and 4.12 hereof; 7. (c) the Company to re-issue the two prior bridge notes evidencing the $100,000 provided by Investor to date, to conform to the forms of Note attached hereto as Exhibits A-1 and A-2; (d) all conditions set forth in the Notes to continue, including without limitation, the covenants; (e) the Company to have permitted, and to continue to permit, Investor to serve as the lead in regard to the Bridge Funding and Bridge Period Activities, and in regard to the Anticipated Equity Financing; (f) the Company's board of directors to have resolved that a reverse split of its outstanding stock is needed, and that the terms, conditions and timing shall be determined during the Bridge Period as part of the Bridge Period Activities, and shall be reasonably satisfactory to Investor; (g) the Company to obtain all necessary creditor and stockholder consents, and any additional consents requested by Investor, and the Company to make all necessary regulatory filings related to this Agreement and the Related Recapitalization Documents and the transactions contemplated thereby, in each case as rapidly as reasonably possible during the Bridge Period; (h) all secured creditors of the Company to have executed a subordination agreement, in the form attached hereto as Exhibit E, except for the equipment lessors and holders of statutory liens or landlord liens set forth on Schedule 2.2 hereto; (i) each holder of secured convertible promissory notes issued on November 13, 2003 (each a "MANAGEMENT Note" and, collectively the "MANAGEMENT NOTES") shall have executed the notice, consent and waiver in the form attached hereto as Exhibit F; (j) each holder of a Management Note shall have executed and delivered the First Amendment to Convertible Secured Promissory Note in the form attached hereto as Exhibit G; (k) each holder of a warrant to purchase common shares issued in connection with the Management Notes shall have executed the First Amendment to Warrants to Purchase Common Shares in the form attached hereto as Exhibit H; (l) all fees, costs and expenses incurred and/or undertaken by Investor to be satisfied by the Company as provided in Section 4.11 hereof; (m) progress toward and/or in the Bridge Period Activities to be satisfactory to Investor; (n) the Company to have satisfied all applicable general conditions to closing, as set forth in Section 4.9; 8. (o) the Company to deliver to Investor at each closing of Bridge Funding and each closing of any other element of the Recapitalization Plan an officer's certificate, executed by an authorized and responsible officer of the Company, and certifying that the foregoing conditions have been fulfilled; (p) the Company to be in compliance with all conditions, covenants and other provisions contained in the Notes; (q) with respect to the Subsequent Bridge Funding only, the Company to have agreed with Investor to extend the Bridge period through the date that is ninety (90) days from and after July 25, 2004 (such ninety (90) days, the "EXTENDED BRIDGE PERIOD"), in contemplation of the Subsequent Bridge Funding; (r) with respect to the Subsequent Bridge Funding only, the Company having completed the negotiation of, and executed, one or more contract services agreements, acceptable to Investor, providing for all services necessary for rapid restart of the Company's Phase III prostate cancer trial and Phase II brain cancer trial, including, without limitation, regulatory advisory services and good manufacturing practice (GMP) manufacturing; and (s) the Company to have implemented new measures, acceptable to Investor, to ensure that all pre-and post-closing conditions and covenants provided for herein and in the Related Recapitalization Documents are fully satisfied, including, without limitation, to ensure that during the Extended Bridge Period the covenants required by Sections 2.5(c), (d), (e), (g), (h) and (i) are satisfied. 2.5 Covenants Related to Bridge Funding and Equity Financing Period: As more fully set forth in the forms of the Notes evidencing the Bridge Funding, during the Bridge Period and for so long as any Bridge Funding remains outstanding, the Company shall comply with certain affirmative and negative covenants including, without limitation, covenants relating to financial matters, handling of intellectual property, issuance of any equity or debt securities, handling of TFF devices, confidentiality and exclusivity, and other material matters. Without limiting the foregoing, during the Bridge Period and the Equity Financing Period, the Company shall: (a) coordinate with Investor on the preparation and filing with the SEC of any Exchange Act filings and confidential treatment requests covering any commercially sensitive terms (as determined jointly by the Company and Investor) of this Agreement and any Related Recapitalization Document required to be filed with the SEC under applicable SEC regulations, and the Company shall use its best efforts to obtain confidential treatment of such information from the SEC; (b) take all steps reasonably necessary to implement the structure provided in Section 3.3 hereof; (c) not hire, engage, retain, or agree to hire, engage or retain, any full or part-time, permanent or temporary employee, consultant, adviser, independent contractor, collaborator, intern or other personnel of any kind (collectively, "PERSONNEL"), except with Investor's express prior written approval, on a case by case basis; 9. (d) not enter into, increase, expand, extend, renew or reinstate any severance, separation, retention, change of control or similar agreement with any Personnel (or agree, promise, commit or undertake to do so), except with Investor's prior written approval, on a case by case basis; (e) not purchase, lease, hire, rent or otherwise acquire directly or indirectly any rights in or to any asset or facility outside of the ordinary course of business in an amount in excess of $10,000, in aggregate, or agree, promise or commit to do so, except in accordance with the Company's budget that has been approved by the Company's board of directors and the Investor; (f) take all steps reasonably necessary to procure the execution and delivery by Dan Wilds of the First Amendment to Warrants to Purchase Common Shares during the thirty (30) day Funded Bridge Period of the Initial Bridge Note; (g) make no expenditures in excess of $10,000 in aggregate other than in accordance with a budget pre-approved by Investor; (h) report the Company's cash position and all expenditures and agreements, commitments or undertakings for expenditures to Investor on a bi-weekly basis; and (i) not deviate, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Schedule of Exceptions in connection with the Subsequent Bridge Note, nor take any action or make any promise, undertaking or commitment that would result in the Company incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Investor, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Investor. 2.6 Modification of Bridge Period: (a) Early Termination of Bridge Period: The Bridge Period shall continue until one hundred eighty (180) days after the Effective Date. The Bridge Period may only terminate prior to one hundred eighty (180) days after the Effective Date upon the mutual agreement of the parties. (b) Extension of Bridge Period: The Bridge Period may be extended beyond the period of one hundred eighty (180) days after the Effective Date upon the occurrence of one of the following events: (i) mutual agreement of the parties; or (ii) Investor reasonably determines, in its discretion, that further time is needed to complete the Bridge Period Activities, and Investor is willing to provide reasonable additional Bridge Funding for the period of such extension. 2.7 Conversion of Bridge Funding: 10. (a) Automatic Conversion: The Bridge Funding shall automatically convert into Convertible Preferred Stock, upon the terms and conditions set forth herein, in the Notes and in the Convertible Preferred Stock Term Sheet, only in the event, and upon the closing of, the purchase in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments), on the terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a minimum of $15 million of Convertible Preferred Stock. (b) Discretionary Conversion: Until, and/or in the absence of, the closing of purchases for cash of a minimum of $15 million of Convertible Preferred Stock, by Other Investors, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the determination as to whether to convert any or all of the Bridge Funding into equity shall be made by Investor in its sole discretion. Investor may make such determinations from time to time with regard to any Note and at any time before such Note has been discharged in full, and, as applicable, at any time on or before the expiration of the thirty (30) day notice period required under each Note in the event the Company wishes to prepay such Note. Investor may, in its sole discretion, elect to convert any or all of the principal and/or interest due under each Note into any Equity Security and/or Debt Security (each as defined below) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). For purposes hereof, (i) the term "EQUITY SECURITY" means any class or series of equity security, or any combination of classes and/or series of equity securities, of the Company that have been authorized under the Company's certificate of incorporation, as amended and/or restated, including by any certificate of designation (the "CHARTER"), or any new class or series of equity security, or any combination of new and/or existing classes and/or series of equity securities, of the Company for which the Company has undertaken any agreement, obligation, promise, commitment or letter of intent to obtain such authorization and (ii) the term "DEBT SECURITY" means any evidence of indebtedness of the Company that the Company has authorized, created or incurred, or that the Company has undertaken any agreement, obligation, promise, commitment or letter of intent to authorize, create or incur. (c) Information for Investor's Election. The Company shall provide to Investor, within two (2) business days after notice of each request by Investor, all information reasonably requested by Investor in connection with any Equity Securities and/or Debt Securities, to enable Investor to make decisions regarding one or more conversions. In the event that the Company seeks to prepay a Note evidencing Bridge Funding, the Company shall deliver to Investor, simultaneously and together with the notice required under such Note of the Company's interest in prepaying the Note, a summary of all material information, terms and conditions relating to all Equity Securities and Debt Securities (including any "side" letters or agreements or separate agreements). (d) Conversion. The conversion price for any conversion pursuant to Section 2.7(a) shall be the lowest nominal or effective price per share paid by the Other Investors who acquire such Convertible Preferred Stock (with the exception of shares issuable upon exercise of the Initial Bridge Warrants). The conversion price for any conversion into any Equity Security or Debt Security pursuant to Section 2.7(b) shall be the lowest of (i) the lowest nominal or effective price per share paid by any investor at any time on or after the date one year prior to the 11. Effective Date (with the exception of (x) purchases of up to 35,000 shares of the Company's Common Stock, $0.001 par value ("COMMON STOCK") pursuant to certain options to purchase, at a purchase price of $0.0001, that were outstanding on the Effective Date and held by members of the Board of Directors, as set forth in Schedule 2.7(d), and (y) shares issuable upon the exercise of the Initial Bridge Warrants, each of which shall be excluded from consideration under this section), (ii) the lowest nominal or effective price at which any investor is entitled to acquire shares (including, without limitation, through purchase, exchange, conversion or exercise) pursuant to any other security, instrument, or promise, undertaking, commitment, agreement or letter of intent of the Company outstanding on or after the Effective Date or granted, issued, extended or otherwise made available by the Company at any time on or after the date one year prior to the Effective Date (regardless of whether currently exercisable or convertible) (with the exception of (x) certain options to purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that were outstanding on the Effective Date and held by members of the Board of Directors as set forth in Schedule 2.7(d), and (y) the Initial Bridge Warrants, each of which shall be excluded from consideration under this section); and (iii) the lesser of $0.10 per share or 35% discount to the average closing price per share of the Common Stock during any twenty consecutive trading days (beginning with the twenty consecutive trading days prior to the Effective Date); provided, however, that in no event shall the price per share calculated pursuant to this clause (iii) be less than $0.04 per share. The calculation required by clause (ii) hereof shall initially be based upon Schedule 2.7(d) hereto. All other rights, preferences, privileges, terms and conditions received by Investor in connection with any conversion and/or any securities issued by the Company to Investor upon conversion, shall be no less favorable to Investor than the rights, preferences, privileges, terms and conditions any other investor in the Company has received or is entitled to receive with respect to the security into which Investor is converting pursuant to any other security, instrument, promise, undertaking, commitment, agreement or letter of intent of the Company, whether or not such rights, preferences, privileges, terms and conditions for any other investor are incorporated into the agreements or documents relating to any conversion or any issuance of the security or other instrument to that investor or are provided separately, at any time on or after one year prior to the Effective Date. In regard to each conversion hereunder, the Company hereby agrees to take and/or arrange for all necessary corporate and related action to enable the execution of each such conversion elected by Investor. Except as set forth on Schedule 2.7(d) hereto, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of the Company are outstanding or authorized. At each closing of the Bridge Funding and the Anticipated Equity Financing, if any, the Company shall provide Investor with an updated Schedule 2.7(d). (e) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with any Note evidencing Bridge Funding, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such Note and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the Note against impairment. The Investor's rights, preferences and privileges granted under and/or in connection with any Note and/or Investor Designated Securities may not be amended, modified or waived without the 12. Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (f) Right of First Refusal: In the event that the Company proposes to authorize or issue any Equity Security and/or Debt Security, Investor shall have a right of first refusal to purchase any or all of such Equity Security and/or Debt Security, through the conversion of any or all of the Notes and the exercise of any or all of the Bridge Warrants for such securities; provided, however, that in the event of automatic conversion of Bridge Funding pursuant to Section 2.7(a) hereof, Investor's right of first refusal shall relate solely to the purchase of Convertible Preferred Stock. Any such conversion of Notes by Investor would be at the conversion price provided in Section 2.7(d) and any such exercise of the Bridge Warrants would be at the exercise price provided in the applicable Bridge Warrant, in each case irrespective of the purchase price proposed to be paid by any other investor for such securities. This right of first refusal shall apply at each closing of the issuance of any such Equity Security and/or Debt Security, so long as any Notes or Bridge Warrants are outstanding. Such right of first refusal shall apply regardless of whether or not Investor leads or otherwise participates in any such financing. Prior to issuing any Equity Security or Debt Security, the Company shall provide Investor with at least sixty days advance written notice of its intention to issue such securities, which notice shall describe in sufficient detail (to the extent then known) the securities proposed to be issued, the parties to whom the Company proposes to issue such securities and the price at which the securities are proposed to be issued (collectively the "FINANCING TERMS"). The Company shall update Investor with respect to the Financing Terms to the extent that the Financing Terms change or become known to the Company. Once the Financing Terms are fixed, the Company shall provide Investor with a final notice ("FINAL NOTICE") containing all Financing Terms and Investor shall have a period of thirty days to exercise its right of first refusal following delivery of such Final Notice to Investor by the Company. All rights of first refusal provided by this Section 2.7(f) are in addition to, and shall in no way be deemed to limit, offset or supersede, Investor's right of first refusal contained in Section 3.4(d) of this Agreement. 2.8 Initial Bridge Warrants: (a) Issuance of Initial Bridge Warrants. At each closing of Initial Bridge Funding, Investor received a warrant with coverage equal to three hundred percent (300%) of the principal amount due under each Note evidencing the Bridge Funding provided in connection with such closing (collectively, the "INITIAL BRIDGE WARRANTS"). The Company therefore issued $3,300,000 in warrant coverage on the $1,100,000 of Initial Bridge Funding provided prior to the Restatement Date. The number of shares subject to such Initial Bridge Warrants so issued was determined on the basis of $0.05 per share (subject to adjustment for stock splits, stock dividends and the like). The number of shares for which Investor shall initially be able to exercise the Initial Bridge Warrants Investor received for the Initial Bridge Funding shall therefore be 66,000,000 shares. (b) Exercise of Initial Bridge Warrants: The Initial Bridge Warrants shall become exercisable on the Restatement Date and continue to be exercisable, in whole or in part, until the dates seven years after issuance, respectively, of such Initial Bridge Warrants. The exercise price of the Initial Bridge Warrants shall be $0.01 per share (subject to adjustment for stock dividends, stock splits, certain dilutive issuances and similar transactions, as provided more 13. fully in the Initial Bridge Warrants). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the Initial Bridge Warrants shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the Initial Bridge Warrants shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the Initial Bridge Warrants, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such Initial Bridge Warrants and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the Initial Bridge Warrants against impairment. The Investor's rights, preferences and privileges granted under and/or in connection with the Initial Bridge Warrants may not be amended, modified or waived without the Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of Initial Bridge Warrants and Notes. The Company and Investor, as a result of arm's length bargaining, agree that the aggregate fair market value of the Notes issued in connection with the Initial Bridge Funding, if issued apart from the Initial Bridge Warrants, is $1,045,000 for such Notes, and the aggregate fair market value of the Initial Bridge Warrants, if issued apart from such Notes, is $55,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Notes and/or the Initial Bridge Warrants shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.8(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing. 2.9 Subsequent Bridge Warrant: (a) Issuance of Subsequent Bridge Warrant. On the Restatement Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the Subsequent Bridge Funding (the "SUBSEQUENT BRIDGE WARRANT" and, collectively with the Initial Bridge Warrants and the 14. Preferred Stock Warrants (as defined herein), the "WARRANTS"). The Company shall, therefore, issue $2,000,000 in warrant coverage on the $2,000,000 of Subsequent Bridge Funding provided on the Restatement Date. The number of shares subject to such Subsequent Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the Subsequent Bridge Warrant shall therefore be 20,000,000 shares as of the Restatement Date. (b) Exercise of Subsequent Bridge Warrant: The Subsequent Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the Subsequent Bridge Warrant shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the Subsequent Bridge Warrant) and a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale of Convertible Preferred Stock; provided, however that in no event will the exercise price be less than $0.04 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the Subsequent Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the Subsequent Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the Subsequent Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the Subsequent Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such Subsequent Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the Subsequent Bridge Warrant against impairment. The Investor's rights, preferences and privileges granted under and/or in connection with the Subsequent Bridge Warrant may not be amended, modified or waived without the Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. 15. (d) Tax Treatment of Subsequent Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the Subsequent Bridge Funding, if issued apart from the Subsequent Bridge Warrant, is $1,980,000, and the fair market value of the Subsequent Bridge Warrant, if issued apart from such Note, is $20,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the Subsequent Bridge Funding and/or the Subsequent Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.9(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing. 2.10 Post-Closing Matters: Following the closing of the Subsequent Bridge Funding, the parties agree to take all steps necessary to amend any Related Recapitalization Document to (i) replace all Notes representing the Initial Bridge Funding with a Note in the form of Exhibit A-5; and (ii) conform any language therein to the language provided herein within ten (10) business days of the Restatement Date. To the extent that any provisions of this Agreement are inconsistent with or in addition to the provisions contained in any Related Recapitalization Document, the provisions hereof shall be controlling. SECTION 3: ANTICIPATED EQUITY FINANCING 3.1 Essential Part of Recapitalization Plan: As provided in Section 1.1, hereof, the Company is being recapitalized in two stages under the Recapitalization Plan: first, through Bridge Funding, and thereafter through an Anticipated Equity Financing. The Recapitalization Plan comprises a single integrated plan, and all terms and conditions set forth in this Agreement and the Related Recapitalization Documents - including, without limitation, the Anticipated Equity Financing - are an essential part of the transaction. This integrated structure, with binding agreement between the parties in regard to the Anticipated Equity Financing as well as the Bridge Funding, is necessary to provide adequate consideration to Investor, and is also both necessary and desirable for the Company, in order to provide the resources needed to restart the Company's business, and enable the Company to maintain and build that business on a sustainable basis. The Company shall fully disclose and present the Recapitalization Plan as a single integrated plan in all regulatory filings and all documents relating to shareholder notice and consent in connection with the Recapitalization Plan. 3.2 Fiduciary Exception: Notwithstanding the binding agreement set forth herein in regard to the Anticipated Equity Financing, that agreement, and the Company's obligations thereunder, shall be subject to a limited fiduciary exception, pursuant to which the Company may respond to or accept a proposal for equity financing or merger, consolidation, business combination or sale of all or substantially all of the Company's assets from another party or parties (each of the foregoing constituting an "ALTERNATIVE EQUITY FINANCING Proposal"), but (a) only as and to the extent required by applicable law; (b) only in regard to an Alternative Equity Financing Proposal that has not been directly or indirectly solicited by the Company or any of its officers, directors or employees, Soma Partners LLC ("SOMA"), or any advisors, agents or consultants of the Company during the Standstill Period provided in Section 4.1 hereof or during the standstill period provisions described in the Notes and Section 13 of each of the 10% Convertible, Secured Promissory Notes issued by the Company to the Investor, dated as of 16. February 2, 2004 and March 1, 2004, respectively (an "UNSOLICITED PROPOSAL"), and (c) only if the Board of Directors of the Company provides written certification to Investor that the Alternative Equity Financing Proposal is an Unsolicited Proposal. The Company shall notify Investor of its receipt of any Unsolicited Proposal immediately upon receipt thereof, and shall provide to Investor a copy of such Unsolicited Proposal or a description of all material terms thereof, including the party or parties involved. If the Company's board of directors determines that acceptance of any Unsolicited Proposal is required in order to fulfill its fiduciary obligations, prior to accepting such Unsolicited Proposal, the Company shall notify Investor of its intent to accept such Unsolicited Proposal. Investor shall have twenty-one (21) days from the date it receives such notice from the Company to present a revised proposal of its own to the Company (although Investor shall under no circumstances be obligated to do so), which the Company's board of directors shall fully consider in good faith. In the event that, following the consideration of any revised proposal from Investor or, in the absence of any such revised proposal, following the expiration of twenty-one (21) days, the Company's board of directors determines that acceptance of the Unsolicited Proposal is required in order to fulfill its fiduciary obligations pursuant to this Section 3.2 and the Company has complied with all aspects of this Section 3.2, then the Company shall be under no obligation to proceed with the Anticipated Equity Financing; provided, however, that all other terms and conditions of this Agreement and the Related Recapitalization Documents, including, without limitation, the terms and conditions of any Notes and Warrants issued pursuant to this Agreement, shall remain in full force and effect (with the exception of Sections 2.1, 2.5(b), 2.5(c), 4.6(b), 4.6(d), 4.6(e) and 4.6(h) of this Agreement which shall terminate and be of no further effect). Upon the later of (i) the termination, if applicable, of the Company's obligation to proceed with the Anticipated Equity Financing as described in this Section 3.2, and (ii) the date that no Notes are outstanding, the covenants contained in Section 4.6(f) of this Agreement shall terminate and be of no further effect. 3.3 Structure: It is the preference of the Company to raise the Anticipated Equity Financing in the form of a private investment in public entity ("PIPE") transaction, with the Company remaining a publicly traded entity. However, the Company acknowledges and agrees that there can be no assurance that it will be reasonably feasible to do so. The Company, with assistance from two investment banks, has tried for two years without success to raise financing through a secondary equity offering or PIPE while remaining a publicly traded entity. In order to raise the necessary follow-on financing to the Bridge Funding, it may be necessary for the Company to do so in connection with, or following, the deregistration of the Common Stock under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). In order to accommodate the Company's preference for a PIPE transaction, while also providing for the possibility of effecting the follow-on financing in connection with or following deregistration of the Common Stock under the Exchange Act if the latter transaction is either necessary or desirable, the parties agree to the plan set forth below. The parties further agree that the securities to be sold for the Anticipated Equity Financing will be the same Convertible Preferred Stock, on the same terms and conditions as set forth herein, regardless of whether the structure of the Anticipated Equity Financing is (i) a PIPE transaction, (ii) in connection with, or following, the deregistration of the Common Stock under the Exchange Act, or (iii) a combination thereof. (a) Initial PIPE: The Company will first seek to sell at least $8 million of the Convertible Preferred Stock through a PIPE transaction. The Company's Board of Directors is 17. requested not to change until the earlier of: (x) approval by the Company's stockholders of the transactions contemplated by this Agreement and/or the Related Recapitalization Documents; or (y) the expiration of the Bridge Period. In the event such sale through a PIPE transaction is not achieved, and if it reasonably appears that such sale can be achieved in connection with or following the deregistration of the Company's Common Stock under the Exchange Act, the Company will then review the Anticipated Equity Financing with a view to proceeding with such financing in connection with or following the deregistration of the Company's Common Stock under the Exchange Act. (b) Regulatory Approval and Shareholder Consent: The Company will fully disclose, in all applicable regulatory filings and all documents relating to shareholder notice and consent, the full Recapitalization Plan. 3.4 Terms and Conditions: The terms and conditions of the Anticipated Equity Financing shall be as set forth herein and in the Convertible Preferred Stock Term Sheet, which is attached hereto as Exhibit B and incorporated herein by reference. Such terms and conditions include, without limitation, the following: (a) Securities To Be Issued: The Anticipated Equity Financing shall consist of the issuance and sale of up to $40 million of Convertible Preferred Stock (including any shares issuable upon conversion of Bridge Funding, but not including any shares issuable upon exercise of warrants, options, and similar instruments or obligations, which shares shall be issued in addition to the issuance and sale of up to $40 million) (the "MAXIMUM ISSUANCE"), in one or more closings over a period of 12 months commencing at the first closing of Convertible Preferred Stock (the "EQUITY FINANCING PERIOD"), so long as the aggregate amount issued and sold (excluding the amounts to be issued upon exercise of warrants, options and similar instruments or obligations) does not exceed the Maximum Issuance. The price per share for such issuance and sale shall be the lesser of $0.10 per share (as adjusted for stock splits, stock dividends and the like) or a 35% discount to the average closing price during the twenty trading days prior to closing; provided, however, that in no event shall the price per share be less than $0.04 per share (as adjusted for stock splits, stock dividends and the like). (b) Preferred Warrants: The Company shall issue $8 million in warrant coverage on the first $8 million of Convertible Preferred Stock purchased for cash (the "PREFERRED STOCK WARRANTS"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of shares issuable upon exercise of warrants to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like), and the aggregate number of shares for which the holders of Preferred Stock Warrants shall be able to exercise such Warrants shall therefore be 80,000,000 shares. The exercise price of such Preferred Stock Warrants shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like) and a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale of Convertible Preferred Stock; provided, however that in no event will the exercise price be less than $0.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates. 18. (c) Investor Election to Lead: Investor has elected to serve as the lead to identify and organize Other Investors during the Bridge Period and the Equity Financing Period, and prepare for one or more closings of the Anticipated Equity Financing during the Equity Financing Period. (d) Right of First Refusal: Investor shall have a right of first refusal to purchase up to $15 million of the Convertible Preferred Stock. This right of first refusal shall apply at each closing during the Equity Financing Period, until the $15 million amount is reached. Such purchases shall be determined in addition to, and shall not be deemed to include, any purchases of Convertible Preferred Stock by Investor (including its designees) through conversion of Bridge Funding, or exercise of any warrants or similar instruments. Such right of first refusal shall apply regardless of whether or not Investor leads the financing during any part of the Equity Financing Period. SECTION 4: GENERAL PROVISIONS 4.1 Standstill and Exclusivity: During the Bridge Period and the Equity Financing Period, as defined herein and in the Convertible Preferred Stock Term Sheet, but excluding the periods from February 18, 2004 through February 29, 2004 and March 16, 2004 through the Effective Date (collectively the "STANDSTILL PERIOD"), the parties shall have worked together, and shall continue to work together, in good faith with best efforts to implement the terms of this Agreement. Except as provided in the fiduciary exception set forth in Section 3.2 hereof, during the Standstill Period the Company and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall work only with Investor and its agents, advisers and consultants, and shall have had, and shall continue to have, no discussions, negotiations and/or communications of any kind with any other parties, regardless of which party initiates or attempts to initiate any such contact or communication, in regard to any potential equity or debt financing of the Company, and/or any joint venture, license, co-development or other business arrangement, or merger, consolidation, business combination or sale of all or substantially all of the Company's assets, by or with parties other than Investor. 4.2 Cross-Default: The Company acknowledges that the financing contemplated by this Agreement is part of an integrated Recapitalization Plan, as set forth in this Agreement and the Related Recapitalization Documents. The Company further acknowledges and agrees that this Agreement is subject to all terms and conditions set forth in the Related Recapitalization Documents, and that the Related Recapitalization Documents are subject to all of the terms and conditions of this Agreement. The Company agrees that any default by the Company under any provision of this Agreement or any of the Related Recapitalization Documents will constitute a default under each other Related Recapitalization Document and this Agreement. 4.3 Termination of Soma Partners: Prior to any closing hereunder, including without limitation the closing of the Initial Bridge Funding hereunder, the Company shall terminate all existing agreements, understandings, commitments and obligations with Soma (other than an existing obligation of $3,000 and obligations under the tail period following termination of the letter agreement between the Company and Soma dated October 15, 2003). Following such termination, the Company shall be permitted (but not required) to negotiate and enter into a new agreement with Soma, provided that the terms and conditions of any such agreement are in 19. accordance with prevailing market terms, and provided further that the Company obtains the prior written approval of Investor for any such new agreement. 4.4 Indemnification: The Company will indemnify, defend and hold Investor and each person controlling Investor harmless, to the fullest extent allowed under applicable law, from and against all liabilities, losses, and damages, together with all reasonable costs and expenses related thereto (including, without limitation, reasonable legal and accounting fees and expenses), other than consequential losses or damages, which would not have been incurred if (a) all of the representations and warranties of the Company herein had been true, correct and complete as of each closing, and (b) all of the covenants and agreements of the Company herein had been fully and timely complied with and performed. The Company will pay as incurred to Investor and to each person controlling Investor, all legal and other expenses reasonably incurred in connection with investigating, defending against, and/or settling any such liability, loss or damage. 4.5 Injunctive Relief: The Company agrees that its breach of this Agreement will cause irreparable harm to the Investor and that monetary damages would not be a sufficient remedy in the event of a breach of the Agreement by the Company. The Company agrees that Investor shall be entitled to seek and obtain injunctive relief and/or specific performance under this Agreement in the event of any such breach. Such remedies shall not be deemed to be exclusive remedies for a breach of this Agreement but shall be in addition to all other remedies available to Investor at law or in equity. 4.6 Additional Covenants: (a) The Company will make, in a timely manner, all filings required by applicable regulatory agencies (whether state or federal), exchanges, markets or other bodies, at the Company's expense, in connection with the transactions contemplated by this Agreement and the Related Recapitalization Documents. (b) As soon as practicable after the Effective Date, the Company will use its best efforts to obtain all necessary consents and, if applicable, shareholder votes from its shareholders to implement the transactions contemplated by this Agreement and the Related Recapitalization Documents. (c) The Company shall not hire, engage, retain or agree to hire, engage or retain any Personnel, except with Investor's express prior written approval, on a case by case basis; (d) The Company shall not enter into, increase, expand, extend, renew or reinstate any severance, retention, separation, change of control or similar agreement with any Personnel, or agree, promise, commit or undertake to do so, without the prior written approval of Investor; (e) The Company shall make no expenditures in excess of $10,000 in aggregate other than in accordance with a budget pre-approved by Investor; 20. (f) The Company shall report the Company's cash position and all expenditures and commitments for expenditures to Investor on a bi-weekly basis; (g) The Company shall not deviate, during the period covered by such budget, more than $10,000 in aggregate from the budget included in the Schedule of Exceptions in connection with the Subsequent Bridge Note, nor take any action or make any promise, undertaking or commitment that would result in the Company incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Investor, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Investor; (h) The Company shall not purchase, lease, hire, rent or otherwise acquire directly or indirectly any rights in or to any asset or facility outside of the ordinary course of business in an amount in excess of $10,000, in aggregate, or agree, promise or commit to do so, except in accordance with the Company's budget that has been approved by the Company's board of directors and the Investor; (i) The Company shall comply in all respects with all covenants listed in Section 10 of the Notes. The covenants listed in Section 10 of the Notes are hereby incorporated by reference into this Section 4.6 of this Agreement; (j) The Company shall comply in all respects with all covenants listed in Section 3 of the Initial Bridge Warrants. The covenants listed in Section 3 of the Initial Bridge Warrants are incorporated by reference into this Section 4.6 of this Agreement; (k) The Company shall use its best efforts to obtain, within 30 days of the Effective Date, the written agreement, in a form acceptable to Investor, of each of those stockholders of the Company listed on Schedule 4.6 hereto (the "KEY STOCKHOLDERS") to vote in favor of the approval of this Agreement, the Related Recapitalization Documents and all transactions contemplated hereunder and thereunder, including, without limitation, the approval of an amendment to the Company's Charter in order to authorize sufficient capital stock to permit the Anticipated Equity Financing. Such written agreement of the Key Stockholders shall, without limitation, include a provision whereby each Key Stockholder agrees that it will not take any action in opposition to the transactions contemplated hereby or attempt to frustrate the purposes hereof; and (l) The Company shall comply in all respects with all covenants listed in Section 3 of the Subsequent Bridge Warrant. The covenants listed in Section 3 of the Subsequent Bridge Warrant are incorporated by reference into this Section 4.6 of this Agreement. 4.7 Representations and Warranties: Except as expressly set forth (with reference to a section in this Agreement) in the Schedule of Exceptions (as updated as of each closing contemplated by this Agreement and the Related Recapitalization Documents) attached hereto as Exhibit I (the "SCHEDULE OF EXCEPTIONS"), and only to the extent such exceptions are acceptable to Investor, in its sole discretion, as of the Effective Date, and independently as of the date upon 21. which each Note is issued to Investor, and as of the date of each closing, if any, of the Anticipated Equity Financing, the Company represents and warrants to the following: 4.7.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business, properties, operations, prospects or condition (financial or otherwise). 4.7.2 Authorization of Agreement, Etc. The execution, delivery and performance by the Company of this Agreement, including the Related Recapitalization Documents, has been duly authorized by all requisite corporate action by the Company in accordance with Delaware law. This Agreement and the Related Recapitalization Documents that are being or have been executed as of such closing are valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of general application effecting enforcements of creditors' rights or general principles of equity. 4.7.3 No Conflicts. The execution, delivery, performance, issuance, sale and delivery of this Agreement and the Related Recapitalization Documents, and compliance with the provisions hereof by the Company, will not (a) to the knowledge of the Company, violate any provision of any law, statute, rule or regulation applicable to the Company or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to the Company or any of its properties or assets or (b) conflict with or result in any material breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of, any encumbrance upon any of the material assets of the Company under, the Charter or Bylaws of the Company (as they may be amended to date) or any agreement or instrument to which the Company is a party. As used herein, "encumbrance" shall mean any liens, charges, encumbrances, equities, claims, options, proxies, pledges, security interests, licenses or other similar rights of any nature. 4.7.4 Compliance with Other Instruments. The Company is not in violation of any term of the Company's Charter, as amended, including any certificate of designation filed therewith, and/or the Company's Bylaws. The Company is not, in any material respect, in violation of any term of any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation to which the Company or any of such Collateral is subject. To the best of the Company's knowledge, no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a breach or violation, in any material respect, under any applicable judgments, orders, writs, decrees, federal, state and/or local laws, rules or regulations which would have a material adverse affect on the condition, financial or otherwise, or operations of the Company (as it is currently conducted and as it is proposed to be conducted) or on any material assets or any Intellectual Property owned, controlled, licensed, possessed, and/or used by the Company. To the best of its knowledge, the Company has avoided every condition, and has not performed any act, the occurrence of which 22. would result in the Company's loss of any right granted under any license, distribution agreement or other agreement or Intellectual Property. 4.7.5 Approvals. The Company has obtained all necessary permits, authorizations, waivers, consents and approvals of or by, and made all necessary notifications of and/or filings with, all applicable persons (governmental and private), in connection with the execution, delivery, performance, issuance, sale and/or delivery of this Agreement and the Related Recapitalization Documents, and consummation by the Company of the transactions contemplated hereby and thereby, except as listed in Schedule 4.7.5. 4.7.6 Capitalization. The authorized capital stock of the Company consists of 125,000,000 shares of Common Stock, par value $0.001 per share and 15,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the date hereof, 19,028,779 shares of Common Stock and no shares of preferred stock of any kind are issued and outstanding. No other shares of any class or series of the Company's capital stock are authorized and/or issued and outstanding. All issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, and are fully paid and non-assessable, and have been offered, sold and delivered by the Company in compliance with all applicable federal and state securities laws. Except as set forth in Schedule 4.7.6, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of the Company is authorized or outstanding, and there is no agreement, promise, commitment, undertaking or letter of intent of any kind (direct or indirect, contingent or otherwise) by the Company to issue any shares, subscriptions, warrants, options, convertible securities, or other such rights, or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in Schedule 4.7.6, the Company has no obligation of any kind (direct or indirect, contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Schedule 4.7.6 includes a true, accurate and complete statement describing the total number of shares of the Company outstanding as of the date of this Agreement (on a fully diluted basis, including, without limitation, all warrants and options outstanding (whether or not currently exercisable), all convertible instruments of any kind (whether or not currently convertible), shares of all classes of stock, and any agreements, promises, commitments, undertakings or letters of intent to issue any of the foregoing. 4.7.7 Authorization of the Shares. The Company has, or before the first closing of the Anticipated Equity Financing hereunder will have, authorized the issuance and sale of a sufficient number of shares of Convertible Preferred Stock, par value $0.001 per share, and Common Stock of the Company to fully implement the Recapitalization Plan, while maintaining such additional authorized but unissued shares as reasonably determined by Holder to be appropriate. Of such authorized shares, a sufficient number of shares shall be reserved for issuance upon any exercise of the Bridge Warrants and/or Preferred Stock Warrants. If at any time the number of authorized but unissued shares of Convertible Preferred Stock and/or of Common Stock is not sufficient to effect the conversion of all then outstanding convertible Notes and other instruments, and the exercise of all then outstanding warrants, options and similar instruments, then, in addition to such other remedies as may be available to Investor, including, without limitation, the exercise of Investor's right of first refusal set forth in Section 2.7(f) 23. hereof, the Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Convertible Preferred Stock and/or Common Stock to such number of shares as will be sufficient for such purposes. Such corporate action shall include, without limitation, obtaining all requisite regulatory approvals and any requisite shareholder approval of any necessary amendment to the Company's Charter. 4.7.8 Litigation. Except as set forth in Schedule 4.7.8 of the Disclosure Schedule, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against the Company, or its officers, directors, advisors, agents, properties, assets or business, in each case relating to the Company. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. 4.7.9 No Liens. Except for liens for the benefit of Investor, created by this Agreement and/or any of the Related Recapitalization Documents, and except as set forth in Schedule 4.7.9 of the Disclosure Schedule, none of the material assets of the Company, including the Collateral, are subject to any existing lien, pledge, security interest or other encumbrance of any kind, direct or indirect, contingent or otherwise. 4.7.10 Full Disclosure. Notwithstanding any other provision of this Agreement or any Related Recapitalization Document, neither this Agreement, any of the Related Recapitalization Documents nor any exhibit hereto or thereto, nor any written report, certificate, instrument or other information furnished to Investor in connection with the transactions contemplated under and/or in connection with this Agreement and the Related Recapitalization Documents contain any material misstatement (including, without limitation, any material omission), or is misleading in any material respect. 4.7.11 No Other Security Interests or Other Encumbrances. Except as set forth in Schedule 4.7.11 (and only to the amounts set forth on such schedule), there are no existing security interests, pledges, liens or other encumbrances of any kind, direct or indirect, contingent or otherwise (including without limitation any licensing or partnering arrangements or agreements), in or relating to any assets of the Company, including, without limitation, any Intellectual Property (as defined in the Note) or other Collateral. All existing security interests, pledges, liens or other encumbrances of any kind, other than those set forth in Schedule 4.7.11 hereto (and only to the amounts set forth on such schedule), are subordinate to the security interest established pursuant to the Notes, in accordance with Section 11 thereof, all necessary consents, subordination agreements and waivers, if any, have been obtained, and all amended filings and/or re-filings shall be made immediately upon the Effective Date. 4.7.12 "Small Business". (a) Small Business Status. The Company together with its "affiliates" (as that term is defined in Section 121.103 of Title 13 of Code of Federal Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including Section 121.301(c) of Title 13, Code of Federal Regulations. 24. (b) Information for SBA Reports. The Company has delivered and/or will deliver to Investor certain information, set forth by and regarding the Company and its affiliates in connection with this Agreement, on SBA Forms 480, 652 and Part A and B of Form 1031. This information delivered was true, accurate, complete and correct, and any information yet to be delivered will be true, accurate, complete and correct, and in form and substance acceptable to Investor. (c) Eligibility. The Company is eligible for financing by any SBIC Investor pursuant to Section 107.720 of Title 13 of the Federal Regulations. 4.7.13 Intellectual Property. (a) Definitions. "INTELLECTUAL PROPERTY" means all foreign and domestic intangible property and rights, owned, licensed, sub-licensed or otherwise obtained by the Company, including, without limitation, (i) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations and applications therefor, including divisions, continuations, continuations-in-part, requests for continued examination, and renewal applications, and including renewals, extensions and reissues, including without limitation those items referenced on Appendix 2 to Exhibit A of the Note (collectively, "PATENTS"); (ii) confidential and proprietary information, trade secrets and know-how, including without limitation processes, schematics, formulae, drawings, prototypes, models, designs and customer lists (collectively, "TRADE SECRETS"); (iii) all data, slides, observations, and laboratory results, produced by, for or on behalf of the Company, or which the Company has rights to obtain (collectively, "DATA"); (iv) all FDA applications, registrations, filings and other rights (collectively, "FDA RIGHTS") and all data and documentation supporting or relating thereto; (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, "COPYRIGHTS"); (v) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all extensions, modifications and renewals of same, including without limitation those items referenced on Appendix 1 to Exhibit A of the Note (collectively, "TRADEMARKS"); (vi) all other intellectual property or proprietary rights, including, without limitation, all claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including rights to recover for past, present and future violations thereof (collectively, "OTHER PROPRIETARY RIGHTS"). "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating to or affecting the Intellectual Property, including, without limitation, agreements granting rights to use the Licensed or Sub-Licensed Intellectual Property, agreements granting rights to use Owned Intellectual Property, confidentiality agreements, Trademark coexistence agreements, Trademark consent agreements and non-assertion agreements. 25. "LICENSED OR SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual Property that the Company is licensed, sub-licensed or otherwise permitted by other persons or entities to use. "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by the Company. "REGISTERED" means issued, registered, renewed or the subject of a pending application. (b) Schedule 4.7.13 ("INTELLECTUAL PROPERTY") sets forth a true and complete list and summary description of (A) all Registered or material Owned Intellectual Property (each identified as a Patent, Trademark, Trade Secret, Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or Sub-Licensed Intellectual Property and (C) all Intellectual Property Contracts. (c) All Intellectual Property is valid, subsisting and enforceable. No Owned Intellectual Property has been canceled, suspended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting the Company's rights thereto. No Licensed or Sub-Licensed Intellectual Property has been canceled, suspended, not renewed or extended, adjudicated invalid, not maintained, expired or lapsed, or is subject to any outstanding order, judgment or decree restricting its use or adversely affecting or reflecting the Company's rights thereto. (d) The Owned Intellectual Property is owned exclusively by the Company and has been used with all patent, trademark, copyright, confidential, proprietary and other Intellectual Property notices and legends prescribed by law or otherwise permitted. (e) No suit, action, reissue, reexamination, public protest, interference, opposition, cancellation or other proceeding (collectively, "SUIT") is pending or threatened concerning any claim or position: (i) that the Company, or another person or entity, has violated any Intellectual Property rights. To the Company's best knowledge, the Company is not violating and has not violated any intellectual property rights of any other party. (ii) that the Company, or another person or entity, has breached any Intellectual Property Contract. There exists no event, condition or occurrence which, with the giving of notice or lapse of time, or both, would constitute a breach or default by the Company, or a breach or default by another person or entity, under any Intellectual Property Contract. No party to any Intellectual Property Contract has given the Company notice of its intention to cancel, terminate or fail to renew any Intellectual Property Contract. (iii) that the Intellectual Property has been violated or is invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or not owned exclusively by the Company. No such claim has been threatened or asserted. To the Company's best knowledge, no valid basis for any such Suits or claims exists. 26. (f) To the Company's best knowledge, no other person or entity is violating, infringing upon or claiming rights incompatible with the Company's rights to any Intellectual Property. The Company has provided to Investor and all Other Investors copies of all information reasonably available to it relevant to intellectual property rights claimed by third parties and possible infringement thereof including, without limitation, any freedom to practice or freedom to operate opinions. (g) The Company owns or otherwise holds valid rights to use all Intellectual Property used in its business. (h) The Company has timely made all filings and payments with the appropriate foreign and domestic agencies and other parties required to maintain in full force and effect all Intellectual Property. Except as set forth on Schedule 4.7.13, no due dates for filings or payments concerning the Intellectual Property (including, without limitation, office action responses, affidavits of use, affidavits of continuing use, renewals, requests for extension of time, maintenance fees, application fees and foreign convention priority filings) fall due within ninety (90) days prior to or after the closing, whether or not such due dates are extendable. The Company is in compliance with all applicable rules and regulations of such agencies and other parties with respect to the Intellectual Property. All documentation necessary to confirm and effect the Intellectual Property, if acquired from other persons or entities, has been recorded in the United States Patent and Trademark Office, the United States Copyright Office and other official offices. (i) The Company has undertaken and consistently implemented best efforts to protect the secrecy, confidentiality and value of all non-public Intellectual Property used in its business (including, without limitation, entering into appropriate confidentiality agreements with all officers, directors, employees and other persons or entities with access to such non-public Intellectual Property). Company management has not disclosed any such non-public Intellectual Property to any persons or entities other than (i) Company employees or Company contractors who had a need to know and use such non-public Intellectual Property in the ordinary course of employment or contract performance, or (ii) prospective customers, and in each case who executed appropriate confidentiality agreements. (j) The Company has taken all reasonable measures to confirm that no current or former Company employee is or was a party to any confidentiality agreement or agreement not to compete that restricts or forbids, or restricted or forbade at any time during such employee's employment by the Company, such employee's performance of the Company's business, or any other activity that such employee was hired to perform or otherwise performed on behalf of or in connection with such employee's employment by the Company. 4.7.14 SEC Filings; Financial Statements. (a) The Company has delivered or made available to Investor accurate and complete copies of all registration statements, proxy statements and other statements, reports, schedules, forms and other documents filed by the Company with the SEC since January 1, 2003, and all amendments thereto (the "COMPANY SEC DOCUMENTS"). Except as set forth on Schedule 4.7.14, all statements, reports, schedules, forms and other documents required to have 27. been filed by the Company with the SEC have been so filed on a timely basis. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The financial statements (including any related notes) contained in the Company SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material in amount), and (iii) fairly present the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries for the periods covered thereby. 4.7.15 Liabilities. The Company has no accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Restatement Date other than (i) tax liabilities to the State of Washington in the maximum amount of $492,000, (ii) amounts payable to Cognate and (iii) future lease payments to Benaroya Capital Co. LLC for the Company's premises lease not yet due, in the aggregate in excess of $450,000, of which $325,000 are currently due payables, $69,000 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and $55,000 are accrued vacation and sick pay. 4.7.16 Compliance with All Standstill Provisions. The Company has complied in all respects with all standstill, exclusivity and confidentiality provisions of (a) this Agreement, the Notes and the Related Recapitalization Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between the Company and Investor dated as of February 2, 2004 and (c) Section 13 of that certain 10% Convertible, Secured Promissory Note by and between the Company and Investor dated as of March 1, 2004. 4.8 Representations and Warranties of Investor: Investor hereby represents and warrants to the Company, as of the Effective Date and, independently as of the date upon which each Note is issued to Investor that subject to, and based in part on, the Company's representation and warranty in Section 4.7.10 hereof, (a) Investor has conducted its own due diligence review of the Company and received copies or originals of all documents it has requested from the Company; Notwithstanding the foregoing, this representation shall not in any way be deemed to prohibit, limit, restrict or otherwise impact Investor's rights to indemnification, and/or to any other rights 28. or remedies available at law or equity, from the Company and its affiliates in the event of a breach by the Company of any representation, warranty, covenant or other term hereof or of any Related Recapitalization Document; and (b) Investor is aware of the Company's financial prospects and acknowledges that the sources of repayment of the Notes and the payment of Investor's fees, costs and expenses pursuant to Section 4.11 are limited to additional capital raised in bridge or other debt financing, the Anticipated Equity Financing or other future financing transaction or foreclosure of the Collateral. 4.9 Conditions to Closing: Notwithstanding anything to the contrary, and, in each case, unless expressly waived in writing in advance by Investor (any such waiver by Investor shall be applicable only as to such closing and shall not be deemed a waiver of such condition as to future closings, if any), and only to the extent expressly waived, all closings contemplated under this Agreement and the Related Recapitalization Documents shall be conditional upon and subject to the satisfaction or waiver of each of the following conditions precedent, with each such satisfaction or waiver to be determined by Investor in its sole discretion (including, without limitation, the acceptability to Investor of any exception set forth in a disclosure schedule), on or before the applicable closing date. Investor shall make all such determinations in its sole discretion. These conditions are in addition to the conditions set forth in Section 2.4. The conditions precedent to each closing under this Agreement and the Related Recapitalization Documents shall include the following, unless waived by Investor in its sole discretion: (a) Performance of Obligations. The Company has in all material respects performed all obligations and agreements and complied with all covenants and other items contained in the Agreement and the Related Recapitalization Documents required to be performed or fulfilled on or before the applicable closing date. (b) Representations True and Complete. All of the representations and warranties made by the Company in the Agreement and the Related Recapitalization Documents true, correct and complete, with no material inaccuracies or omissions, as of the applicable closing date. (c) No Material Adverse Change. There has been no change that has had or could reasonably be expected to have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently conducted and/or as it is proposed to be conducted) (a "MATERIAL ADVERSE EFFECT") since December 31, 2003. (d) Proceedings. All corporate and other proceedings, and all documents applicable to the transactions involved in the purchase and sale of any securities issued or to be issued under this Agreement or the Related Recapitalization Documents, are satisfactory in substance and form to Investor and, if applicable Other Investors), and Investor and its counsel and Other Investors (as applicable) and their respective counsel have received all such counterpart originals or certified or other copies of such documents as they may have requested including, without limitation, the following: 29. (i) The Company's Charter (including any amendments, restatements and certificates of designation thereto) filed with and certified by the Delaware Secretary of State; (ii) A certificate, as of the most recent practicable date prior to or on the applicable closing date, as to the corporate good standing of the Company, issued by the Delaware Secretary of State and any other applicable state tax department; (iii) The Bylaws of the Company, certified by the Secretary of the Company as of the applicable closing date; (iv) The resolutions of the Board of Directors of the Company authorizing and approving all matters in connection with this Agreement and the Related Recapitalization Documents and the transactions contemplated hereby and thereby, certified by the Secretary of the Company as of the applicable closing date. (v) As applicable, the resolutions of the Company's stockholders or stockholder vote, certified by the Secretary of the Company, of the stockholders approving any matter in connection with this Agreement and/or the Related Recapitalization Documents upon which the stockholders are required to vote under applicable law as of any applicable closing date whereby such stockholder approval would be necessary to issue securities due at such closing date or otherwise effectuate such closing. (e) Executed Agreements. The Company will have executed, delivered and maintained in force this Agreement and the Related Recapitalization Documents. (f) Due Diligence. The Company will have provided prior to the applicable closing date all due diligence information requested by Investor or any Other Investor, and/or necessary to enable such investor to complete a thorough due diligence review and obtain a complete and accurate understanding of the business, operations, prospects, assets, liabilities, structure, legal aspects and condition, financial or otherwise, of the Company. (g) No Severance Agreements. The Company will not have entered into, increased, expanded, extended, or renewed any severance, separation, retention, change of control or similar agreement with any employee, or agreed, promised or committed to do so, within the six month period prior to any closing hereunder, without the prior written approval of Investor. (h) Termination of Soma Partners. The Company shall deliver to Investor written evidence satisfactory to Investor that all existing agreements with Soma have been terminated, and that the Company has notified Soma that Investor was not introduced to the Company by Soma and that in accordance with Section 7 of the letter agreement by and between Soma and the Company, dated as of October 15, 2003, Soma is not entitled to any compensation (cash or securities) from the Company by virtue of any investment by Investor in the Company (other than an existing obligation of $3,000). (i) Board Certification of Shares Outstanding. The Board of Directors of the Company shall deliver to the Investor a certified statement detailing, to the best of the board's 30. knowledge, the total number of shares of the Company outstanding as of the date of each closing (on a fully-diluted basis, including, without limitation, all shares of stock of all series and classes, all options, warrants, convertible instruments of any kind (whether or not exercised or converted as the case may be), and any promises, commitments, agreements, undertakings or letters of intent to issue any of the foregoing). (j) Bridge Funding Conditions. The Company has complied with all of the Closing Conditions of Bridge Funding as listed in Section 2.4 hereof. (k) Officer's Certificate. The Chief Executive Officer of the Company, or other officer of the Company acceptable to Investor in Investor's sole discretion, will deliver to Investor at each closing a certificate certifying that the conditions specified in this Section 4.9 (other than actions to be taken by parties other than the Company or existing shareholders) have been fulfilled. For each subsequent closing, there shall have been no material inaccuracy or omission in any certificate delivered to Investor pursuant to this Section 4.9(k) on the Effective Date or at any closing occurring after the Effective Date. (l) The Board of Directors of the Company shall have amended the Stockholder Rights Agreement (the "RIGHTS AGREEMENT") dated as of February 26, 2002 between the Company and Mellon Investor Services LLC, as Rights Agent such that (i) Investor, Other Investors, and their respective affiliates shall be excluded from the definition of the "ACQUIRING PERSON" thereunder (and any additional, conforming changes that are deemed necessary to prevent the transactions contemplated hereby from triggering the occurrence of a "DISTRIBUTION DATE" thereunder) and (ii) the Rights Agreement may not be further amended without the consent of Investor except in the event that the Company's obligation to effect the Anticipated Equity Financing is terminated pursuant to Section 3.2 hereof. (m) The Company shall have obtained the written agreement, in a form acceptable to Investor, of each Key Stockholder (as listed in Schedule 4.6 hereto) to vote in favor of the approval of this Agreement, the Related Recapitalization Documents and all transactions contemplated hereunder and thereunder, including, without limitation, the approval of an amendment to the Company's Charter in order to authorize sufficient capital stock to permit the Anticipated Equity Financing. Such written agreement of the Key Stockholders shall, without limitation, include a provision whereby each Key Stockholder agrees that it will not take any action in opposition to the transactions contemplated hereby or attempt to frustrate the purposes hereof. 4.10 SBA Matters. The Company acknowledges that Investor has informed the Company that it is a Federal licensee or sub-licensee under the Small Business Investment Act ("SBIA") and a participant in the Small Business Investment Company ("SBIC") program of the United States Small Business Administration ("SBA") and, as such, in its business and investment activities is required to comply with the SBIA and all regulations, advice, direction and guidance applicable to SBIC's. In addition, such laws and regulations also require certain practices on the part of the companies in which Investor makes investments, including but not limited to those requirements specifically enumerated in this Agreement. So long as Investor holds any securities of the Company: 31. (a) The Company will not change the nature of its business activity in a manner that would cause a violation of Sections 107.720 and/or 107.760(b) of Title 13 of the Code of Federal Regulations (including, without limitation, by undertaking real estate, film production or oil and gas exploration activities). In the event that the Company changes the nature of its business activity such that such change would render the Company ineligible for financing pursuant to applicable SBA rules and regulations, the Company agrees to use its best efforts to facilitate a transfer or redemption of any securities then held by Investor. (b) The Company will at all times comply with the non-discrimination requirements of Parts 112, 113 and 117 of Title 13 of the Code of Federal Regulations. (c) Promptly after the end of each fiscal year (but in any event prior to February 28 of each year), and at such other times as Investor may reasonably request, the Company will deliver to Investor a written assessment, in form and substance satisfactory to Investor, of the economic impact of Investor's financing hereunder, specifying the full-time equivalent jobs created or retained in connection with such investment, and the impact of the financing on the Company's business in terms of revenues and profits and on taxes paid by the Company and its employees. (d) The Company will provide to Investor and any Other Investor that is a participant in a SBIC (each, an "SBIC INVESTOR") all financial information required by such SBIC Investor, on a timely basis, including without limitation, its quarterly and annual balance sheets and income statement. Such financial information will be certified by a member of management of the Company at least annually. Financial information required will also include such information as is necessary for such SBIC Investor to file Form 468 with the SBA. The Company will also provide on a timely basis any other information reasonably requested or required by any governmental agency asserting jurisdiction over Investor. The Company agrees to allow SBA examiners access to the Company's books and records, as reasonably required by such examiners, in connection with their annual audits of Investor or for any other legitimate purposes reasonably related to the investment of the SBA in Investor. The Company will also provide, in good faith and in a timely manner, all other assistance and cooperation reasonably required to enable any SBIC or SBIC Investor to make all necessary filings and comply with all applicable SBA and SBIC-related requirements. (e) The proceeds from the sale of securities (including, without limitation, the Notes, Bridge Warrants, Preferred Stock Warrants and/or shares of Convertible Preferred Stock) to any SBIC Investor (the "PROCEEDS"), shall be used by the Company for its growth, modernization and/or expansion and/or for general corporate purposes as permitted by applicable SBA rules and regulations. 4.11 Fees; Expenses The Company shall pay, reimburse or otherwise satisfy, upon demand of Investor, all fees, costs and expenses incurred and/or undertaken, and to be incurred and/or undertaken, by Investor relating to the preparation for, development of and implementation of the Recapitalization Plan set forth in this Agreement, including, without limitation, all due diligence expenses and all expenses relating to the Bridge Funding, the Anticipated Equity Financing and the transactions contemplated hereby and the documentation of all of the foregoing (including, without limitation all legal fees and expenses and costs 32. incurred and to be incurred in connection with any SBA filings), which shall be satisfied by the Company upon Investor's demand, including but without limitation upon each closing of the Bridge Funding or Anticipated Equity Financing. This obligation shall apply regardless of whether or not all of the transactions contemplated in this Agreement close. At each closing of Bridge Funding or Anticipated Equity Financing, at Investor's sole discretion, and with respect to any or all of such fees, costs and expenses accrued through such closing, the Company shall (a) pay Investor in cash concurrently with such closing (or at Investor's sole discretion, Investor may withhold such amount from the wire of investment proceeds), (b) issue a Note in the form of Exhibit A-5 in principal amount equal to such fees, costs and expenses (which at Investor's option may instead be evidenced as an increase in the principal amount of any Note issued in connection with such closing); or (c) treat such fees, costs and expenses as an unsecured payable. At any time following such closing, Investor may require any amounts that it elected to have the Company treat as unsecured amounts payable to be paid in cash or satisfied by issuance of a Note in the principal amount of some or all of such unsecured obligation. 4.12 Confidentiality. Notwithstanding the fiduciary exception set forth in Section 3.2 hereof, during the Standstill Period the Company and its officers, directors, employees, agents, advisers, consultants, partners and collaborators shall maintain confidentiality, and shall not provide copies, excerpts, summaries or descriptions, or communicate in any way with any third parties, either directly or indirectly, as to any aspects of the recapitalization of the Company and/or any financing by Investor, including, without limitation, the identity of the parties involved, any terms of this Agreement and/or the Related Recapitalization Documents, the Convertible Preferred Stock or any other matter relating to the recapitalization of the Company or the progress or status of any activities or processes relating to the recapitalization of the Company; provided, however, nothing herein shall prohibit the Company from filing this Agreement and any Related Recapitalization Document with the Securities and Exchange Commission (the "SEC"), if required by the regulations of the SEC (subject to the covenant in Section 2.5(a) hereof). 4.13 Miscellaneous: (a) Counterparts. This Agreement may be executed in counterparts, each of which when so executed and delivered will constitute a complete and original instrument but all of which together will constitute one and the same agreement, and it will not be necessary when making proof of this Agreement or any counterpart thereof to account for any counterpart other than the counterpart of the party against whom enforcement is sought. (b) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law. Each party to this Agreement hereby irrevocably and unconditionally agrees that any legal action, suit or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby will be brought in any federal or state court located in Delaware, and hereby irrevocably and unconditionally expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and hereby irrevocably and unconditionally waives any claim (by way of motion, as a defense or otherwise) of improper venue, that it is not subject personally to the jurisdiction of such court, that such courts are an inconvenient forum or that this Agreement or the subject matter may not be enforced in or by 33. such courts. Each party hereby irrevocably and unconditionally consents to the service of process of any of the aforementioned courts in any such action, suit or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth or provided for in Section 4.13(c) of this Agreement, such service to become effective upon delivery, in accordance with Section 4.13(c) below. Nothing herein contained will be deemed to affect the right of any party to serve process in any manner permitted by law or commence legal proceedings or otherwise proceed against any other party in any other jurisdiction to enforce judgments obtained in any action, suit or proceeding brought pursuant to this Section. (c) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to be effective upon delivery when delivered (a) personally; (b) by facsimile, provided a copy is mailed on the same day by overnight delivery with a nationally recognized overnight delivery service; (c) by overnight delivery with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications will be, in the case of Investor; Linda F. Powers Managing Director Toucan Capital Corp. 7600 Wisconsin Ave, 7th floor Bethesda, MD 20814 Tel: 240-497-4060 Fax: 240-497-4065 lpowers@toucancapital.com And in the case of the Company: Northwest Biotherapeutics, Inc. Attention: Alton Boynton 22322 20th Avenue, SE, Suite 150 Bothell, Washington 98021 Fax: 425-608-3009 or at such other address and facsimile number as the receiving party will have furnished to the sending party in writing. Each party will provide five (5) business days' prior written notice to the other parties of any change in address or facsimile number. (d) Survivability. The representations, warranties, covenants and agreements made herein will survive any investigation made by or on behalf of the Investor or the Company, and will survive for two years after the applicable closing date. (e) Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof will inure to the benefit of, and be binding upon, the respective successors, assigns, heirs, executors and administrators of the parties hereto. Notwithstanding anything to the contrary in this Agreement or the Related Recapitalization Documents, Investor may transfer or assign all or any portion of its rights under this Agreement and the other Related 34. Recapitalization Documents to any person or entity, or designate another party to exercise all or any portion of Investor's rights under this Agreement and the other Related Recapitalization Documents, so long as such transfer or assignment is permissible under applicable federal and state securities laws. Without limiting the generality of the foregoing, all representations, warranties, covenants and agreements benefiting Investor will inure to the benefit of any and all subsequent holders from time to time of the Notes, the Bridge Warrants, Preferred Stock Warrants, the shares of Convertible Preferred Stock contemplated by this Agreement, and any Debt Securities and/or Equity Securities issued or issuable upon exercise or conversion of any of the foregoing. (f) Entire Agreement; Amendments. This Agreement (including the Schedules and Exhibits hereto, which are an integral part of this Agreement) and the Related Recapitalization Documents constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Except as otherwise expressly provided herein, neither this Agreement, the Related Recapitalization Documents nor any term hereof or thereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Company and Investor. Notwithstanding anything to the contrary, no provision that applies to any person or entity specifically designated by name will be amended, waived, discharged or terminated without the express written consent of such named person or entity. Also notwithstanding anything to the contrary, this Agreement and/or the other Related Recapitalization Documents will be amended as and to the extent necessary to comply with the Small Business Investment Act and all regulations, advice, direction and guidance applicable to SBICs. (g) Interpretation. All pronouns and any variations thereof will be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require. All references to "$" or dollars herein will be construed to refer to United States dollars. The titles of the Sections and subsections of this Agreement are for convenience or reference only and are not to be considered in construing this Agreement. (h) Rights, Separability. In case any provision of this Agreement or the Related Recapitalization Documents will be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. [SIGNATURE PAGE FOLLOWS] 35. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the Restatement Date. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton Boynton ------------------------------------ Name: Alton Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda F. Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-1 FORM OF $50,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 26, 2004 EXHIBIT A-2 FORM OF $50,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 26, 2004 EXHIBIT A-3 FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 26, 2004 EXHIBIT A-4 FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED JUNE 11, 2004 EXHIBIT A-5 FORM OF $2,000,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED JULY 30, 2004 EXHIBIT B CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT C INITIAL BRIDGE WARRANT DATED APRIL 26, 2004 EXHIBIT C-1 INITIAL BRIDGE WARRANT DATED JUNE 11, 2004 EXHIBIT D FORM OF PREFERRED STOCK WARRANT EXHIBIT E SUBORDINATION AGREEMENT EXHIBIT F NOTICE, CONSENT AND WAIVER EXHIBIT G FIRST AMENDMENT TO CONVERTIBLE SECURED PROMISSORY NOTE EXHIBIT H FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES EXHIBIT I SCHEDULE OF EXCEPTIONS EXHIBIT J SUBSEQUENT BRIDGE WARRANT AMENDMENT NO. 1 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT This AMENDMENT NO. 1 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "Amendment") is made and entered into as of October 22, 2004 (the "Amendment Date") by and between Northwest Biotherapeutics, Inc., and its affiliates, if any (collectively, the "Company"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and Toucan Capital Fund II, L.P., and its designees (collectively, "Investor"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS Whereas, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "Agreement"); Whereas, the Company and Investor desire to amend the Agreement in order for Investor to provide the Company with up to $1,000,000 of additional Bridge Funding and to make such other changes to the Agreement as are set forth herein; and Whereas, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. Amendment Now, Therefore, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.1 of the Agreement is hereby amended by replacing "one hundred eighty (180)" with "two hundred twenty five (225) (or in the event the November Bridge Funding (as defined herein) is not provided, one hundred ninety five (195))." 2. Section 1.2 of the Agreement is hereby amended by inserting ", including without limitation, the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated October 22, 2004 attached hereto as Exhibit A-6, the October 22 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-1 and, if issued, the Note evidencing the November Bridge Funding (as defined herein) in the form attached hereto as Exhibit A-7 and the November Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-2" immediately following the phrase "such other documents and agreements" in subsection (g) thereof. 1 3. Section 2.1 of the Agreement is hereby amended by adding a new subsection (k) immediately following Section 2.1(j) as follows: [***]* 4. Action 2.2(a) of the Agreement is hereby amended by replacing "A-5" with "A-6 (and if issued, A-7)." 5. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the third sentence thereof: "On October 22, 2004 (the "Amendment Date"), Investor is providing an additional $500,000 of Bridge Funding (the "October 22 Bridge Funding") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the remaining Bridge Period following the period covered by the Subsequent Bridge Funding. The October 22 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-6 and shall be provided on the terms and conditions set forth herein. The October 22 Bridge Funding shall be used only for the purposes and in the amounts set forth in the budget included in the Schedule of Exceptions in connection with the October 22 Bridge Funding. Subject to the satisfaction, or waiver by Investor, of the conditions set forth in Section 2.4(t) and Section 2.4(u) (as well as all other closing conditions contained herein), on or before November 5, 2004 Investor shall provide an additional $500,000 of Bridge Funding (the "November Bridge Funding") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the remaining Bridge Period following the period covered by the Subsequent Bridge Funding. If provided, the November Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-7 and shall be provided on the terms and conditions set forth herein. If provided, the November Bridge Funding shall be used only for the purposes and in the amounts set forth in the budget included in the Schedule of Exceptions in connection with the November Bridge Funding." 6. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "Subsequent Bridge Note funds" with "Subsequent Bridge Funding, October 22 Bridge Funding or, if provided, November Bridge Funding" in the fourth sentence thereof (i.e., the tenth sentence thereof after giving effect to the inclusion of the six new sentences therein per Section 5 of this Amendment). 7. Section 2.5(i) of the Agreement is hereby amended and restated in its entirety as follows: - ---------- * Confidential Treatment Requested 2 "(i) not deviate, during the period covered by such budgets, more than $10,000 in aggregate from the budget included in the Schedule of Exceptions in connection with the Subsequent Bridge Funding or the budget included in the Schedule of Exceptions in connection with the October 22 Bridge Funding or the November Bridge Funding, nor take any action or make any promise, undertaking or commitment that would result in the Company incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Investor, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Investor." 8. Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each amended by replacing "one hundred eighty (180)" with "two hundred twenty five (225)." 9. Section 2.4 of the Agreement is hereby amended by adding new subsections 2.4(t) and 2.4(u) immediately following Section 2.4(s) thereof, as follows: "(t) with respect to the October 22 Bridge Funding and the November Bridge Funding only, the Company and Investor shall have agreed to a mutually acceptable budget for the period from the Amendment Date through December 7, 2004. (u) with respect to the October 22 Bridge Funding and the November Bridge Funding only, the Company to have reported to Investor the Company's cash position and all expenditures and agreements commitments or undertakings for expenditures as of the Amendment Date and as of the date of such closing." 10. The Agreement is hereby amended by adding new Sections 2.11 and 2.12, immediately following Section 2.10 thereof, as follows: "2.11 October 22 Bridge Warrant: (a) Issuance of October 22 Bridge Warrant. On the Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the October 22 Bridge Funding (the "October 22 Bridge Warrant"). The Company shall, therefore, issue $500,000 in warrant coverage on the $500,000 of October 22 Bridge Funding provided on the Amendment Date. The number of shares subject to the October 22 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the October 22 Bridge Warrant shall therefore be 5,000,000 shares as of the Amendment Date. 3 (b) Exercise of October 22 Bridge Warrant. The October 22 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the October 22 Bridge Warrant shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the October 22 Bridge Warrant) and a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale of Convertible Preferred Stock; provided, however that in no event will the exercise price be less than $0.04 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the October 22 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the October 22 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the October 22 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "Investor Designated Securities"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the October 22 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such October 22 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the October 22 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the October 22 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. 4 (d) Tax Treatment of October 22 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the October 22 Bridge Funding, if issued apart from the October 22 Bridge Warrant, is $495,000, and the fair market value of the October 22 Bridge Warrant, if issued apart from such Note, is $5,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the October 22 Bridge Funding and/or the October 22 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.11(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing. 2.12 November Bridge Warrant: (a) Issuance of November Bridge Warrant. Within fourteen (14) calendar days of the Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the November Bridge Funding (the "November Bridge Warrant"). Therefore, if the November Bridge Funding is provided, the Company shall issue $500,000 in warrant coverage on the $500,000 of November Bridge Funding provided. The number of shares subject to the November Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the November Bridge Warrant, if issued, shall therefore be 5,000,000 shares as of issuance. (b) Exercise of November Bridge Warrant. The November Bridge Warrant, if issued, shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the November Bridge Warrant, if issued, shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the November Bridge Warrant) and a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale of Convertible Preferred Stock; provided, however that in no event will the exercise price be less than $0.04 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the November Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the November Bridge Warrant, if issued, shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the November Bridge Warrant, if issued, shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "Investor Designated Securities"). 5 (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the November Bridge Warrant, if issued, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such November Bridge Warrant, if issued, and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the November Bridge Warrant, if issued, against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the November Bridge Warrant, if issued, may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of November Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that, if the November Bridge Funding is provided, the fair market value of the Note to be issued in connection with the November Bridge Funding, if issued apart from the November Bridge Warrant, is $495,000, and the fair market value of the October 22 Bridge Warrant, if issued apart from such Note, is $5,000. The Company and Investor further agree that, if the November Bridge Funding is provided, all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the November Bridge Funding and/or the November Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.12(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 6 11. Section 3.4(b) of the Agreement is hereby amended by: a. replacing "$8 million" with "$7 million (or, in the event that the November Bridge Funding is not provided, $7,500,000)" in the first sentence thereof; and b. replacing "80,000,000" with "70,000,000 (or, in the event that the November Bridge Funding is not provided, 75,000,000)" in the third sentence thereof. 12. Section 4.6(g) of the Agreement is hereby amended and restated in its entirety as follows: "(g) The Company shall not deviate, during the period covered by such budgets, more than $10,000 in aggregate from the budget included in the Schedule of Exceptions in connection with the Subsequent Bridge Funding, the budget included in the Schedule of Exceptions in connection with the October 22 Bridge Funding, or the Schedule of Exceptions in connection with the November Bridge Funding, if issued, nor take any action or make any promise, undertaking or commitment that would result in the Company incurring or accumulating payables and/or other financial obligations of any kind, whether current or deferred, direct or indirect, for purposes other than as set forth in budgets expressly agreed to by Investor, and/or in any amounts in excess of the amounts set forth in such agreed budgets, which equal or exceed $10,000 in aggregate, and which have not been approved in writing in advance by Investor;" 13. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. Other than (i) tax liabilities to the State of Washington in the maximum amount of $492,000, (ii) amounts payable to Cognate Therapeutics and (iii) future lease payments to Benaroya Capital Co. LLC for the Company's premises lease not yet due, the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Amendment Date, do not exceed $400,000, of which (X) $276,000 are currently due payables (including $204,966 for attorney and auditor fees), (Y) $65,000 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (Z) $59,000 are accrued vacation and sick pay." 7 14. The Agreement is hereby amended by adding new Exhibits A-6 and A-7, immediately following Exhibit A-5 thereto, in the forms attached as Exhibits A-6 and A-7 hereto. 15. The Agreement is hereby amended by adding new Exhibits K-1 and K-2, immediately following Exhibit J thereto, in the forms attached as Exhibits K-1 and K-2 hereto. 16. The October 22 Bridge Warrant in the form attached hereto as Exhibit K-1 (and, if issued, the November Bridge Warrant attached hereto as Exhibit K-2) shall be deemed to be a "Bridge Warrant" and a "Warrant" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the October 22 Bridge Funding in the form attached hereto as Exhibit A-6 issued on the Amendment Date (and, if issued, the Note evidencing the November Bridge Funding in the form attached hereto as Exhibit A-7) shall be deemed to be a "Note" for all purposes under the Agreement and any Related Recapitalization Document. Each of the October 22 Bridge Warrant and the Note evidencing the October 22 Bridge Funding (and, if issued, the November Bridge Warrant and the Note evidencing the November Bridge Funding) shall be deemed to be "Related Recapitalization Documents" for all purposes under the Agreement and all other Related Recapitalization Documents. 17. The Agreement is hereby amended by replacing Exhibit B thereto (the "Convertible Preferred Stock Term Sheet") with the Amended and Restated Convertible Preferred Stock Term Sheet in the form attached hereto as Exhibit B, which shall be deemed the "Convertible Preferred Stock Term Sheet" for all purposes under this Agreement and all other Related Recapitalization Documents. 18. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 19. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 20. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 21. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 22. This Amendment shall take effect immediately upon execution by the Company and Investor. 8 [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 9 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 1 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the AMENDMENT DATE above written. Northwest Biotherapeutics, Inc. By: /s/ Alton Boynton ------------------------------------ Name: Alton L. Boynton Title: President Toucan Capital Fund II, LP By: /s/ Linda Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director 10 EXHIBIT A-6 Form of $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note Dated October 22, 2004 11 EXHIBIT A-7 Form of $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note to Evidence November Bridge Funding (If Provided) EXHIBIT B AMENDED AND RESTATED BINDING TERM SHEET CONVERTIBLE PREFERRED STOCK Northwest Biotherapeutics, Inc. October 22, 2004 EXHIBIT K-1 FORM OF OCTOBER 22 BRIDGE WARRANT EXHIBIT K-2 FORM OF NOVEMBER BRIDGE WARRANT AMENDMENT NO. 2 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of November 10, 2004 by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.1 of the Agreement is hereby amended by replacing "two hundred twenty five (225)" with "two hundred thirty-five (235)" and by replacing "one hundred ninety five (195)" with "two hundred (200)." 2. Section 2.3(b) of the Agreement is hereby amended by replacing "November 5, 2004" with "November 12, 2004." 3. Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each amended by replacing "two hundred twenty five (225)" with "two hundred thirty-five (235) (or in the event the November Bridge Funding is not provided, two hundred (200))." 4. Section 2.12(a) of the Agreement is hereby amended by replacing "Within fourteen (14) calendar days of the Amendment Date" with "If Investor provides the November Bridge Funding." 1 5. Section 2.12(d) of the Agreement is hereby amended by replacing "October 22 Bridge Warrant" with "November Bridge Warrant." 6. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 7. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement, as amended (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 8. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 9. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 10. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 2 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton Boynton ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director 3 AMENDMENT NO. 3 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of December 27, 2004 (the "THIRD AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.1 of the Agreement is hereby amended by replacing "two hundred thirty-five (235) (or in the event the November Bridge Funding (as defined herein) is not provided, two hundred (200))" with "two hundred fifty seven (257)." 2. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated December 27, 2004 attached hereto as Exhibit A-8, and the December 27 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-3" immediately following the phrase "in the form attached hereto as Exhibit K-2" in subsection (g) thereof. 1 3. Section 2.1(k) of the Agreement is hereby deleted from the Agreement in its entirety and shall no longer be a covenant to which the Company is subject. 4. Section 2.2(a) of the Agreement is hereby amended by replacing "A-6 (and if issued, A-7)" with "A-8." 5. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the ninth sentence thereof: "On December 27, 2004 (the "THIRD AMENDMENT DATE"), Investor is providing an additional $250,000 of Bridge Funding (the "DECEMBER 27 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the remaining Bridge Period following the period covered by the November Bridge Funding. The December 27 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-8 and shall be provided on the terms and conditions set forth herein. The December 27 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 6. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "or if provided, November Bridge Funding" with "November Bridge Funding or December 27 Bridge Funding" in the tenth sentence thereof (i.e., the thirteenth sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 4 of this Amendment). 7. Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each amended by replacing "two hundred thirty-five (235) (or in the event the November Bridge Funding (as defined herein) is not provided, two hundred (200))" with "two hundred fifty-seven (257)." 8. The Agreement is hereby amended by adding a new Section 2.13, immediately following Section 2.12 thereof, as follows: "2.13 December 27 Bridge Warrant: (a) Issuance of December 27 Bridge Warrant. On the Third Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the December 27 Bridge Funding (the "DECEMBER 27 BRIDGE WARRANT"). The Company shall, therefore, issue $250,000 in warrant coverage on the $250,000 of December 27 Bridge Funding provided on the Third Amendment Date. The number of shares subject to the December 27 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the December 27 Bridge Warrant shall therefore be 2,500,000 shares as of the Third Amendment Date. (b) Exercise of December 27 Bridge Warrant. The December 27 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the 2 December 27 Bridge Warrant shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the December 27 Bridge Warrant) and a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale of Convertible Preferred Stock; provided, however that in no event will the exercise price be less than $0.04 per share (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the December 27 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the December 27 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the December 27 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the December 27 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such December 27 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the December 27 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the December 27 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of December 27 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the December 27 Bridge Funding, if issued apart from the December 27 Bridge Warrant, is $247,500, and the fair market value of the December 27 Bridge Warrant, if issued apart from such Note, is $2,500. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the December 27 3 Bridge Funding and/or the December 27 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.13(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 9. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$7 million (or, in the event that the November Bridge Funding is not provided, $7,500,000)" with "$6.75 million" in the first sentence thereof; and (b) replacing " "70,000,000 (or, in the event that the November Bridge Funding is not provided, 75,000,000)" with "67,500,000" in the third sentence thereof. 10. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $486,000, (ii) amounts payable to Cognate Therapeutics and (iii) future sublease payments to MediQuest Corporation for the Company's premises sublease not yet due, and a contingent lease liability to Benaroya Capital Co. LLC for premises currently occupied by MediQuest Corporation should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Third Amendment Date, do not exceed $427,690 (excluding amounts payable to Cognate), of which (x) $307,690 are currently due payables (including $283,747 for attorney and auditor fees), (y) $56,000 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $64,000 are accrued vacation and sick pay." 11. The Agreement is hereby amended by adding new Exhibit A-8, immediately following Exhibit A-7 thereto, in the form attached as Exhibit A-8 hereto. 12. The Agreement is hereby amended by adding new Exhibit K-3, immediately following Exhibit K-2 thereto, in the form attached as Exhibit K-3 hereto. 13. The December 27 Bridge Warrant in the form attached hereto as Exhibit K-3 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the December 27 Bridge Funding in the form attached hereto as Exhibit A-8 issued on the Third Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the December 27 Bridge Warrant and the Note evidencing the December 27 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 4 14. Exhibit B to the Agreement is hereby amended by Exhibit B-1 hereto (the "AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended by the Amendment to the Amended and Restated Convertible Preferred Stock Term Sheet, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under this Agreement and all other Related Recapitalization Documents. 15. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 16. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 17. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 18. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 19. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 3 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Third Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton Boynton ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-8 FORM OF $250,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED DECEMBER 27, 2004 EXHIBIT B-1 FORM OF AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-3 FORM OF DECEMBER 27 BRIDGE WARRANT AMENDMENT NO. 4 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of January 26, 2005 (the "FOURTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 2.2(a) of the Agreement is hereby amended by adding the phrase " and, to the extent that Investor determines in its sole discretion to do so, during the Equity Financing Period" immediately following "Bridge Period" in the first sentence thereof. 2. Section 2.3 (c) of the Agreement is hereby amended by adding the phrase "(including any Bridge Funding provided by Investor during the Equity Financing Period)" immediately following "Subsequent Bridge Funding, if any" in the first sentence thereof. 1 3. Section 3.3 of the Agreement is hereby amended by adding a new subsection 3.3(c) immediately following Section 3.3(b) thereof, as follows: "(c) Board of Directors Composition: On the Fourth Amendment Date, the authorized number of directors shall be one (1). The authorized number of directors may not be increased or decreased without the consent of the holders of a majority of the shares of Convertible Preferred Stock. The holders of a majority of the shares of Convertible Preferred Stock, acting in their sole discretion, may require the Company to increase the total number of authorized directors at any time following the Fourth Amendment Date, up to a maximum of seven (7) directors. Subject to the limitation in the following sentence, any newly created directorships shall be designated by the holders of a majority of the shares of Convertible Preferred Stock, acting in their sole discretion, to be filled by either: (i) an outside director with significant industry experience, who is reasonably acceptable to the holders of a majority of the Convertible Preferred Stock, to be elected by the holders of the Company's Common Stock (which may, subject to applicable law, the Charter or the Bylaws, be filled initially by vote of the remaining director(s)) (a "COMMON DIRECTORSHIP"); or (ii) a director to be designated by the holders of a majority of the Convertible Preferred Stock (a "PREFERRED DIRECTORSHIP"). Notwithstanding the foregoing, no more than four (4) directorships shall be designated as Preferred Directorships, no more than two (2) directorships shall be designated as Common Directorships, and one (1) director shall be the chief executive officer of the Company." 4. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $486,000, (ii) amounts payable to Cognate Therapeutics and (iii) future sublease payments to MediQuest Corporation for the Company's premises sublease not yet due, and a contingent lease liability to Benaroya Capital Co. LLC for premises currently occupied by MediQuest Corporation should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Fourth Amendment Date, do not exceed $370,378 (excluding amounts payable to Cognate), of which (x) $243,778 are currently due payables (including $209,023 for attorney and auditor fees), (y) $52,000 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $67,000 are accrued vacation and sick pay." 5. Exhibit B to the Agreement, as amended on December 27, 2004, is hereby further amended by Exhibit B-2 hereto (the "SECOND AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 2 6. Exhibit D to the Agreement is hereby amended and restated by Exhibit D hereto. Exhibit D, as so amended and restated, shall be deemed to constitute the "PREFERRED STOCK WARRANT" for all purposes under the Agreement and all other Related Recapitalization Documents. 7. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 8. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 9. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 10. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 11. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 3 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 4 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Fourth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton Boynton ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT B-2 FORM OF SECOND AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT D FORM OF PREFERRED STOCK WARRANT AMENDMENT NO. 5 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of April 12, 2005 (the "FIFTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated April 12, 2005 attached hereto as Exhibit A-9, and the April 12 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-4" immediately following the phrase "in the form attached hereto as Exhibit K-3" in subsection (g) thereof. 1 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-8" with "A-9." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the twelfth sentence thereof: "On April 12, 2005 (the "FIFTH AMENDMENT DATE"), Investor is providing an additional $450,000 of Bridge Funding (the "APRIL 12 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from March 25, 2005 through April 30, 2005. The April 12 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-9 and shall be provided on the terms and conditions set forth herein. The April 12 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "or December 27 Bridge Funding" with "December 27 Bridge Funding or April 12 Bridge Funding" in the thirteenth sentence thereof (i.e., the sixteenth sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.14, immediately following Section 2.13 thereof, as follows: "2.14 April 12 Bridge Warrant: (a) Issuance of April 12 Bridge Warrant. On the Fifth Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the April 12 Bridge Funding (the "APRIL 12 BRIDGE WARRANT"). The Company shall, therefore, issue $450,000 in warrant coverage on the $450,000 of April 12 Bridge Funding provided on the Fifth Amendment Date. The number of shares subject to the April 12 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the April 12 Bridge Warrant shall therefore be 4,500,000 shares as of the Fifth Amendment Date. (b) Exercise of April 12 Bridge Warrant. The April 12 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the April 12 Bridge Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the April 12 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the April 12 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible 2 Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the April 12 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the April 12 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such April 12 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the April 12 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the April 12 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of April 12 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the April 12 Bridge Funding, if issued apart from the April 12 Bridge Warrant, is $445,500, and the fair market value of the April 12 Bridge Warrant, if issued apart from such Note, is $4,500. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the April 12 Bridge Funding and/or the April 12 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.14(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 6. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$6.75 million" with "$6.3 million" in the first sentence thereof; and (b) replacing " "67,500,000" with "63,000,000" in the third sentence thereof. 7. Section 4.7.6 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.6. Capitalization. The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000 3 shares of Preferred Stock, par value of $0.001 per share. As of the date hereof, 19,028,779 shares of Common Stock and 32,500,000 shares of series A preferred stock are issued and outstanding. No other shares of any class or series of the Company's capital stock are authorized and/or issued and outstanding. All issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, and are fully paid and non-assessable, and have been offered, sold and delivered by the Company in compliance with all applicable federal and state securities laws. Except as set forth in Schedule 4.7.6, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of the Company is authorized or outstanding, and there is no agreement, promise, commitment, undertaking or letter of intent of any kind (direct or indirect, contingent or otherwise) by the Company to issue any shares, subscriptions, warrants, options, convertible securities, or other such rights, or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in Schedule 4.7.6, the Company has no obligation of any kind (direct or indirect, contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Schedule 4.7.6 includes a true, accurate and complete statement describing the total number of shares of the Company outstanding as of the date of this Agreement (on a fully diluted basis, including, without limitation, all warrants and options outstanding (whether or not currently exercisable), all convertible instruments of any kind (whether or not currently convertible), shares of all classes of stock, and any agreements, promises, commitments, undertakings or letters of intent to issue any of the foregoing." 8. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $494,000, (ii) amounts payable to Cognate Therapeutics and (iii) future sublease payments to MediQuest Corporation for the Company's premises sublease not yet due, and a contingent lease liability to Benaroya Capital Co. LLC for premises currently occupied by MediQuest Corporation should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Fifth Amendment Date, do not exceed $350,525 (excluding amounts payable to Cognate), of which (x) $231,356 are currently due payables (including $204,812 for attorney and auditor fees), (y) $43,505 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $75,664 are accrued vacation and sick pay." 9. The Agreement is hereby amended by adding new Exhibit A-9, immediately following Exhibit A-8 thereto, in the form attached as Exhibit A-9 hereto. 10. Exhibit B to the Agreement, as amended on December 27, 2004 and January 26, 2005, is hereby further amended by Exhibit B-3 hereto (the "THIRD AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute 4 the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 11. The Agreement is hereby amended by adding new Exhibit K-4, immediately following Exhibit K-3 thereto, in the form attached as Exhibit K-4 hereto. 12. The April 12 Bridge Warrant in the form attached hereto as Exhibit K-4 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the April 12 Bridge Funding in the form attached hereto as Exhibit A-9 issued on the Fifth Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the April 12 Bridge Warrant and the Note evidencing the April 12 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 13. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 14. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 15. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 16. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 17. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 5 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Fifth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton L. Boynton ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda F. Powers ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-9 FORM OF $450,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED APRIL 12, 2005 EXHIBIT B-3 FORM OF THIRD AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-4 FORM OF APRIL 12 BRIDGE WARRANT AMENDMENT NO. 6 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of May 13, 2005 (the "SIXTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment No. 5 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated May 13, 2005 attached hereto as Exhibit A-10, and the May 13 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-5" immediately following the phrase "in the form attached hereto as Exhibit K-4" in subsection (g) thereof. 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-9" with "A-10." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the fifteenth sentence thereof: "On May 13, 2005 (the "SIXTH AMENDMENT DATE"), Investor is providing an additional $450,000 of Bridge Funding (the "MAY 13 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from May 13, 2005 through June 30, 2005. The May 13 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A- 10 and shall be provided on the terms and conditions set forth herein. The May 13 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "December 27 Bridge Funding or April 12 Bridge Funding" with "December 27 Bridge Funding, April 12 Bridge Funding or May 13 Bridge Funding") in the sixteenth sentence thereof (i.e., the nineteenth sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.15, immediately following Section 2.14 thereof, as follows: "2.15 May 13 Bridge Warrant: (a) Issuance of May 13 Bridge Warrant. On the Sixth Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the May 13 Bridge Funding (the "MAY 13 BRIDGE WARRANT"). The Company shall, therefore, issue $450,000 in warrant coverage on the $450,000 of May 13 Bridge Funding provided on the Sixth Amendment Date. The number of shares subject to the May 13 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the May 13 Bridge Warrant shall therefore be 4,500,000 shares as of the Sixth Amendment Date. (b) Exercise of May 13 Bridge Warrant. The May 13 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the May 13 Bridge Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the May 13 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the May 13 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the May 13 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the May 13 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such May 13 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the May 13 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the May 13 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of May 13 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the May 13 Bridge Funding, if issued apart from the May 13 Bridge Warrant, is $445,500, and the fair market value of the May 13 Bridge Warrant, if issued apart from such Note, is $4,500. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the May 13 Bridge Funding and/or the May 13 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.15(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 6. Section 3.4(b) of the Agreement is hereby amended by: (A) replacing "$6.3 million" with "$5.85 million" in the first sentence thereof; and (B) replacing " "63,000,000" with "58,500,000" in the third sentence thereof. 7. Section 4.7.6 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.6. Capitalization. The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the date hereof, 19,078,048 shares of Common Stock and 32,500,000 shares of series A preferred stock are issued and outstanding. No other shares of any class or series of the Company's capital stock are authorized and/or issued and outstanding. All issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, and are fully paid and non-assessable, and have been offered, sold and delivered by the Company in compliance with all applicable federal and state securities laws. Except as set forth in Schedule 4.7.6, no subscription, warrant, option, convertible security, or other right (direct or indirect, contingent or otherwise) to purchase or otherwise acquire any equity securities of the Company is authorized or outstanding, and there is no agreement, promise, commitment, undertaking or letter of intent of any kind (direct or indirect, contingent or otherwise) by the Company to issue any shares, subscriptions, warrants, options, convertible securities, or other such rights, or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as set forth in Schedule 4.7.6, the Company has no obligation of any kind (direct or indirect, contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. Schedule 4.7.6 includes a true, accurate and complete statement describing the total number of shares of the Company outstanding as of the date of this Agreement (on a fully diluted basis, including, without limitation, all warrants and options outstanding (whether or not currently exercisable), all convertible instruments of any kind (whether or not currently convertible), shares of all classes of stock, and any agreements, promises, commitments, undertakings or letters of intent to issue any of the foregoing." 8. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $503,000, (ii) amounts payable to Cognate Therapeutics and (iii) future sublease payments to MediQuest Corporation for the Company's premises sublease not yet due, and a contingent lease liability to Benaroya Capital Co. LLC for premises currently occupied by MediQuest Corporation should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Sixth Amendment Date, do not exceed $474,539 (excluding amounts payable to Cognate), of which (x) $355,963 are currently due payables (including $347,629 for attorney and auditor fees), (y) $39,360 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $79,216 are accrued vacation and sick pay." 9. The Agreement is hereby amended by adding new Exhibit A-10, immediately following Exhibit A-9 thereto, in the form attached as Exhibit A-10 hereto. 10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26, 2005, and April 12, 2005 is hereby further amended by Exhibit B-4 hereto (the "FOURTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 11. The Agreement is hereby amended by adding new Exhibit K-5, immediately following Exhibit K-4 thereto, in the form attached as Exhibit K-5 hereto. 12. The May 13 Bridge Warrant in the form attached hereto as Exhibit K-5 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the May 13 Bridge Funding in the form attached hereto as Exhibit A-10 issued on the Sixth Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the May 13 Bridge Warrant and the Note evidencing the May 13 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 13. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 14. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 15. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 16. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 17. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 6 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Sixth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-10 FORM OF $450,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED MAY 13, 2005 EXHIBIT B-4 FORM OF FOURTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-5 FORM OF MAY 13 BRIDGE WARRANT WAIVER AGREEMENT The undersigned, Toucan Capital Fund II, L.P. ("Toucan") is a party to that certain Northwest Biotherapeutics Amended and Restated Recapitalization Agreement with Northwest Biotherapeutics, Inc. (the "Company"), dated July 30, 2004, as amended on October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April 12, 2005 and May 13, 2005 (the "Recapitalization Agreement"). WHEREAS, The Company is not able to fulfill certain of the conditions set forth in Sections 2.4 and 4.9 of the Recapitalization Agreement and Toucan is willing to allow limited waivers of certain of the conditions solely in connection with the closing of the bridge funding on May 13, 2005 (the "May 13 Bridge Funding"). Toucan hereby waives the following conditions and relinquishes the Company from complying with such conditions solely in connection with and as applicable to the closing of the May 13 Bridge Funding: 1. The conditions set forth in Section 2.4 (a) and (g) to the extent they relate to Related Recapitalization Documents that have not been executed by the Company. 2. The conditions set forth in Section 2.4 (k) as to Dan Wilds. 3. The conditions set forth in Section 4.9 (a), (b), (d), and (e) to the extent they relate to Related Recapitalization Documents that have not been executed by the Company. The waiver of the foregoing conditions in connection with the May 13 Bridge Funding shall apply only to the May 13 Bridge Funding and shall not be deemed to be a waiver of any condition or conditions as to any future closing or closings of the Bridge Funding, if any, or the Anticipated Equity Financing, if any. Capitalized terms used, but not otherwise defined herein shall have the meaning ascribed to them in the Recapitalization Agreement. DATED: May 13, 2005. TOUCAN CAPITAL FUND II, L.P. By: ------------------------------------ Linda F. Powers Its: Managing Director AMENDMENT NO. 7 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 7 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of June 16, 2005 (the "SEVENTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment No. 5 to the Agreement; WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment No. 6 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT 1 NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated June 16, 2005 attached hereto as Exhibit A-11, and the June 16 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-6" immediately following the phrase "in the form attached hereto as Exhibit K-5" in subsection (g) thereof. 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-10" with "A-11." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the eighteenth sentence thereof: "On June 16, 2005 (the "SEVENTH AMENDMENT DATE"), Investor is providing an additional $500,000 of Bridge Funding (the "JUNE 16 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from June 16, 2005 through July 29, 2005. The June 16 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-11 and shall be provided on the terms and conditions set forth herein. The June 16 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "May 13 Bridge Funding" with "May 13 Bridge Funding or June 16 Bridge Funding") in the nineteenth sentence thereof (i.e., the twenty-second sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.16, immediately following Section 2.15 thereof, as follows: "2.16 June 16 Bridge Warrant: (a) Issuance of June 16 Bridge Warrant. On the Seventh Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the June 16 Bridge Funding (the "JUNE 16 BRIDGE WARRANT"). The Company shall, therefore, issue $500,000 in warrant coverage on the $500,000 of June 16 Bridge Funding provided on the Seventh Amendment Date. The number of shares subject to the June 16 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the June 16 Bridge Warrant shall therefore be 5,000,000 shares as of the Seventh Amendment Date. (b) Exercise of June 16 Bridge Warrant. The June 16 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the June 16 Bridge 2 Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the June 16 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the June 16 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the June 16 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the June 16 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such June 16 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the June 16 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the June 16 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of June 16 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the June 16 Bridge Funding, if issued apart from the June 16 Bridge Warrant, is $495,000, and the fair market value of the June 16 Bridge Warrant, if issued apart from such Note, is $5,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the June 16 Bridge Funding and/or the June 16 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.16(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 3 6. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$5.85 million" with "$5.35 million" in the first sentence thereof; and (b) replacing "58,500,000" with "53,500,000" in the third sentence thereof. 7. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $512,000, (ii) amounts payable to Cognate Therapeutics and (iii) future sublease payments to MediQuest Corporation for the Company's premises sublease not yet due, and a contingent lease liability to Benaroya Capital Co. LLC for premises currently occupied by MediQuest Corporation should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Seventh Amendment Date, do not exceed $448,602 (excluding amounts payable to Cognate), of which (x) $331,383 are currently due payables (including $284,497 for attorney and auditor fees), (y) $35,219 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $82,000 are accrued vacation and sick pay." 8. The Agreement is hereby amended by adding new Exhibit A-11, immediately following Exhibit A-10 thereto, in the form attached as Exhibit A-11 hereto. 9. Exhibit B to the Agreement, as amended on December 27, 2004, January 26, 2005, April 12, 2005 and May 13, 2005 is hereby further amended by Exhibit B-5 hereto (the "FIFTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 10. The Agreement is hereby amended by adding new Exhibit K-6, immediately following Exhibit K-5 thereto, in the form attached as Exhibit K-6 hereto. 11. The June 16 Bridge Warrant in the form attached hereto as Exhibit K-6 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the June 16 Bridge Funding in the form attached hereto as Exhibit A-11 issued on the Seventh Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the June 16 Bridge Warrant and the Note evidencing the June 16 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 12. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 4 13. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 14. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 15. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 16. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 7 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Seventh Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-11 FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED JUNE 16, 2005 EXHIBIT B-5 FORM OF FIFTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-6 FORM OF JUNE 16 BRIDGE WARRANT AMENDMENT NO. 8 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 8 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of July 26, 2005 (the "EIGHTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment No. 5 to the Agreement; WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment No. 6 to the Agreement; WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment No. 7 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and 1 WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated July 26, 2005 attached hereto as Exhibit A-12, and the July 26 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-7" immediately following the phrase "in the form attached hereto as Exhibit K-6" in subsection (g) thereof. 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-11" with "A-12." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the twenty-first sentence thereof: "On July 26, 2005 (the "EIGHTH AMENDMENT DATE"), Investor is providing an additional $500,000 of Bridge Funding (the "JULY 26 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from July 26, 2005 through August 23, 2005. The July 26 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-12 and shall be provided on the terms and conditions set forth herein. The July 26 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "June 16 Bridge Funding" with "June 16 Bridge Funding or July 26 Bridge Funding") in the twenty-second sentence thereof (i.e., the twenty-fifth sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.17, immediately following Section 2.16 thereof, as follows: "2.17 July 26 Bridge Warrant: (a) Issuance of July 26 Bridge Warrant. On the Eighth Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the July 26 Bridge Funding (the "JULY 26 BRIDGE WARRANT"). The Company shall, therefore, issue $500,000 in warrant coverage on the $500,000 of July 26 Bridge Funding provided on the Eighth Amendment Date. The number of shares subject to the July 26 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the July 26 Bridge Warrant shall therefore be 5,000,000 shares as of the Eighth Amendment Date. (b) Exercise of July 26 Bridge Warrant. The July 26 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the July 26 Bridge Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the July 26 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms 2 and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the July 26 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the July 26 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the July 26 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such July 26 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the July 26 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the July 26 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of July 26 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the July 26 Bridge Funding, if issued apart from the July 26 Bridge Warrant, is $495,000, and the fair market value of the July 26 Bridge Warrant, if issued apart from such Note, is $5,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the July 26 Bridge Funding and/or the July 26 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.17(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 6. Section 3.4(a) of the Agreement is hereby amended by replacing the phrase "of 12 months commencing at the first closing of Convertible Preferred Stock" with "beginning with the first closing of Convertible Preferred Stock and ending on December 31, 2006 (or such later date as is mutually agreed by the parties hereto)" in the first sentence thereof. 7. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$5.35 million" with "$4.85 million" in the first sentence thereof; and (b) replacing "53,500,000" with "48,500,000" in the third sentence thereof. 8. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $322,017, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for the Company's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Eighth Amendment Date, not in excess of $472,524 (excluding amounts payable to Cognate and Investor), of which (x) $356,694 are currently due payables (including $248,598 for attorney and auditor fees), (y) $31,076 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget 3 included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $84,754 are accrued vacation and sick pay." 9. The Agreement is hereby amended by adding new Exhibit A-12, immediately following Exhibit A-11 thereto, in the form attached as Exhibit A-12 hereto. 10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005 and June 16, 2005 is hereby further amended by Exhibit B-6 hereto (the "SIXTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 11. The Agreement is hereby amended by adding new Exhibit K-7, immediately following Exhibit K-6 thereto, in the form attached as Exhibit K-7 hereto. 12. The July 26 Bridge Warrant in the form attached hereto as Exhibit K-7 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the July 26 Bridge Funding in the form attached hereto as Exhibit A-12 issued on the Eighth Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the July 26 Bridge Warrant and the Note evidencing the July 26 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 13. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 14. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 15. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 16. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 17. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 4 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 8 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Eighth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-12 FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED JULY 26, 2005 EXHIBIT B-6 FORM OF SIXTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-7 FORM OF JULY 26 BRIDGE WARRANT Exhibit 10.1 AMENDMENT NO. 9 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 9 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of September 7, 2005 (the "NINTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment No. 5 to the Agreement; WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment No. 6 to the Agreement; WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment No. 7 to the Agreement; WHEREAS, on July 26, 2005, the Company and Investor entered into Amendment No. 8 to the Agreement; WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and 1 WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated September 7, 2005 attached hereto as Exhibit A-13, and the September 7 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-8" immediately following the phrase "in the form attached hereto as Exhibit K-7" in subsection (g) thereof. 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-12" with "A-13." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the twenty-first sentence thereof: "On September 7, 2005 (the "NINTH AMENDMENT DATE"), Investor is providing an additional $500,000 of Bridge Funding (the "SEPTEMBER 7 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from September 7, 2005 through September 30, 2005. The September 7 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-13 and shall be provided on the terms and conditions set forth herein. The September 7 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Investor and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "July 26 Bridge Funding" with "July 26 Bridge Funding or September 7 Bridge Funding") in the twenty-fifth sentence thereof (i.e., the twenty-eighth sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.18, immediately following Section 2.17 thereof, as follows: "2.18 September 7 Bridge Warrant: (a) Issuance of September 7 Bridge Warrant. On the Ninth Amendment Date, Investor shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the September 7 Bridge Funding (the "SEPTEMBER 7 BRIDGE Warrant"). The Company shall, therefore, issue $500,000 in warrant coverage on the $500,000 of September 7 Bridge Funding provided on the Ninth Amendment Date. The number of shares subject to the September 7 Bridge Warrant to be so issued shall be determined on the basis of $0.10 2 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Investor shall initially be able to exercise the September 7 Bridge Warrant shall therefore be 5,000,000 shares as of the Ninth Amendment Date. (b) Exercise of September 7 Bridge Warrant. The September 7 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the September 7 Bridge Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the September 7 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the September 7 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the September 7 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the September 7 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such September 7 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the September 7 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the September 7 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of September 7 Bridge Warrant and Note. The Company and Investor, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the September 7 Bridge Funding, if issued 3 apart from the September 7 Bridge Warrant, is $495,000, and the fair market value of the September 7 Bridge Warrant, if issued apart from such Note, is $5,000. The Company and Investor further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the September 7 Bridge Funding and/or the September 7 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.18(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing." 6. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$4.85 million" with "$4.35 million" in the first sentence thereof; and (b) replacing "48,500,000" with "43,500,000" in the third sentence thereof. 7. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the maximum amount of $322,017, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Co. LLC for the Company's premises should Mediquest Corporation default on its lease with Benaroya Capital Co. LLC and which is not yet due, and (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Ninth Amendment Date, not in excess of $278,524 (excluding amounts payable to Cognate and Investor), of which (x) $168,282 are currently due payables (including $100,042 for attorney and auditor fees), (y) $25,134 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $85,522 are accrued vacation and sick pay." 8. The Agreement is hereby amended by adding new Exhibit A-13, immediately following Exhibit A-12 thereto, in the form attached as Exhibit A-13 hereto. 9. Exhibit B to the Agreement, as amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005 and July 26, 2006 is hereby further amended by Exhibit B-7 hereto (the "SEVENTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 10. The Agreement is hereby amended by adding new Exhibit K-8, immediately following Exhibit K-7 thereto, in the form attached as Exhibit K-8 hereto. 11. The September 7 Bridge Warrant in the form attached hereto as Exhibit K-8 shall be deemed to be a "BRIDGE WARRANT" and a "Warrant" for all purposes under the Agreement and 4 any Related Recapitalization Document. The Note evidencing the September 7 Bridge Funding in the form attached hereto as Exhibit A-13 issued on the Ninth Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the September 7 Bridge Warrant and the Note evidencing the September 7 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 12. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 13. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 14. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 15. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 16. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 9 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Ninth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: ------------------------------------ Name: Linda F. Powers Title: Managing Director EXHIBIT A-13 FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED SEPTEMBER 7, 2005 EXHIBIT B-7 FORM OF SEVENTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET AMENDMENT NO. 10 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 10 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AMENDMENT") is made and entered into as of November 14, 2005 (the "TENTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms used herein but not otherwise defined shall have the meaning given such terms in the Agreement (as defined below). RECITALS WHEREAS, the Company and Investor have entered into that certain Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the "AGREEMENT"); WHEREAS, on October 22, 2004, the Company and Investor entered into Amendment No. 1 to the Agreement; WHEREAS, on November 10, 2004, the Company and Investor entered into Amendment No. 2 to the Agreement; WHEREAS, on December 27, 2004, the Company and Investor entered into Amendment No. 3 to the Agreement; WHEREAS, on January 26, 2005, the Company and Investor entered into Amendment No. 4 to the Agreement; WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment No. 5 to the Agreement; WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment No. 6 to the Agreement; WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment No. 7 to the Agreement; WHEREAS, on July 26, 2005, the Company and Investor entered into Amendment No. 8 to the Agreement; WHEREAS, on September 7, 2005, the Company and Investor entered into Amendment No. 9 to the Agreement; 1 WHEREAS, the Company and Investor desire to further amend the Agreement to make such changes to the Agreement as are set forth herein; and WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may be amended or modified only by a written instrument signed by the Company and Investor. AMENDMENT NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agree as follows: 1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated November 14, 2005 attached hereto as Exhibit A-14, and the November 14 Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-9" immediately following the phrase "in the form attached hereto as Exhibit K-8" in subsection (g) thereof. 2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-13" with "A-14." 3. Section 2.3(b) of the Agreement is hereby amended by adding the following text immediately following the twenty-fourth sentence thereof: "On November 14, 2005 (the "TENTH AMENDMENT DATE"), Toucan Partners, LLC ("TOUCAN PARTNERS"), the designee of Toucan Capital Fund II, L.P., is providing an additional $400,000 of Bridge Funding (the "NOVEMBER 14 BRIDGE FUNDING") to cover general operating expenses and certain other expenses of the Company agreed in advance by Investor during the period from November 14, 2005 through December 7, 2005. The November 14 Bridge Funding shall be evidenced by a Note in the form attached hereto as Exhibit A-14 and shall be provided on the terms and conditions set forth herein. The November 14 Bridge Funding shall be used only for the purposes and in the amounts agreed to in writing by Toucan Partners and the Company." 4. Section 2.3(b) of the Agreement is hereby further amended by replacing the phrase "September 7 Bridge Funding" with "September 7 Bridge Funding or November 14 Bridge Funding") in the twenty-eighth sentence thereof (i.e., the thirty-first sentence thereof after giving effect to the inclusion of the three new sentences therein per Section 3 of this Amendment). 5. The Agreement is hereby amended by adding a new Section 2.19, immediately following Section 2.18 thereof, as follows: "2.19 November 14 Bridge Warrant: (a) Issuance of November 14 Bridge Warrant. On the Tenth Amendment Date, Toucan Partners shall receive a warrant with coverage equal to one hundred percent (100%) of the principal amount due under the Note evidencing the November 14 Bridge Funding (the "NOVEMBER 14 BRIDGE WARRANT"). The Company shall, therefore, issue $400,000 in warrant coverage on the $400,000 of November 14 Bridge Funding provided on the Tenth Amendment Date. The number of shares subject to the November 14 Bridge Warrant to be so issued shall be determined on the basis of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like). The total number of shares for which Toucan Partners shall initially be able to exercise the November 14 Bridge Warrant shall therefore be 4,000,000 shares as of the Tenth Amendment Date. (b) Exercise of November 14 Bridge Warrant. The November 14 Bridge Warrant shall be immediately exercisable upon issuance and continue to be exercisable for a period of seven (7) years after its issuance date. The exercise price of the November 14 Bridge Warrant shall be $0.04 (subject to adjustment for stock splits, stock dividends and the like, as provided more fully in the November 14 Bridge Warrant). In the event the Convertible Preferred Stock is approved and authorized, and the terms and conditions are the same as set forth herein and in the Convertible Preferred Stock Term Sheet, and 2 Other Investors have purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, then the November 14 Bridge Warrant shall be exercisable solely for such Convertible Preferred Stock (subject to Section 5 thereof). However, if, for any reason, such Convertible Preferred Stock is not approved or authorized, and/or is approved or authorized on any terms different than any terms set forth herein and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors have not purchased in cash (and not by conversion of debt, exercise of warrants or options, or conversion or exercise of other securities or instruments) a minimum of $15 million of such Convertible Preferred Stock, on the terms and conditions set forth herein and in the Convertible Preferred Stock Term Sheet, the November 14 Bridge Warrant shall be exercisable for any Equity Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any combination thereof, in each case that Investor shall designate in Investor's sole discretion (the securities so elected being the "INVESTOR DESIGNATED SECURITIES"). (c) No Impairment. The Company shall not, by amendment of its Charter or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, omission, or agreement, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company under and/or in connection with the November 14 Bridge Warrant, but shall at all times in good faith use best efforts to assist in carrying out of all the provisions of and/or relating to such November 14 Bridge Warrant and in taking all such action as may be necessary or appropriate to protect Investor's rights, preferences and privileges under and/or in connection with the November 14 Bridge Warrant against impairment. Investor's rights, preferences and privileges granted under and/or in connection with the November 14 Bridge Warrant may not be amended, modified or waived without Investor's prior written consent, and the documentation providing for such rights, preferences and privileges will specifically provide as such. (d) Tax Treatment of November 14 Bridge Warrant and Note. The Company and Toucan Partners, as a result of arm's length bargaining, agree that the fair market value of the Note to be issued in connection with the November 14 Bridge Funding, if issued apart from the November 14 Bridge Warrant, is $396,000, and the fair market value of the November 14 Bridge Warrant, if issued apart from such Note, is $4,000. The Company and Toucan Partners further agree that all tax filings and records relating to or including this Agreement, the Note to be issued in connection with the November 14 Bridge Funding and/or the November 14 Bridge Warrant shall be prepared on the basis of, and consistently reflect, the agreed fair market values set forth in this Section 2.19(d), and the Company shall instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing. 6. Section 3.4(b) of the Agreement is hereby amended by: (a) replacing "$4.35 million" with "$3.95 million" in the first sentence thereof; and (b) replacing "43,500,000" with "39,500,000" in the third sentence thereof. 7. Section 4.7.15 of the Agreement is hereby amended and restated in its entirety as follows: "4.7.15 Liabilities. The Company has the following accrued liabilities: (i) tax liabilities to the State of Washington in the approximate amount of $329,243, (ii) amounts payable to Cognate Therapeutics and Investor, (iii) future sublease payments to MediQuest Corporation and a contingent lease liability to Benaroya Capital Company, LLC for the Company's premises should Mediquest Corporation default on its lease with Benaroya Capital Company, LLC and which is not yet due, and (iv) the Company's aggregate accrued, contingent and/or other liabilities of any nature, either mature or immature, as of the Tenth Amendment Date, not in excess of $407,126 (excluding amounts payable to Cognate and Investor), of which (x) $296,028 are currently due payables (including $212,021 for attorney fees), (y) $18,103 are the aggregate balances of capital leases payable in monthly installments in the amounts set forth in the budget included in the Schedule of Exceptions through the first calendar quarter of 2006, decreasing thereafter, the last of which is fully amortized in May 2007, and (z) $92,995 are accrued vacation and sick pay." 8. The AGREEMENT is hereby amended to add a new Section 4.14 as follows: 3 "4.14 Designee. The parties hereto agree that Toucan Partners, LLC, a Delaware limited liability company, as a designee of Toucan Capital Fund II, L.P., is entitled to all rights, privileges and remedies afforded Investor by this Agreement and all Related Recapitalization Documents, to the extent it participates in any closing contemplated hereby." 9. The Agreement is hereby amended by adding new Exhibit A-14, immediately following Exhibit A-13 thereto, in the form attached as Exhibit A-14 hereto. 10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005 is hereby further amended by Exhibit B-8 hereto (the "EIGHTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement and all other Related Recapitalization Documents. 11. The Agreement is hereby amended by adding new Exhibit K-9, immediately following Exhibit K-8 thereto, in the form attached as Exhibit K-9 hereto. 12. The November 14 Bridge Warrant in the form attached hereto as Exhibit K-9 shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the Agreement and any Related Recapitalization Document. The Note evidencing the November 14 Bridge Funding in the form attached hereto as Exhibit A-14 issued on the Tenth Amendment Date shall be deemed to be a "NOTE" for all purposes under the Agreement and any Related Recapitalization Document. Each of the November 14 Bridge Warrant and the Note evidencing the November 14 Bridge Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and all other Related Recapitalization Documents. 13. Except as amended and/or restated hereby, all other terms and conditions of the Agreement shall be unaffected hereby and remain in full force and effect. 14. This Amendment (including the Exhibits hereto, which are an integral part of the Amendment), together with the Agreement (including the Schedules and Exhibits thereto, which are an integral part of the Agreement) and the Related Recapitalization Documents, constitute the entire agreement among the parties hereto and thereto with regard to the subjects hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 15. This Amendment shall be governed by and construed under the laws of the State of Delaware, without regard to its conflicts of law provisions. 16. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. 17. This Amendment shall take effect immediately upon execution by the Company and Investor. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 4 IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 10 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Tenth Amendment Date above written. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Alton L. Boynton ----------------------------------- Name: Alton L. Boynton Title: President TOUCAN CAPITAL FUND II, LP By: /s/ Linda F. Powers ----------------------------------- Name: Linda F. Powers Title: Managing Director TOUCAN PARTNERS, LLC By: /s/ Linda F. Powers ----------------------------------- Name: Linda F. Powers Title: Managing Member EXHIBIT A-14 FORM OF $400,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED PROMISSORY NOTE DATED NOVEMBER 14, 2005 EXHIBIT B-8 FORM OF EIGHTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET EXHIBIT K-9 FORM OF NOVEMBER 14 BRIDGE WARRANT EX-10.24 11 v16023exv10w24.txt EXHIBIT 10.24 Exhibit 10.24 AMENDED AND RESTATED BINDING TERM SHEET CONVERTIBLE PREFERRED STOCK Northwest Biotherapeutics, Inc. October 22, 2004 THIS AMENDED AND RESTATED BINDING CONVERTIBLE PREFERRED STOCK TERM SHEET AMENDS AND RESTATES THAT CERTAIN BINDING CONVERTIBLE PREFERRED STOCK TERM SHEET BY AND BETWEEN THE PARTIES HERETO DATED AS OF APRIL 26, 2004. Issuer: Northwest Biotherapeutics, Inc. (the "Company"), a Delaware corporation. Purchasers: Toucan Capital Fund II, L.P and/or its designee(s) (collectively, "Investor"), and such other investors as may subsequently be identified (the "Other Investors"). Election to lead At Investor's election on or before the end of the equity financing: Bridge Funding Period, Investor shall have the right to lead the equity financing and assemble the syndicate of Other Investors. Securities to be 10% Cumulative Convertible Preferred Stock Issued: ("Convertible Preferred" or "Convertible Preferred Stock"), convertible into common stock of the Company ("Common" or "Common Stock"). Share price: The price per share shall be the lesser of $0.10 per share or 35% discount to the average closing price during the twenty trading days prior to closing; provided, however, that in no event will the price per share be less than $.04. The share price provided herein is subject to adjustment for dividends, splits, etc. Amount of Issuance: Up to $40 million (including any shares issuable upon conversion of Bridge Funding, but not including any shares issuable upon exercise of warrants, options, and similar instruments or obligations) (the "Maximum Issuance"), in one or more tranches. First Closing: First closing ("First Closing") to occur upon completion of Bridge Period, documentation and fulfillment of conditions to closing. Subsequent Closings: Additional closings of the Convertible Preferred Stock after the First Closing ("Subsequent Closings") may take place at any time on or before 12 months after the First Closing (the "Equity Financing Period"), so long as the aggregate amount raised does not exceed the Maximum Issuance. All subsequent closings of the Convertible Preferred Stock shall be on the same terms and conditions as in the First Closing and shall use the same documentation as in the First Closing. Warrants: The Company shall issue $7 million (or, in the event that the November Bridge Funding is not provided, $7.5 million) in warrant coverage on the first $7 million A-1 (or, in the event that the November Bridge Funding is not provided, $7.5 million) Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $7 million (or, in the event that the November Bridge Funding is not provided, $7.5 million) is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 70 million (or, in the event that the November Bridge Funding is not provided, 75 million) shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like) and 35% discount to the average closing price during the twenty trading days prior to the First Closing; provided, however, that in no event will the exercise price be less than $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates. Tax Treatment of Warrants: The Company and the purchasers of the Convertible Preferred Stock shall agree upon the fair market value of the Preferred Stock Warrants, and the Company shall make all of its tax filings on this basis, and instruct its accountants and other tax-preparation professionals to prepare all tax filings and returns on the basis of the foregoing. Right of First Refusal: Investor shall have a right of first refusal to purchase up to $15 million of the Convertible Preferred Stock. This right of first refusal shall apply at each closing during the Equity Financing Period, until the $15 million amount is reached. Such purchases shall be determined in addition to, and shall not be deemed to include, any purchases of Convertible Preferred Stock by Investor (including its designees) through conversion of Bridge Funding, or exercise of any warrants or similar instruments. Such right of first refusal shall apply regardless of whether or not Investor leads the financing during any part of the Equity Financing Period. Conditions to Closings: The following conditions shall apply to each closing for the purchase and sale of Convertible Preferred Stock. Each such condition must be satisfied or waived, and such satisfaction and/or waiver of each such condition shall be determined by Investor and, as applicable, Other Investors in their respective sole discretion, individually and not jointly. - The Company shall have in all material respects performed, and be in compliance with, all obligations, agreements, covenants, closing conditions and other provisions contained in the Amended and Restated Recapitalization Agreement by and between the parties hereto dated July 30, 2004, as amended on October 22, 2004 (the "Recapitalization Agreement"), the Notes evidencing Bridge Funding (to the extent any such notes remain outstanding), and the other Related Recapitalization. A-2 Documents including, without limitation, the financing documents associated with the issuance of the Convertible Preferred Stock (the "Financing Documents"), required to be performed or fulfilled on or before the applicable closing date. - All representations and warranties set forth in the Recapitalization Agreement, the Notes evidencing Bridge Funding (to the extent any such notes remain outstanding), and the other Related Recapitalization Documents shall be true and complete as of each closing. - There shall have been no change that has had or is reasonably likely to have a material adverse effect on the business, affairs, prospects, operations, properties, assets, liabilities, structure or condition, financial or otherwise, of the Company (as such business is presently conducted and/or as it is proposed to be conducted) between the date of the Recapitalization Agreement and each closing of purchases of Convertible Preferred Stock. - All corporate and other proceedings, and all documents relating to the issuance and sale of Convertible Preferred Stock pursuant to the Recapitalization Agreement shall be satisfactory in substance and form to Investor and Other Investors, as applicable. Investor's counsel and each Other Investors' counsel (if applicable) shall have received all such counterpart originals or certified or other copies of such documents as they may have requested including, without limitation: - The resolutions of the Board of Directors of the Company, authorizing and approving all matters in connection with the sale of the Convertible Preferred Stock certified by the Secretary of the Company as of the Closing Date. - All stockholder consents, votes or other approval required by applicable state or federal law (including any and all SEC rules and regulations) and any consents required by applicable securities exchanges or markets or corporate partners required to authorize and approve all matters in connection with the sale of Convertible Preferred Stock as contemplated by this term sheet. - The Company shall have executed, delivered and maintained in force (i) a Convertible Preferred Stock purchase agreement, (ii) an Investors' Rights Agreement, (iii) an amended and restated certificate of incorporation (or if appropriate, a certificate of designation), (iv) a voting agreement, if applicable, and (v) such other documents as may be necessary or desirable in the determination of Investor and Other Investors, as applicable. - The Investor and Other Investors shall have received from counsel A-3 to the Company an opinion letter containing opinions customary for transactions similar to the Proposed Equity Financing in the form reasonably acceptable to Investor and Other Investors (including, but not limited to, an opinion that the issuance of the Convertible Preferred Stock, the Preferred Stock Warrants and the securities issuable upon conversion and/or exercise thereof pursuant to the Proposed Equity Financing are exempt from the registration provisions of the federal and state securities laws). - The Company shall have taken all necessary steps to set the number of directors on the Company's board of directors at seven (7) and elect directors according to the "Board of Directors" section below, including, without limitation, execution of a Voting Agreement if necessary or desirable in the determination of Investor and Other Investors, as applicable. - The Company shall have delivered a certificate of its Chief Executive Officer, or other authorized and responsible officer of the Company acceptable to Investor and Other Investors, as applicable, in their respective sole discretion, certifying that all closing conditions have been fulfilled and that all representations and warranties are applicable and true as of the date of such closing. - The Company shall have provided prior to the applicable closing date all due diligence information requested by any investor, and/or necessary to enable such investor to complete a thorough due diligence review and obtain a complete and accurate understanding of the business, operations, prospects, assets, liabilities, structure, legal aspects and condition, financial or otherwise, of the Company. - Within the six month period prior to any closing of Convertible Preferred Stock, the Company shall not have entered into, increased, expanded, extended, renewed or reinstated (or agreed, promised, committed or undertaken to do so), any severance, separation, retention, change of control or similar agreement with any employee, other than such agreements entered into with the prior written approval of Investor and Other Investors, as applicable. - Within the six month period prior to any closing of Convertible Preferred Stock, the Company shall not have hired, or agreed to hire, any employee or engaged, or agreed to engage, any consultant, independent contractor or any other non-employee personnel, except in accordance with the Company's budget that has been approved by the Company's board of directors and the Investor and Other Investors, as applicable; A-4 - Within the six month period prior to any closing of Convertible Preferred Stock, the Company shall not have purchased, leased, hired, rented or otherwise acquired directly or indirectly any rights in or to any asset or facility in an amount in excess of $10,000, or agreed, promised or committed to do so, except in accordance with the Company's budget that has been approved by the Company's board of directors and the Investor and Other Investors, as applicable. - [***]* - All Intellectual Property licenses, agreements, patent applications and filings shall be current and in good standing. - The Company shall have obtained the approval of the required number of its stockholders (the Company shall be obligated to use its best efforts in good faith comply with these terms and conditions to obtain stockholder consent and, in the event that it uses its best efforts in good faith to do so and fails to achieve stockholder approval, the Company shall not be required to sell the Convertible Preferred Stock). - The satisfaction of other customary conditions of transactions of this sort that Investor may reasonably require. Conversion: The Convertible Preferred Stock shall be convertible at any time, in whole or in part, at the option of the holder (without any further payment by the holder) into Common Stock of the Company. The initial conversion ratio shall be one share of Common Stock for each share of Convertible Preferred Stock (the "Conversion Ratio"). The Conversion Ratio shall be subject to appropriate adjustment in the event of (i) any subdivision or combination of the Company's outstanding Common Stock, (ii) any distribution by the Company of a stock dividend or assets, (iii) any capital reorganization or reclassification of the Company affecting the conversion price, or other similar transactions, as applicable. The Conversion Ratio shall also be subject to adjustment pursuant to the anti-dilution provisions (below). Rights, Preferences, (1) Dividends: A cumulative dividend shall accrue Privileges and at the rate of 10% per annum, compounding quarterly Restrictions: on the Convertible Preferred Stock. No dividends shall be paid on the Common or any other securities issued by the Company other than the Convertible Preferred Stock. Dividends shall be payable as and when determined - ---------- * Confidential Treatment Requested. A-5 by the Board of Directors, and upon the occurrence of a liquidation. A liquidation shall be deemed to include, without limitation, a merger resulting in a change in control of the Company, sale of all or substantially all of the assets of the Company, or transfer of control (not including any transfer of control that is the result of the sale and issuance of the Convertible Preferred Stock contemplated hereunder, the conversion of any of the Bridge Funding or exercise of any Bridge Warrants or Preferred Stock Warrants). (2) Liquidation Preference: In the event of liquidation or winding up of the Company, the holders of shares of Convertible Preferred shall be entitled (at such holders' option) to convert such shares to Common Stock or to receive, in preference to the holders of Common, (i) an amount equal to the original purchase price with respect to such Convertible Preferred Stock, plus (ii) (to the extent of current and/or retained earnings) any dividends accrued but not paid on such Convertible Preferred Stock, or such lesser amount as is the maximum amount acceptable under applicable SBA and SEC rules and regulations. Thereafter, all remaining assets shall be distributed pro-rata to the holders of Common Stock and all Convertible Preferred Stock on an as converted basis. A liquidation shall be deemed to include, without limitation, a merger resulting in a change in control of the Company, sale of all or substantially all of the assets of the Company, or transfer of control (not including any transfer of control that is the result of the sale and issuance of the Convertible Preferred Stock contemplated hereunder, the conversion of any of the Bridge Funding or exercise of any Bridge Warrants or Preferred Stock Warrants). (3) Anti-dilution: Notwithstanding anything herein to the contrary, except for issuances to management and employees, which must be approved by the Board pursuant to written benefit plans, and except for issuances relating to the Bridge Funding under the Recapitalization Agreement, if the Company issues (or, directly or indirectly promises, commits, or undertakes to issue) any additional securities or instruments at a nominal or effective purchase price less than the price resulting from the application of the Conversion Ratio, calculated on a fully diluted basis with respect to the Convertible Preferred Stock, then the Conversion Ratio of such Convertible Preferred Stock shall be reduced on a full ratchet basis to eliminate the effect of such dilutive issuance on such Convertible Preferred Stock. (4) Protective Provisions: Until fewer than 1,000,000 shares of Convertible Preferred Stock are outstanding (as adjusted for stock splits, stock dividends and the like), the Company shall not, without the approval of the Board of Directors and the affirmative vote or written consent of the holders of a majority of the then outstanding shares of Convertible Preferred Stock: (i) authorize or issue (including, without limitation, by way of recapitalization), or obligate itself to authorize or issue, any equity security of the Corporation, or any other security exercisable for or convertible into an equity security of the Corporation, that has redemption rights or that is senior to or on parity with the Convertible Preferred Stock as to dividend rights, voting rights, liquidation preferences or any other A-6 rights, preferences or privileges; (ii) increase or decrease (other than by conversion) the total number of authorized shares of Convertible Preferred Stock or Common Stock; (iii) effect any sale, lease, assignment, transfer or other conveyance or encumbrance of all or substantially all of the assets of the Corporation or any of its subsidiaries in one or more related transactions, or any consolidation or merger resulting in a change in control of the Company, or any reclassification, recapitalization or other change of any capital stock of the Corporation; (iv) change the authorized number of directors of the Corporation; (v) amend or repeal the Certificate (including by way of any Certificate of Designation) or the Corporation's Bylaws; (vi) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any of the Common Stock or common stock equivalents; provided, however, that this restriction shall not apply to the repurchase of up to a maximum of $100,000 of Common Stock per year from employees, officers, directors, consultants, advisors or other persons performing services for the Corporation, pursuant to agreements under which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment; (vii) effect the liquidation, dissolution or winding up of the Corporation; or (viii) agree, promise, commit or undertake to do any of the foregoing. (5) Voting Rights: The holders of Convertible Preferred will have the right to that number of votes equal to the number of shares of Common Stock issuable upon conversion of such Preferred Stock. Private Placement: The Convertible Preferred Stock shall not be registered under the Securities Act of 1933, as amended (the "Act") and may not be resold without such registration or an exemption under the provisions of the Act. The Convertible Preferred Stock shall be sold only to "accredited investors," as defined in Regulation D under the Act. Registration Rights At the request of Investor, the Company will use its best efforts to prepare and file, within 60 days following the First Closing and each Subsequent Closing, a registration statement on Form SB-2 or Form S-1 (or if Form S-3 is available, on Form S-3) (the "Registration Statement") for the resale of the shares of Common Stock issuable to the Investor and Other Investors upon conversion of the Convertible Preferred Stock and upon exercise of the Warrants, and use its commercially reasonable efforts to cause the Registration Statement to become effective within 120 days after such closing. The Company agrees to make such filings as are necessary to keep the Registration Statement effective until the earlier of (A) the date that the investors have completed the distribution related to the Common Stock, or (B) such time that all Common Stock then held by the investors (including shares of Common Stock issuable upon conversion of Preferred Stock held by the investors) can be sold without compliance with the registration requirements of the Securities Act pursuant to Rule 144(k) under the Securities Act. A-7 Liquidated Damages: In the event that the Company shall fail to cause the Registration Statement to be timely filed, timely declared effective, or to be kept effective (other than pursuant to customary permissible suspension periods), the Company shall pay as liquidated damages the amount of 1% per month of the aggregate purchase price for the securities remaining to be sold pursuant to the Registration Statement or such lesser amount that is the maximum permitted under applicable SBA rules and regulations. In the event that the Company's Common Stock is no longer registered under the Securities Exchange Act of 1934, as amended following completion of the First Closing, or for any reason the Company does not register for resale all shares of Common into which the Convertible Preferred converts, as provided for above, Investor and each Other Investor shall have the following registration rights with respect to the Common Stock into which such investor's Convertible Preferred converts: (1) Demand Registration Rights. If, at any time after the initial purchase of the Convertible Preferred Stock, holders of at least 20% of the Common Stock issued or issuable upon conversion of the Convertible Preferred Stock request that the Company file a Registration Statement covering at least 10% of the Common issued or issuable upon conversion of the Convertible Preferred (or any lesser percentage if the anticipated aggregate offering price would exceed $2,000,000), the Company shall cause the shares attributable to the Convertible Preferred Stock to be registered. The Company shall not be obligated to effect more than two registrations per year under these demand right provisions. (2) Registration on Form S-3: Holders of Common issued or issuable upon conversion of the Convertible Preferred Stock shall have the right to require the Company to file unlimited Registration Statements on Form S-3 (or any equivalent successor form), provided the Company is otherwise eligible to use Form S-3 for such a registration and the anticipated aggregate offering price in each registration on Form S-3 exceeds $1,000,000. (3) Piggy-Back Registration: Holders of Common issued or issuable upon conversion of the Convertible Preferred Stock shall be entitled to unlimited 'piggy-back' registration rights on all registrations of the Company. (4) Transfer of Registration Rights: The registration rights may be transferred to any transferee permitted under applicable Federal and state securities laws, provided that the Company is given written notice thereof and provided that the transferee agrees in writing to be bound by the terms of the stock purchase agreement and other agreements relating to this transaction. A-8 (5) Costs: The Company shall bear all expenses relating to all such preparation and filings. (6) Indemnification: The Company shall provide the Investors with the maximum indemnification allowed under applicable law with regard to the registration rights. Regulatory Costs The Company shall be responsible for completing and shall bear all costs associated with all regulatory filings that are necessary in connection with the transactions described herein, including, without limitation, U.S. Securities and Exchange Commission filings (whether these filings are made by the Company, the purchasers of the Convertible Preferred Stock or their affiliates), blue sky filings and/or other necessary filings under applicable securities market or exchange rules and regulations. Board of Directors: The authorized number of directors shall be seven (7). Four (4) of the seven directors shall be designated by the holders of a majority of the Convertible Preferred Stock, two (2) of the directors shall be outsiders with significant industry experience who are reasonably acceptable to the holders of a majority of the Convertible Preferred Stock, and one (1) of the directors shall be the CEO of the Company. D&O Insurance: As promptly as practicable after the First Closing, the Company shall use best efforts to obtain and maintain in force $10 million in director and officer liability insurance coverage. SBA Provisions: The Company shall make such representations, warranties and covenants, and shall provide such documentation and information rights as may be necessary (e.g., certification that at the time of Investor's investment the Company is a "small" business, has the majority of its operations in the US, and is not engaged in oil and gas exploration, movie production or certain other prohibited activities), to satisfy the requirements of the SBA in regard to investment by Investor in the Company. Documentation: The purchase of the Convertible Preferred Stock shall be made pursuant to a Stock Purchase Agreement, Investor Rights Agreement, Voting Agreement (if applicable) and Amended and Restated Certificate of Incorporation (or if appropriate, certificate of designation) to be drafted by counsel to the Investor. Such agreements and other documents shall contain, among other things, appropriate representations and warranties (including, without limitation, reps and warranties concerning the Intellectual Property, the financial condition of the Company, the absence of litigation or threats thereof, and full disclosure of all material information), covenants, protective provisions, and conditions of closing including those noted above. A-9 Miscellaneous: Customary provisions, including applicable law (Delaware), severability, assignment (except as provided under the rights of first refusal above, holders of Convertible Preferred Stock shall be free to assign or transfer their Convertible Preferred Stock or rights hereunder to any party permitted under applicable federal and state securities laws, as long as transferee agrees to the terms and obligations of the Convertible Preferred Stock, respectively), etc. Transaction Expenses: The Company shall pay, reimburse or otherwise satisfy, upon demand of Investor, all fees, costs and expenses incurred and/or undertaken by Investor relating to the preparation for, development of and implementation of the Recapitalization Plan set forth in the Recapitalization Agreement, including, without limitation, all due diligence expenses and all expenses relating to the Bridge Funding and the Anticipated Equity Financing and the transactions contemplated hereby and by the Recapitalization Agreement and the documentation of all of the foregoing (including, without limitation all legal fees and expenses). This obligation shall apply regardless of whether or not all of the transactions contemplated in the Recapitalization Agreement close. At each closing of the Anticipated Equity Financing, at Investor's sole discretion, and with respect to any or all of such fees, costs and expenses accrued through such closing, the Company shall (a) pay Investor in cash concurrently with such closing (or at Investor's sole discretion, Investor may withhold such amount from the wire of investments proceeds), (b) issue a promissory note in the form of the Notes in principal amount equal to such fees, costs and expenses; or (c) treat such fees, costs and expenses as an unsecured payable. At any time following such closing, Investor may require any amounts that it elected to have the Company treat as unsecured amounts payable to be paid in cash or satisfied by issuance of a Note in the principal amount of some or all of such unsecured obligation. Cross-default: The Company acknowledges that the financing contemplated by this term sheet is part of an integrated Recapitalization Plan, as set forth in the Recapitalization Agreement. The Company further acknowledges and agrees that this term sheet is subject to all terms and conditions set forth in the Recapitalization Agreement and the other Related Recapitalization Documents and that the Recapitalization Agreement and the other Related Recapitalization Documents are subject to all terms and conditions set forth in this Term Sheet. The Company agrees that any default by the Company under any provision of this Term Sheet, the Recapitalization Agreement or any of the other Related Recapitalization Documents will constitute a default under this Term Sheet, each other Related Recapitalization Document and the Recapitalization Agreement. Standstill/exclusivity: The standstill/exclusivity provision in the Recapitalization Agreement shall remain in full force and effect during the Equity Financing Period. Termination The Company's obligations to issue any securities in connection with the Anticipated Equity Financing may terminate only in accordance with Section 3.2 of the Recapitalization Agreement; however, such termination shall not have any A-10 impact on the other rights and obligations of the parties under the Recapitalization Agreement or the Related Recapitalization Documents, except as explicitly set forth in Section 3.2 of the Recapitalization Agreement. No Offer For purposes of applicable securities laws, this Term Sheet does not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein. Binding Agreement This Term Sheet constitutes a binding commitment on the part of the Company. The obligations of Investor and Other Investors under this Term Sheet are subject to the conditions contained herein and in the Related Recapitalization Documents. AGREED AND ACCEPTED: TOUCAN CAPITAL FUND II, LP NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Linda Powers By: /s/ Alton Boynton --------------------------------- ------------------------------------ Name: Linda F. Powers Name: Alton Boynton Title: Managing Director Title: President Date: October 22, 2004 Date: October 22, 2004 A-11 AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of December 27, 2004 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 (as so amended and restated, the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 3 (the "THIRD AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Third Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $6.75 million in warrant coverage on the first $6.75 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $6.75 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 67.5 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be the lesser of $0.10 per share (subject to adjustment for stock splits, stock dividends and the like) and 35% discount to the average closing price during the twenty trading days prior to the First Closing; provided, however, that in no event will the exercise price be less than $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. The thirteenth bullet in the paragraph entitled "Conditions to Closing" of the Convertible Preferred Stock term Sheet is hereby deleted in its entirety and shall not be a condition precedent to the obligation of any Investor to Purchase Convertible Preferred Stock from the Company. 3. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 4. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2. The Company and Toucan have executed this AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Linda Powers By: /s/ Alton Boynton --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 3. SECOND AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This SECOND AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of January 26, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 4 (the "FOURTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Fourth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Board of Directors:" is hereby amended and restated in its entirety as follows: "The authorized number of directors shall initially be one (1). The authorized number of directors may not be increased or decreased without the consent of the holders of a majority of the shares of Convertible Preferred Stock. The holders of a majority of the shares of Convertible Preferred Stock, acting in their sole discretion, may require the Company to increase the total number of authorized directors at any time following the first closing of the Convertible Preferred Stock, up to a maximum of seven (7) directors. Subject to the limitation in the following sentence, any newly created directorships shall be designated by the holders of a majority of the shares of Convertible Preferred Stock, acting in their sole discretion, to be filled by either: (i) an outside director with significant industry experience, who is reasonably acceptable to the holders of a majority of the Convertible Preferred Stock, to be elected by the holders of the Company's Common Stock (which may, subject to applicable law, the Certificate of Incorporation or the Bylaws, be filled initially by vote of the remaining director(s)) (a "COMMON DIRECTORSHIP"); or (ii) a director to be designated by the holders of a majority of the Convertible Preferred Stock (a "PREFERRED DIRECTORSHIP"). Notwithstanding the foregoing, no more than four (4) directorships shall be designated as Preferred Directorships, no more than two (2) directorships shall be designated as Common Directorships, and one (1) director shall be the chief executive officer of the Company." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2. The Company and Toucan have executed this SECOND AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Linda Powers By: /s/ Alton Boynton --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 3. THIRD AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This THIRD AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of April 12, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004 and January 26, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 5 (the "FIFTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Fifth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $6.3 million in warrant coverage on the first $6.3 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $6.3 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 63 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2. The Company and Toucan have executed this THIRD AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Linda Powers By: /s/ Alton Boynton --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 3. FOURTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This FOURTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of May 13, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004, January 26, 2005 and April 12, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 6 (the "SIXTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Sixth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $5.85 million in warrant coverage on the first $5.85 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $5.85 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 58.5 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] The Company and Toucan have executed this FOURTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: By: --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President FIFTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This FIFTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of June 16, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004, January 26, 2005, April 12, 2005 and May 13, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 7 (the "SEVENTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Seventh Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $5.35 million in warrant coverage on the first $5.35 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $5.35 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 53.5 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2. The Company and Toucan have executed this FIFTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: By: --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 3. SIXTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This SIXTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of July 26, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005 and June 16, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). 1 WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 8 (the "EIGHTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Eighth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Subsequent Closings:" is hereby amended by replacing the phrase "12 months after the First Closing" with "December 31, 2006 (or such later date as is mutually agreed by the parties hereto)" in the first sentence thereof. 2. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $4.85 million in warrant coverage on the first $4.85 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $4.85 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 48.5 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 3. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 4. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 2 The Company and Toucan have executed this SIXTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: By: --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 3 SEVENTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This SEVENTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of September 7, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005 and July 26, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 9 (the "NINTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Ninth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $4.35 million in warrant coverage on the first $4.35 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $4.35 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 43.5 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 1 The Company and Toucan have executed this SEVENTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: By: --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President 2 EIGHTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET This EIGHTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this "AMENDMENT") is made effective as of November 14, 2005 by and between NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN"). RECITALS WHEREAS, the Company and Toucan are party to that certain Binding Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and amended and restated on October 22, 2004 as further amended on December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET"). WHEREAS, concurrently herewith, the Company and its affiliates, if any, and Toucan and its designees, are entering into Amendment No. 10 (the "TENTH AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by and between the parties thereto; and WHEREAS, in connection with the Tenth Amendment, the Company and Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided herein. AGREEMENT NOW, THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Toucan agree as follows: 1. The paragraph of the Convertible Preferred Stock Term Sheet entitled "Warrants:" is hereby amended and restated in its entirety as follows: "The Company shall issue $3.95 million in warrant coverage on the first $3.95 million Convertible Preferred Stock purchased for cash (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon conversion of notes, exercise of warrants, or other conversion or exercise. The number of warrants to be so issued shall be determined on the basis of $0.10 per share. If the total of $3.95 million is invested in Convertible Preferred Stock, the number of warrants issued shall be exercisable for 3.95 million shares of Convertible Preferred Stock. The exercise price of such Preferred Stock Warrants shall be $.04 per share (subject to adjustment for stock splits, stock dividends and the like). The exercise period shall commence upon issuance of the Preferred Stock Warrants, and shall continue for a period of seven (7) years after their respective issuance dates." 2. Unless specifically modified or changed by the terms of this Amendment, all terms and conditions of the Convertible Preferred Stock Term Sheet shall remain in effect and shall apply fully as described and set forth in the Convertible Preferred Stock Term Sheet. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 1 The Company and Toucan have executed this EIGHTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET as of the day and year first written above. TOUCAN CAPITAL FUND II, L.P. NORTHWEST BIOTHERAPEUTICS, INC. By: /s/ Linda Powers By: /s/ Alton L. Boynton --------------------------------- ------------------------------------ Name: Linda Powers Name: Alton L. Boynton Title: Managing Director Title: President EX-10.27 12 v16023exv10w27.txt EXHIBIT 10.27 EXHIBIT 10.27 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON NOVEMBER ___, 2008 (the "EXPIRATION DATE"). No. __________ NORTHWEST BIOTHERAPEUTICS, INC. WARRANT TO PURCHASE COMMON SHARES For VALUE RECEIVED, ____________________ ("Warrantholder"), is entitled to purchase, subject to the provisions of this Warrant, from Northwest Biotherapeutics, Inc., a Delaware corporation ("Company"), at any time not later than 5:00 P.M., Seattle time, on the Expiration Date (as defined above), at an exercise price per share equal to $0.__ [Insert closing price on date of closing] (the exercise price in effect being herein called the "Warrant Price"), ______ shares ("Warrant Shares") of the Company's Common Stock, par value $0.001 per share ("Common Stock"). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended ("Securities Act"), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. Exercise. (a) Manner of Exercise. This Warrant may be exercised at any time or from time to time, on any business day, for all or part of the full number of Warrant Shares during the period of time described above, by surrendering it at the principal office of the Company at 22322 20th Avenue SE, Suite 150, Bothell, Washington 98021, with the subscription form in the form attached hereto duly executed, together with payment for the Warrant Shares to be purchased, payable in cash, cashier's check and/or wire transfer of immediately available funds. Subject to Section 3(b) below, no other form of consideration shall be acceptable for the exercise of this Warrant. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise together with delivery of payment therefor as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the record holder of such shares as of the close of business on such date. As soon as practicable on or after such date, and in any event within 20 days thereof, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares of Common Stock issuable upon such exercise. Upon any partial exercise, the Company will issue and deliver to Holder a new Warrant with respect to the Warrant Shares not previously purchased. No fractional shares of Common Stock shall be issued upon exercise of a Warrant. In lieu of any fractional share to which Holder would be entitled upon exercise, the Company shall pay cash equal to the product of such fraction multiplied by the then current fair market value of one share of Common Stock, as determined in good faith by the Company. (b) Net Exercise. In lieu of cash exercising this Warrant, Holder may elect to receive Common Stock equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the Holder hereof a number of shares of Common Stock computed using the following formula: Y (A - B) X = --------- A Where: X = The number of shares of Common Stock to be issued to the Holder. Y = The number of shares of Common Stock purchasable under this Warrant. A = The then current Market Price of one share of the Company's Common Stock at the time of exercise. B = The Exercise Price (as adjusted to the date of such calculations). For purposes of this Section 3(b), the Market Price shall be determined in accordance with the provisions of Section 8(b) -2- Section 4. Compliance with the Securities Act of 1933. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's reasonable satisfaction that such tax has been paid. The holder shall be responsible for income taxes due under federal, state or other law, if any such tax is due. Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon -3- exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. (b) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. "Market Price" as of a particular date (the "Valuation Date") shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the closing sale price of one share of Common Stock on Nasdaq on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted on Nasdaq on the last trading day prior to the Valuation Date; (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the average of the high bid and the low ask price quoted on the OTC Bulletin Board on the last trading day prior to the Valuation Date; or (d) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq or the OTC Bulletin Board, the fair market value of one share of Common Stock as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company. Such adjustment shall be made successively whenever such a payment date is fixed. (c) In the event that, as a result of an adjustment made pursuant to this Section 8, the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. (d) Except as provided in subsection (e) of this Section 8, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (d)(l) through (d)(6) -4- hereof, deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a "Trigger Issuance") the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to the lowest price per share at which any share of Common Stock was issued or sold or deemed to be issued or sold. For purposes of this subsection (d), "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection (d), other than Excluded Issuances (as defined in subsection (e) hereof). For purposes of this subsection (d), the following subsections (d)(l) to (d)(6) shall also be applicable: (d)(1) Issuance of Rights or Options. In case at any time during the term of this Warrant the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Warrant Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price. Except as otherwise provided in subsection 8(d)(3), no adjustment of the Warrant Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual -5- issue of such Common Stock upon conversion or exchange of such Convertible Securities. (d)(2) Issuance of Convertible Securities. In case the Company shall during the term of this Warrant in any manner issue (directly and not by assumption in a merger or otherwise) or sell any securities convertible into Common Stock, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price, provided that (a) except as otherwise provided in subsection 8(d)(3), no adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Warrant Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Warrant Price have been made pursuant to the other provisions of subsection 8(d). (d)(3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 8(d)(l) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 8(d)(l) or 8(d)(2), or the rate at which Convertible Securities referred to in subsections 8(d)(l) or 8(d)(2) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the termination of any Option for which any adjustment was made pursuant to this subsection 8(d) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 8(d) (including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the -6- Company), the Warrant Price then in effect hereunder shall forthwith be changed to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (d)(4) Stock Dividends. Subject to the provisions of this Section 8(d), in case the Company shall during the term of this Warrant declare a dividend or make any other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or Convertible Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (d)(5) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (d)(6) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection (d). (e) Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Warrant Price in the case of the issuance of (A) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (B) shares of Common Stock issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, (C) shares of Common Stock issued upon the conversion of the secured promissory notes, dated as of the date of the initial issuance of this Warrant, in an aggregate principal amount of $_______________ (the "Notes"), (D) shares of Common Stock issued upon the exercise of this Warrant and the other warrants issued in connection with the issuance of the Notes and initially covering an aggregate of ___________ shares of Common Stock (collectively, the "Company Warrants"), and (E) shares of Common Stock issued or issuable by reason of a dividend, stock split or other distribution on shares of Common Stock (but only to the extent that such a -7- dividend, split or distribution results in an adjustment in the Warrant Price pursuant to the other provisions of this Warrant) (collectively, "Excluded Issuances"). (f) Upon any adjustment to the Warrant Price pursuant to Section 8(d) above, the number of Warrant Shares purchasable hereunder shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately thereafter. Section 9. Conversion. The Company shall deliver to the Holder notice of any merger, consolidation, acquisition of all or substantially all of the property or stock, reorganization or liquidation of the Company (collectively a "Reorganization"), as a result of which the stockholders of the Company are to receive cash, stock or other property in exchange for Common Stock, no less than twenty (20) business days before the date scheduled for the Reorganization. Unless the Holder exercises this Warrant as provided in Section 3(a) prior to the date of the Reorganization, this Warrant shall be automatically converted as provided in Section 3(b) upon the effective date of the Reorganization. Section 10. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 10, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising holder of this Warrant an amount in cash equal to the Market Price of such fractional share of Common Stock on the date of exercise. Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Mellon Investor Services LLC. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent. -8- Section 14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one day after delivery to such carrier. All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company's books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days' advance written notice to the other: If to the Company: Northwest Biotherapeutics, Inc. 22322 20th Avenue S.E., Suite 150 Bothell, Washington 98021 Attention: Alton L. Boynton Fax: _____ ________ With a copy to: Lane Powell Spears Lubersky LLP 1420 Fifth Avenue, Suite 4100 Seattle, Washington 98101-2338 Attention: Thomas F. Grohman Fax: (206) 223-7107 Section 15. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 16. Applicable Law; Dispute Resolution; Exclusive Procedure. (a) Governing Law. This Subscription Agreement and all rights hereunder shall be governed by, and interpreted in accordance with, the laws of the State of Washington. (b) Dispute Resolution; Exclusive Procedure. (1) Exclusive Procedure. Every controversy, claim, dispute or disagreement arising with respect to the formation, interpretation, performance, or breach of this Agreement, or any amendment hereto, (any "Dispute") will be resolved in accordance with this -9- Section 16(b), which sets forth the sole and exclusive procedure for the resolution of any Dispute. (2) Injunctive Relief. Notwithstanding anything herein to the contrary, the Company or the Warrantholder may, prior to invoking the procedure called for in this Section 16(b), seek a temporary restraining order or a preliminary injunction (an "Injunctive Action") pursuant to this paragraph. The Superior Court of the State of Washington in King County shall be the exclusive venue and have exclusive jurisdiction for all such Injunctive Actions. The Warrantholder and the Company stipulate and agree for the purposes of any Injunctive Action that all real and personal property of the Company and the Warrantholder relevant to such Injunctive Action will be deemed to be within the jurisdiction of the Superior Court of the State of Washington in King County. Other than the foregoing stipulation regarding matters and property subject to Injunctive Action, any party bringing an Injunctive Action pursuant to this agreement must make a showing of the requisites for such Injunctive Action in such court. This provision for Injunctive Actions is the sole and exclusive process by which any party shall maintain any Injunctive Action, and shall be limited to those cases in which emergency access to the court is necessary to prevent immediate and irreparable harm in the interim period until the agreed upon dispute resolution provisions of this Section 16(b) can be carried out. (3) Negotiation. The Warrantholder or the Company, seeking resolution of a Dispute, must request in writing that a good faith negotiation ("Negotiation Effort") be carried on following any request for a Negotiation Effort, the Company and the Warrantholder shall negotiate in good faith for a period of thirty (30) days (the "Negotiation Period"). The Negotiation Effort may be conducted in person, by telephone, or by such other means as the Designated Representatives agree will tend to lead toward an amicable resolution of the Dispute. Should a Negotiation Effort fail to produce a resolution within the Negotiation Period, the parties may agree to extend the Negotiation Period for a fixed time if each agrees that such an extension could reasonably lead to an amicable resolution. (4) Mediation. Should a Negotiation Effort fail to produce a resolution within the Negotiation Period and any extension thereof, then either the Warrantholder or the Company, if wishing to further pursue resolution of the Dispute, must initiate mediation by providing to Judicial Arbitration Mediation Services ("JAMS"), or its successor, in Seattle, Washington and to the other party a written request for mediation pursuant to this Section, setting forth the subject of the Dispute and the relief requested within fifteen (15) days of the end of the Negotiation Period and any extension thereof. A mediation (the "Mediation") shall be conducted pursuant to the mediation procedures contained in the then published Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association ("AAA"). The Designated Representatives shall cooperate with JAMS and with one another in selecting a mediator from JAMS' panel of neutrals, but if the parties cannot agree on a mediator within seven (7) days from the date of the request for mediation then the parties shall each select a designee from among the JAMS panel of neutrals, and those designees shall in turn select, from among the JAMS panel of neutrals, the single mediator who shall conduct the mediation (the "Mediator"). The Mediator shall have experience with corporate law. The Mediation will be conducted within forty-five (45) days of the expiration of the Negotiation Period and any -10- extension thereof unless otherwise agreed by the parties (the "Mediation Period"). The Mediator may conduct meetings or hearings in Seattle, Washington, or by telephone or teleconference, and request information from the parties as he or she deems necessary, and shall, if the matter remains unresolved through such mediation, issue written recommendations to the parties within fifteen (15) days of the end of the Mediation Period. The parties shall then confer and determine, within seven (7) days of the issuance of the mediator's written recommendations, whether the mediator's recommendations are agreeable to the Company and the Warrantholder. Each party shall bear its own costs of the Mediation, and the mediator's fee shall be divided evenly between the Warrantholder and the Company. The parties agree that Federal and State Evidence Rule 408 shall apply to all statements, information and documents exchanged or discussed as part of the negotiation or mediation processes herein in any arbitration or litigation proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable will not be rendered inadmissible or non-discoverable as a result of its use in the Negotiation Effort or Mediation. (5) Binding Arbitration. (i) If after the mediation procedures called for in this Section 16(b), the Dispute remains unresolved, either party, if wishing to further pursue a resolution of the Dispute, must initiate binding arbitration, before a single arbitrator, by providing to JAMS, or its successor, in Seattle, Washington and to the other party a written request for binding arbitration pursuant to this Section, setting forth the subject of the Dispute and the relief requested within thirty (30) days of the expiration of the seven day period following the issuance of the Mediator's written recommendations. (ii) The parties shall then cooperate with JAMS and with one another in selecting an arbitrator from JAMS' panel of neutrals, but if the parties cannot agree on an arbitrator within seven (7) days, then each party shall select a designee from among the JAMS panel of neutrals, and those designees shall in turn select, from among the JAMS panel of neutrals, the single arbitrator who shall hear the matter in arbitration (the "Arbitrator"). The Arbitrator shall have experience with corporate law. (iii) The arbitration shall be conducted in Seattle, Washington under the arbitration rules contained in the then published Commercial Arbitration Rules and Mediation Procedures of the AAA, except as such are inconsistent with the explicit provisions herein (the "Arbitration"). The arbitration hearing shall be conducted within thirty (30) days of the appointment of the Arbitrator unless otherwise agreed by the parties (the "Arbitration Period"). (iv) The Arbitrator shall have full discretion to regulate discovery so as to provide for prompt, efficient, and fair resolution of the claims, disputes and matters in question; consistent with this and the timelines above, discovery may be had by either party pursuant to the provisions of the Federal Rules of Civil Procedure. During the conduct of the arbitration proceedings, the Arbitrator shall have full discretion concerning the admissibility and relevance of evidence, being guided in exercising such discretion by the principles set out in -11- the Federal Rules of Evidence rather than any other body of evidentiary law as defined by state common law, codes or rules of evidence. (v) The Arbitrator shall, within thirty (30) days following the close of the Arbitration Period, issue an award that shall be binding upon the parties and judgment on the award may be entered in any court of appropriate jurisdiction. The arbitration award must be in writing and must explain the reasons for the decision. The Arbitrator may, but will not be bound to, make findings of fact or conclusions of law. Each party shall bear its own costs in such arbitration, and the Arbitrator's fee shall be divided evenly between the Company and the Warrantholder. (6) Interim Payment of Fees and Expenses. The Company and the Warrantholder agree and understand that during any mediation or arbitration conducted pursuant to this Section 16(b), JAMS may, from time to time, assess each party for its share of JAMS' fees and expenses and the fees and expenses of the Mediator or Arbitrator; it is also understood that JAMS will likely make such requests for payment in advance of the various stages of the proceedings conducted by the Mediator or Arbitrator. If any such request for fees and expenses is not honored promptly by a party (a "Default"), and such Default results in the delay or postponement of any scheduled activities (e.g., discovery, pre-hearing conferences, hearings, etc.), then (i) if during mediation, at the written election of any party not in Default the Mediation Period may be deemed to be terminated immediately, and (ii) if during arbitration the Arbitrator may receive submissions from the parties and factual information from JAMS about amounts due and owing by the parties. Upon consideration thereof, the Arbitrator is authorized to issue written conclusions that the Default constitutes a breach by the defaulting party of its obligation to arbitrate in good faith and to issue an award of sanctions (up to and including entry of a default judgment) against such party based on that conclusion (a "Default Award"). Any Default Award shall be binding upon the parties as an independent final arbitration award on the issue of that Default and judgment on the award may be entered in any court of appropriate jurisdiction. In the case of an arbitration proceeding, the non-defaulting party may elect to proceed with arbitration under the relevant procedures contained in the then published Commercial Arbitration Rules and Mediation Procedures of the AAA for conducting arbitration in the absence of a party or representative. (7) Confidentiality. The negotiation, mediation and arbitration proceedings will be private and confidential. The parties shall not disclose the pleading, discovery materials, transcripts, testimony, documents or other information created, produced or presented in the negotiation, mediation or arbitration to the press, the public or to any third person, except to legal counsel and their employees, experts and others who need to know such information in order to assist in the presentation of or participation in negotiation, mediation or arbitration, without written consent of the other parties or order of the Arbitrator. Nothing in this provision shall be deemed to restrict a party's use or disclosure of documents (i) which are its own, (ii) which are or have been lawfully obtained independent of discovery in the negotiations, mediation, or arbitration, (iii) which are or become generally available to the public through no act of the receiving party, (iv) which have been lawfully obtained from a source other than the other party, (v) which are reasonably necessary to be disclosed in connection with a proceeding -12- or lawsuit contemplated by this Section 16(b), or (vi) which are required to be disclosed by law, court order or subpoena. The Arbitrator may impose such sanctions as are deemed by the Arbitrator to be appropriate for violation of this provision. Section 17. Call Provision. Notwithstanding any other provision contained herein to the contrary, in the event that (i) the closing bid price of a share of Common Stock as traded on Nasdaq (or such other exchange, stock market or quotation service on which the Common Stock may then be primarily listed or quoted) equals or exceeds $1.25 (appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof) for twenty (20) consecutive trading days; or (ii) holders of at least 50% of the aggregate Warrant shares of this series elect to voluntarily exercise or convert such Warrant share to common stock pursuant to the procedures set forth in Section 3, the Company, upon thirty (30) days prior written notice (the "Notice Period") given to the Warrantholder immediately following such twenty (20) trading day period, may demand that the Warrantholder exercise its rights hereunder, and the Warrantholder must exercise its rights prior to the expiration of the Notice Period or if such exercise is not made or if only a partial exercise is made, any and all rights to further exercise rights hereunder shall cease upon the expiration of the Notice Period; provided, however, that the Company simultaneously calls all Warrants of this series on the same terms. Section 18. Registration Rights. In the event that the Company, during the term of this Warrant, engages in a Qualifying Financing, as such term is defined in the secured convertible promissory note dated of even date herewith, and investors purchasing such Qualifying Financing receive registration rights with respect to securities purchased in that financing, then the Warrantholder shall be entitled to registration rights with respect to the shares receivable under this Warrant, such rights to be not less favorable to the Warrantholder than those afforded to investors in the Qualifying Financing. Section 19. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant. Section 20. Amendment; Waiver. Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of this Warrant) upon the written consent of the Company and the holders of Company Warrants representing at least 50% of the number of shares of Common Stock then subject to all outstanding Warrants of this series (the "Majority Holders"); provided, that (x) any such amendment or waiver must apply to all Company Warrants; and (y) the number of Warrant Shares subject to this Warrant, the Warrant Price and the Expiration Date may not be amended, and the right to exercise this Warrant may not be altered or waived, without the written consent of the Warrantholder. Section 21. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof. -13- IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the ______ day of November 2003. NORTHWEST BIOTHERAPEUTICS, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- -14- APPENDIX A NORTHWEST BIOTHERAPEUTICS, INC. WARRANT EXERCISE FORM To: Northwest Biotherapeutics, Inc.: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant ("Warrant") for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant, _______________ shares of Common Stock ("Warrant Shares") provided for therein, and requests that certificates for the Warrant Shares be issued as follows: _____________________________________ Name _____________________________________ Address _____________________________________ _____________________________________ Federal Tax ID or Social Security No. and delivered by (certified mail to the above address, or (electronically (provide DWAC instructions:___________________), or (other (specify): ______________________________), and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned's Assignee as below indicated and delivered to the address stated below. Dated: ___________________, ____ Note: The signature must correspond Signature: with the name of the registered ----------------------------- holder as written on the first page of the Warrant in every particular, ---------------------------------------- without alteration or enlargement or Name (please print) any change whatever, unless the Warrant has been assigned. ---------------------------------------- ---------------------------------------- Address ---------------------------------------- Federal Identification or Social Security No. Assignee: ---------------------------------------- ---------------------------------------- ---------------------------------------- FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES THIS FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES (the "AMENDMENT") is made and entered into as of April 25, 2004, by and among NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and the undersigned holders of Warrants (as defined below) to acquire shares of the Company's common stock (each a "WARRANTHOLDER" and, collectively, the "WARRANTHOLDERS"). When signed by the holders of at least 50% of the common stock subject to Warrants (as defined below) this Amendment will amend each of the Warrants. RECITALS WHEREAS, the Company and the undersigned Warrantholder(s) desire to amend all of the Company Warrants to Purchase Common Shares, of series Nos. BR-1 through BR-5, each dated as of November 13, 2003 (each, a "WARRANT" and, collectively, the "WARRANTS"), as provided herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Section 8(a) of each Warrant is hereby amended and restated in its entirety as follows: "(a) 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, the number and class of Warrant Shares available under this Warrant in the aggregate and the Warrant Price shall be correspondingly adjusted to give the Warrantholder, on exercise for the same Aggregate Warrant Price, the total number, class, and kind of shares as the Warrantholder would have owned had this Warrant been exercised prior to the event and had the Warrantolder continued to hold such shares until after the event requiring adjustment. Notwithstanding the foregoing, no adjustment to the number of Warrant Shares or the Warrant Price shall be made in the event of an issuance or deemed issuance of securities for consideration below the then current Warrant Price pursuant to this Section 8(a). For purposes of this Section 8(a), the "AGGREGATE WARRANT PRICE" shall mean the aggregate Warrant Price payable in connection with the exercise in full of this Warrant. The form of this Warrant need not be changed because of any adjustment in the number of Warrant Shares subject to this Warrant." 2. The first paragraph of Section 8(d) of each Warrant is hereby amended and restated in its entirety to read as follows: "Except as provided in subsections (e) and (f) of this Section 8, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (d)(l) through (d)(6) hereof, deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a "Trigger Issuance") the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to the lowest price per share at which any share of Common Stock was issued or sold or deemed to be issued or sold, but in no event shall the Warrant Price be reduced to less than the lesser of $0.10 per share (subject to adjustment as provided in Section 8(a)) or 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by the Company of Convertible Preferred Stock, par value $0.001 per share as contemplated by that certain Recapitalization Agreement dated as of April 26, 2004 between the Company and Toucan Capital Fund II, L.P.; provided, however, that in no event will the Warrant Price be less than $.04 per share (subject to adjustment as provided in Section 8(a))" 3. Section 8(f) of each Warrant is hereby amended and restated in its entirety to read as follows: "Anything to the contrary herein notwithstanding, in no event shall the then existing Warrant Price be reduced to less than the lesser of $0.10 per share (subject to adjustment as provided in Section 8(a)) or 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by the Company of Convertible Preferred Stock, par value $0.001 per share as contemplated by that certain Recapitalization Agreement dated as of April 26, 2004 between the Company and Toucan Capital Fund II, L.P.; provided, however, that in no event will the Warrant Price be less than $.04 per share (subject to adjustment as provided in Section 8(a)) pursuant to the adjustments provided for in Section 8(d)." 4. Sections 8(b) and 8(c) of each Warrant are hereby deleted in their entirety. 5. Section 18 of each Warrant is hereby deleted in its entirety. 6. All other terms and conditions of the Warrants shall be unaffected hereby and remain in full force and effect. 7. This Amendment shall be governed by and construed under the laws of the State of Washington as applied to agreements among Washington residents entered into and to be performed entirely within the State of Washington. 8. This Amendment may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement. [SIGNATURE PAGE FOLLOWS] 2. IN WITNESS WHEREOF, the parties hereto have executed this FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON SHARES as of the date first above written. COMPANY: NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- WARRANTHOLDERS: /s/ Alton L. Boynton ---------------------------------------- Alton L. Boynton /s/ Marnix L. Bosch ---------------------------------------- Marnix L. Bosch /s/ Eric H. Holmes ---------------------------------------- Eric H. Holmes /S/ Larry L. Richards ---------------------------------------- Larry Richards FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON SHARES EX-10.34 13 v16023exv10w34.txt EXHIBIT 10.34 EXHIBIT 10.34 LEASE AGREEMENT Date: November 4, 2005 THIS LEASE AGREEMENT (the "Lease") is entered into this 4th day of November 2005. Between The International Union of Operating Engineers Local 302 ("Landlord"), and NW Biotherapeutics, a Delaware Corporation ("Tenant"). Landlord and Tenant agree as follows: 1. LEASE SUMMARY. A. LEASE PREMISES. The leased commercial real estate (the "Premises") consist of an agreed area of 2,325 rentable square feet and are outlined on the floor plan attached as Exhibit A, located on the land legally described on attached Exhibit B, and is commonly known as the IUOE Building. The Premises do not include, and Landlord reserves, the exterior walls and roof of the Premises, the land beneath the Premises, the pipes and ducts, conduits, wires, fixtures, and equipment above the suspended ceiling or structural elements of the building in which the Premises are located (the "Building"). The Building, the land upon which it is situated, all other improvements located on such land, and all common areas appurtenant to the Building are referred to as the "Property". B. LEASE COMMENCEMENT DATE. The Lease shall commence on January 1, 2006, or such earlier or later date as provided in Section 3 (the "Commencement Date"). C. LEASE TERMINATION DATE. The Lease shall terminate on December 31, 2006, or such earlier or later date as provided in Section 3 (the "Termination Date"). D. MONTHLY RENT. The monthly rent shall be (check one): [X] $3,100.00, or [ ] according to the Rent Rider attached hereto. Rent shall be payable at Landlord's address shown in Section 1(h) below, or such other place designated in writing by Landlord. E. PREPAID RENT. Upon execution of this Lease, Tenant shall deliver to Landlord the sum of $3,100 as prepaid rent, to be applied to the Rent due for the first month(s) of the Lease. F. SECURITY DEPOSIT. The amount of the security deposit is $3,100.00 G. PERMITTED USE. The Premises shall be used only for general office use and for no other purpose without prior written consent of the Landlord. H. NOTICE AND PAYMENT OF ADDRESSES: Landlord: Tenant: Attention: Beverly Colesgrove Attention: Alton Boynton International Union of Operating Engineers Local 302 NW Biotherapeutics 18701 120th Ave NE 18701 120th Ave NE Bothell, WA 98011-9514 Bothell, WA 98011 2. PREMISES. Landlord leases to Tenant, and Tenant leases from landlord the Premises upon the terms specified in this Lease. 3. TERM. A. COMMENCEMENT DATE. The Lease shall commence on the date specified in Section 1(b), or on such earlier or later date as may be specified by written notice delivered by Landlord to Tenant advising Tenant that the premises are ready for possession and specifying the Commencement Date, which shall not be less than 30 days following the date of such notice. If Tenant occupies the Premises before the Commencement Date specified in Section 1(b), then the Commencement Date shall be the date of occupancy. If Landlord acts diligently to make the Premises available to Tenant, neither Landlord nor any agent or employee of Landlord shall be liable for any damage or loss due to Landlord's inability or failure to deliver possession of the Premises to Tenant as provided in this Lease. The Termination Date shall be modified upon any change in the Commencement Date so that the length of the Lease term is not changed. If Landlord does not deliver possession of the Premises to Tenant within 60 days after the date specified in Section 1(b), Tenant may elect to cancel this Lease by giving written notice to Landlord within ten (10) days after such time period ends. If Tenant gives such notice, the Lease shall be cancelled, all prepaid rent and security deposits shall be refunded to Tenant, and neither Landlord nor Tenant shall have any further obligations to the other. The first "Lease Year" shall commence on the Commencement Date and shall end on the date which is twelve (12) months from the end of the month in which the Commencement Date occurs. Each successive Lease Year during the initial term and any extension terms shall be twelve (12) months, commencing on the first day following the end of the preceding Lease Year, except that the Lease Year shall end on the Termination Date. B. TENANT OBLIGATIONS. To the extent Tenant's tenant improvements are not complete in time for the Tenant to occupy or take possession of the Premises on the Commencement Date due to the failure of Tenant to fulfill any of its obligations under this Lease, the Lease shall nevertheless commence on the Commencement Date. Except as specified elsewhere in this Lease, Landlord makes no representations or warranties to Tenant regarding the Premises, including the structural condition of the Premises and the condition of all mechanical, electrical, and other systems on the Premises. Except for any tenant improvements described on attached Exhibit C to be completed by Landlord (defined therein as "Landlord's Work"), Tenant shall be responsible for performing any work necessary to bring the Premises into condition satisfactory to Tenant. By signing this Lease, Tenant acknowledges that it has had adequate opportunity to investigate the Premises, acknowledges responsibility for making any corrections, alterations and repairs to the Premises (other than the Landlord's Work), and acknowledges that the time needed to complete any such items shall not delay the Commencement Date. 1 LEASE AGREEMENT (CONTINUED) Attached Exhibit C sets forth all Landlord's Work, if any, and all tenant improvements to be completed by Tenant ("Tenant's Work"), which is to be performed on the Premises. Responsibilities for design, payment and performance of all such work shall be as set forth on attached Exhibit C. If Tenant fails to notify Landlord of any defects in the Landlord's Work within ten (10) days of delivery of possession to Tenant, Tenant shall be deemed to have accepted the Premises in their then condition. If Tenant discovers any major defects in the Landlord's Work during this 10-day period that would prevent Tenant from using the premises for its intended purpose, Tenant shall so notify Landlord in writing and the Commencement Date shall be delayed until after Landlord has corrected the major defects and Tenant has had five (5) days to inspect and approve the Premises after Landlord's correction of such defects. The Commencement Date shall not by delayed if Tenant's inspection reveals minor defects in the Landlord's Work that will not prevent Tenant from using the Premises for their intended purpose. Tenant shall prepare a punch list of all minor defects and provide the punch list to Landlord. Landlord shall promptly correct all punch list items. 4. RENT. Tenant shall pay Landlord without demand, deduction or offset, in lawful money of the United States, the monthly rental stated in Section 1(d) in advance on or before the first day of each month during the Lease Term beginning on (check one): [X] the Commencement Date, or [ ] ___________________________ (specify, but if no date specified, then on the Commencement Date), and any other additional payments due to Landlord, including Operating Costs (collectively the "Rent") when required under this Lease. Payments for any partial month at the beginning or end of the Lease term shall be prorated. If any sums payable by Tenant to Landlord under this Lease are not received by the fifth (5th) day of each month, Tenant shall pay Landlord in addition to the amount due, for the cost of collecting and handling such late payment, an amount equal to the greater of $100 or five percent (5%) of the delinquent amount. In addition, all delinquent sums payable by Tenant to Landlord and not paid within five (5) days of the due date shall, at Landlord's option, bear interest at the rate of twelve percent (12%) per annum, or the highest rate of interest allowable by law, whichever is less. Interest on all delinquent amounts shall be calculated from the original due date to the date of payment. Landlord's acceptance of less than the full amount of any payment due from Tenant shall not be deemed an accord and satisfaction or compromise of such payment unless Landlord specifically consents in writing to payment of such lesser sum as an accord and satisfaction or compromise of the amount which Landlord claims. 5. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deliver to Landlord the security deposit specified in Section 1(f) above. Landlord may commingle the security deposit with its other funds. If Tenant breaches any covenant or condition of this Lease, including but not limited to the payment of Rent, Landlord may apply all or any part of the security deposit to the payment of any sum in default and any damage suffered by Landlord as a result of Tenant's breach. In such event, Tenant shall, within five (5) days after written demand therefor by Landlord, deposit with Landlord the amount so applied. Any payment to Landlord from the security deposit shall not be construed as a payment of liquidated damages for any default. If Tenant complies with all of the covenants and conditions of this Lease throughout Lease term, the security deposit shall be repaid to Tenant without interest within thirty (30) days after the vacation of the Premises by Tenant. 6. USES. The Premises shall be used only for the uses(s) specified in Section 1(g) above (the "Permitted Use"), and for no other business or purpose without the prior written consent of Landlord. No act shall be done on or around the Premises that is unlawful or that will increase the existing rate of insurance on the Premises or the Building, or cause the cancellation of any insurance on the Premises or the Building. Tenant shall not commit or allow to be committed any waste upon the Premises, or any public or private nuisance. Tenant shall not do or permit anything to be done in the Premises or on the Property which will obstruct or interfere with the rights of other tenants or occupants of the Property, or their customers, clients and visitors, or to injure or annoy such persons. 7. COMPLIANCE WITH LAWS. Tenant shall not cause or permit the Premises to be used in any way which violates any law, ordinance, or governmental regulation or order. Landlord represents to Tenant, to the best of Landlord's knowledge, that with the exception of any Tenant's Work, as of the Commencement Date, the Premises comply with all applicable laws, rules, regulations, or orders, including without limitation, the Americans with Disabilities Act, if applicable, and Landlord shall be responsible to promptly cure any non-compliance which existed on the Commencement Date. Tenant shall be responsible for complying with all laws applicable to the Premises as a result of Tenant opening the Premises to the public as a place of public accommodation. If the enactment or enforcement of any law, ordinance, regulation or code during the Lease term requires any changes to the Premises during the Lease term, the Tenant shall perform all such changes at its expense if the changes are required due to the nature of Tenant's activities at the Premises, or to alterations that Tenant seeks to make the Premises; otherwise, Landlord shall perform all such changes at its expense. 8. OPERATING COSTS. A. DEFINITION. As used herein, "Operating Costs" shall mean all costs of operating, maintaining and repairing the Premises, the Building, and the Property, determined in accordance with generally accepted accounting principles, and including without limitation the following: all taxes and assessments (including, but not limited to, real and personal property taxes and assessments, local improvement district assessments and other special purpose assessments, and taxes on rent or gross receipts); insurance premiums paid by Landlord and (to the extent used) deductibles; water, sewer and all other utility charges (other than utilities separately metered and paid directly by Tenant or other tenants) janitorial and all other cleaning services, refuse and trash removal; refurbishing and repainting; carpet replacement; air conditioning, heating, ventilation and elevator service; pest control; lighting systems, fire detection and security services; landscape maintenance; management (fees and/or personnel costs); parking lot, road, sidewalk and driveway patching, resurfacing and maintenance; snow and ice removal; amortization (in accordance with generally accepted accounting principles) of capital improvements as Landlord may in the future install to comply with governmental regulations and rules or undertaken in good faith with a reasonable expectation of reducing operating costs (the useful life of which shall be a reasonable period of time as determined by Landlord); and costs of legal services (except those incurred directly relating to a particular occupant of the Building); accounting services, labor, supplies, materials and tools. Operating Costs shall not include: Landlord's income tax or general corporate overhead, depreciation on the Building or equipment therein; loan payments; real estate broker's commission, capital improvements to or major repairs of the Building shell (i.e., the Building structure, exterior walls and roof) not described in this paragraph; or any costs regarding the operation, maintenance and repair of the Premises, the Building, or the Property paid directly by Tenant or other tenants in the Building. If Tenant is renting a pad separate from any other structures on the Property for which Landlord separately furnishes the services described in this 2 LEASE AGREEMENT (CONTINUED) paragraph, then the term "Operating Costs" shall not include those costs of operating, repairing, and maintaining the enclosed mall which can be separately allocated to the tenants of the other structures. Operating Costs which can not be separately allocated to the tenants of the other structures may include but are not limited to: insurance premiums; taxes and assessments; management (fees and/or personnel costs); exterior lighting; parking lot, road, sidewalk and driveway patching, resurfacing and maintenance; snow and ice removal; and costs of legal services and accounting services. B. TYPE OF PAYMENT. Options one and two below address the manner in which Operating Costs are paid under this Lease. To select the pure triple net option, check option 1. To select the base year option, check option 2. [ ] OPTION ONE: TRIPLE NET. As additional Rent, Tenant shall pay to Landlord on the first of each month with payment of Tenant's base Rent one-twelfth of Tenant's Pro Rata Share of Operating Costs. [X] OPTION TWO: BASE YEAR. The base Rent paid by Tenant under this Lease includes Tenant's Pro Rata Share of Operating Costs for the calendar year in which the Commencement Date occurs (the "Base Year"). As additional Rent, Tenant shall pay to Landlord on the first day of each month commencing on the first day of the first year after the Commencement Date, with Tenant's payment of base Rent, one-twelfth of the amount, if any, by which Tenant's Pro Rata Share of Operating Costs exceeds Tenant's annualized Pro Rata Share of Operating Costs for the Base Year. C. METHOD OF PAYMENT. Tenant shall pay to Landlord Operating Costs as provided above pursuant to the following procedure: i) Landlord shall provide to Tenant, at or before the Commencement Date, a good faith estimate of annual Operating Costs for the calendar year in which the Commencement Date occurs. Landlord shall also provide to Tenant, as soon as possible following the first day of each succeeding calendar year, a good faith estimate of Tenant's annual pro Rata Share of Operating Costs for the then-current year; ii) Each estimate of Tenant's annual Pro Rata Share of Operating Costs determined by Landlord as described above, shall be divided into twelve (12) equal monthly installments. If Tenant pays Operating Costs under Option One, Tenant shall pay to Landlord such monthly installment of Operating Costs with monthly payment of base Rent. If Tenant pays Operating Costs under Option Two, Tenant shall pay to Landlord with each monthly payment of base Rent the amount, if any, by which such monthly installments of Operating Costs exceed one-twelfth of Tenant's annualized Pro Rata Share of Operating Costs for the Base Year. In the event the estimated amount of Tenant's Pro Rata Share of Operating Costs has not yet been determined for any calendar year, Tenant shall pay the monthly installment in the estimated amount determined for the preceding calendar year until the estimate for the current calendar year has been provided to Tenant. At such time as the estimate for the current calendar year is received, Tenant shall then pay any shortfall or receive a credit for any surplus for the preceding months of the current calendar year and shall, thereafter, make the monthly installment payment in accordance with the current estimate; and iii) As soon as reasonably possible following the end of each calendar year of the Lease term, Landlord shall determine and provide to Tenant a statement (the "Operating Costs Statement") setting forth the amount of Operating Costs actually incurred and the amount of Tenant's Pro Rata Share of Operating Costs actually payable by Tenant with respect to such calendar year. In the event the amount of Tenant's Pro Rata Share of Operating Costs exceeds the sum of the monthly installments actually paid by Tenant for such calendar year, Tenant shall pay to Landlord the difference within thirty (30) days following receipt of the Operating Costs Statement. In the event the sum of such installments exceeds the amount of Tenant's Pro Rata Share of Operating Costs actually due and owing, the difference shall be applied as a credit to Tenant's future Pro Rata Share of Operating Costs payable by Tenant pursuant to this Section. 9. UTILITIES AND SERVICES. Landlord shall provide the Premises the following services, the costs of which shall be included in the Operating Costs: water and electricity for the Premises seven (7) days per week, twenty-four (24) hours per day, and heating, ventilation and air conditioning from 9 a.m. to 5 p.m. Monday through Friday, and 9 a.m. to 12 p.m. on Saturday. Tenant shall provide their own janitorial service to the Premises. Heating, ventilation and air conditioning services will also be provided by Landlord to the Premises during additional hours on reasonable notice to Landlord, at Tenant's sole costs and expense, at an hourly rate reasonably established by Landlord from time to time and payable by Tenant, as billed, as additional Rent. Tenant shall furnish and pay, at Tenant's sole expense, all other utilities (including, but not limited to, telephone and cable service if available) and other services which Tenant requires with respect to the Premises, except those to be provided by Landlord as described above. Notwithstanding the foregoing, if Tenant's use of the Premises incurs utility service charges which are above ordinary usage, Landlord reserves the right to require Tenant to pay a reasonable additional charge for such usage. For example, where Tenant installs and uses a number of electronic devices which is greater than normal, the increased usage may result in higher electrical charges and increased charges for cooling since overheating of rooms may result. 10. TAXES. Tenant shall pay all taxes, assessments, liens and license fees ("Taxes") levied, assessed or imposed by any authority having the direct or indirect power to tax or assess any such liens, by reason of Tenant's use of the Premises, and all Taxes on Tenant's personal property located on the Premises. Landlord shall pay all Taxes with respect to the Building and the Project, including any Taxes resulting from a reassessment of the Building or the Project due to a change of ownership or otherwise, which shall be included in Operating Costs. 11. COMMONS AREAS. A. DEFINITION. The term "Common Areas" means all areas and facilities that are provided and designated from time to time by Landlord for the general non-exclusive use and convenience of Tenant with other tenants and which are not leased or held for the exclusive use of a particular tenant. Common Areas may, but do not necessarily include, hallways, entryways, stairs, elevators, driveways, walkways, terraces, docks, loading areas, restrooms, trash facilities, parking areas and garages, roadways, pedestrian sidewalks, landscaped areas, security areas and lobby or mall areas. Tenant shall comply with reasonable rules and regulations concerning the use of the Common Areas adopted by Landlord from time to time. Without advance notice to Tenant and without any liability to Tenant, Landlord may change the size, use, or nature of any Common Areas, erect improvements on the Common Areas or convert any portion of the 3 LEASE AGREEMENT (CONTINUED) Common Areas to the exclusive use of Landlord or selected tenants, so long as Tenant is not thereby deprived of the substantial benefit of the Premises. Landlord reserves the use of exterior walls and the roof, and the right to install, maintain, use, repair and replace pipes, ducts, conduits, and wires leading through the Premises in areas which will not materially interfere with Tenant's use thereof. B. USE OF THE COMMON AREAS. Tenant shall have the non-exclusive right in common with such other tenants to whom Landlord has granted or may grant such rights to use the Common Areas. Tenant shall abide by rules and regulations adopted by Landlord from time to time and shall use its best efforts to cause its employees, contractors, and invitees to comply with those rules and regulations, and not interfere with the use of Common Areas by others. C. MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common Areas in good order, condition and repair. This maintenance cost shall be an Operating Costs chargeable to Tenant pursuant to Section 8. 12. ALTERATIONS. Tenant may make alterations, additions, or improvements to the Premises, including any Tenant's Work identified on attached Exhibit C ("Alterations"), with the prior written consent of Landlord. The term "Alterations" shall not include the installation of shelves, movable partitions, Tenant's equipment, and trade fixtures which may be performed without damaging existing improvements or the structural integrity of the Premises, and Landlord's consent shall not be required for Tenant's installation of those items. Tenant shall complete all Alterations at Tenant's expense in compliance with all applicable laws in accordance with plans and specifications approved by Landlord, using contractors approved by Landlord, and in a manner so as to not unreasonably interfere with other tenants. Landlord shall be deemed the owner of all Alterations except for those which Landlord requires to be removed at the end of the Lease term. Tenant shall remove all Alterations at the end of the Lease term unless Landlord conditioned its consent upon Tenant leaving a specified Alteration at the Premises, in which case Tenant shall not remove such Alteration. Tenant shall immediately repair any damage to the Premises caused by the removal of the Alterations. 13. REPAIRS AND MAINTENANCE. Tenant shall, at its sole expense, maintain the Premises in good condition and promptly make all repairs and replacements, whether structural or non-structural necessary to keep the Premises safe and in good condition, including all utilities and other systems serving the Premises. Landlord shall maintain and repair the Building structure, foundation, exterior walls, and roof, and the Common Areas, the cost of which shall be included as an Operating Cost. Tenant shall not damage any demising wall or disturb the structural integrity of the Premises and shall promptly repair any damage or injury done to any such demising walls or structural elements caused by Tenant or its employees, agents, contractors or invitees. If Tenant fails to maintain or repair the Premises, Landlord may enter the Premises and perform such repair or maintenance on behalf of Tenant. In such case, Tenant shall be obligated to pay to Landlord immediately upon receipt of demand for payment, as additional Rent, all costs incurred by Landlord. Notwithstanding anything in this Section to the contrary, Tenant shall not be responsible for any repairs to the Premises made necessary by the acts of Landlord or its agents, employees, contractors or invitees therein. Upon expiration of the Lease term, whether by lapse of time or otherwise, Tenant shall promptly and peacefully surrender the Premises, together with all keys, to Landlord in as good condition as when received by Tenant from Landlord or as thereafter improved, reasonable wear and tear and insured and casualty excepted. 14. ACCESS AND RIGHT OF ENTRY. After reasonable notice from Landlord (except in cases of emergency, where no notice is required), Tenant shall permit Landlord and its agents, employees and contractors to enter the Premises at all reasonable times to make repairs, alterations, improvements or inspections. This Section shall not impose any repair or other obligation upon Landlord not expressly stated elsewhere in this Lease. After reasonable notice to Tenant, Landlord shall have the right to enter the Premises for the purpose of showing the Premises to prospective purchasers or lenders at any time, and to prospective tenants within 180 days prior to the expiration or sooner termination of the Lease term. 15. DESTRUCTION OR CONDEMNATION. A. DAMAGE AND REPAIR. If the Premises or the portion of the Property necessary for Tenant's occupancy are partially damaged but not rendered untenantable, by fire or other insured casualty, then Landlord shall diligently restore the Premises and the portion of the Property necessary for Tenant's occupancy and this Lease shall not terminate; provided, however, Tenant may terminate the Lease if Landlord is unable to restore the Premises within six (6) months of the casualty event. The Premises or the portion of the Property necessary for Tenant's occupancy shall not be deemed untenantable if less than twenty-five percent (25%) of each of those areas are damaged. Notwithstanding the foregoing, Landlord shall have no obligation to restore the Premises or the portion of the Property necessary for Tenant's occupancy if insurance proceeds are not available to pay the entire costs of such restoration. If insurance proceeds are available to Landlord but are not sufficient to pay the entire costs of restoration, then Landlord may elect to terminate this Lease and keep the insurance proceeds, by notifying Tenant within sixty (60) days of the date of such casualty. If the Premises, the portion of the Property necessary for Tenant's occupancy, or 50% or more of the rentable area of the Property are entirely destroyed, or partially damaged and rendered untenantable, by fire or other casualty, Landlord may, at its option: (a) terminate this Lease as provided herein, or (b) restore the Premises and the portion of the Property necessary for Tenant's occupancy to their previous condition; provided, however, if such casualty event occurs during the last six (6) months of the Lease term (after considering any option to extend the term timely exercised by Tenant) then either Tenant or Landlord may elect to terminate the Lease. If, within sixty (60) days after receipt by Landlord from Tenant of written notice that Tenant deems the Premises or the portion of the Property necessary for Tenant's occupancy untenantable, Landlord fails to notify Tenant of its election to restore those areas, or if Landlord is unable to restore those areas within six (6) months of the date of the casualty event, then Tenant may elect to terminate the Lease. If Landlord restores the Premises or the Property under this Section 15(a), Landlord shall proceed with reasonable diligence to complete the work, and the base Rent shall be abated in the same proportion as the untenantable portion of the Premises bears to the whole Premises, provided that there shall be a rent abatement only if the damage or destruction of the Premises or the Property did not result from, or was not contributed to directly or indirectly by the act, fault or neglect of Tenant, or Tenant's officers, contractors, licensees, agents, servants, employees, guests, invitees or visitors. Provided, Landlord complies with its obligations under this Section, no damages, compensation or claim shall be payable by Landlord for inconvenience, loss of business or annoyance directly, incidentally or 4 LEASE AGREEMENT (CONTINUED) consequentially arising from any repair or restoration of any portion of the Premises or the Property. Landlord will not carry insurance of any kind for the protection of Tenant or any improvements paid for by Tenant or as provided in Exhibit C or on Tenant's furniture or on any fixtures, equipment, improvements or appurtenances of Tenant under this Lease, and Landlord shall not be obligated to repair any damage thereto or replace the same unless the damage is caused by landlord's negligence. B. CONDEMNATION. If the Premises, the portion of the property necessary for Tenant's occupancy, or fifty percent (50%) or more of the rentable area of the Property are made untenantable by eminent domain, or conveyed under a threat of condemnation, this Lease shall terminate at the option of either Landlord or Tenant as of the earlier of the date title vests in the condemning authority or the condemning authority first has possession of the Premises or the portion of the Property and all Rents and other payments shall be paid to that date. In case of taking of a part of the Premises or the Property necessary for Tenant's occupancy that does not render those areas untenantable, then this Lease shall continue in full force and effect and the base Rent shall be equitably reduced based on the proportion by which the floor area of any structures is reduced, such reduction in Rent to be effective as of the earlier of the date the condemning authority first has possession of such portion or title vests in the condemning authority. The Premises or the portion of the Property necessary for Tenant's occupancy shall not be deemed untenantable if less than twenty-five percent (25%) of each of those areas are condemned. Landlord shall be entitled to the entire award from the condemning authority attributable to the value of the Premises or the Property and Tenant shall make no claim for the value of its leasehold. Tenant shall be permitted to make a separate claim against the condemning authority for moving expenses or damages resulting from interruption in its business, provided that in no event shall Tenant's claim reduce Landlord's award. 16. INSURANCE. A. LIABILITY INSURANCE. During the Lease term, Tenant shall pay for and maintain commercial general liability insurance with broad form property damage and contractual liability endorsements. This policy shall name Landlord as an additional insured, and shall insure Tenant's activities and those of Tenant's employees, officers, contractors, licensees, agents, servants, employees, guests, invitees or visitors with respect to the Premises against loss, damage or liability for personal injury or death or loss or damage to property with a combined single limit of not less than $1,000,000, and a deductible of not more than $5,000. The insurance will be non-contributory with any liability insurance carried by Landlord. B. TENANT'S INSURANCE. During the Lease term, Tenant shall pay for and maintain replacement cost fire and extended coverage insurance, with vandalism and malicious mischief, sprinkler leakage and earthquake endorsements, in an amount sufficient to cover not less than 100% of the full replacement costs, as the same may exist from time to time, of all Tenant's personal property, fixtures, equipment and tenant improvements. C. MISCELLANEOUS. Insurance required under this Section shall be with companies rated A-V or better in Best's Insurance Guide, and which are authorized to transact business in the State of Washington. No insurance policy shall be cancelled or reduced in coverage and each such policy shall provide that it is not subject to cancellation or a reduction in coverage except after thirty (30) days' prior written notice to Landlord. Tenant shall deliver to Landlord upon commencement of the Lease and from time to time thereafter, copies or certificates of the insurance policies required by this Section. In no event shall the limit of such policies be considered as limiting the liability of Tenant under this Lease. D. LANDLORD INSURANCE. Landlord shall carry standard form extended coverage fire insurance on the building shell and core in the amount of their full replacement value, and such other insurance of such types and amounts as Landlord, in its discretion, shall deem reasonably appropriate. The costs of any such insurance may be included in the Operating Costs by a "blanket policy" insuring other parties and/or locations in addition to the Building, in which case the portion of the premiums therefor allocable to the Building and Project shall be included in the Operating Costs. In addition to the foregoing, in the event Tenant fails to provide or keep in force any of the insurance required above, Landlord, in its discretion, may provide such insurance, in which event, the costs thereof shall be payable by Tenant to Landlord as additional rent on the first day of the calendar month immediately following demand therefor from Landlord. E. WAIVER OF SUBROGATION. Landlord and Tenant hereby release each other and any other tenant, their agents or employees, from responsibility for, and waive their entire claim of recovery for any loss or damage arising from any cause covered by insurance required to be carried by each of them. Each party shall provide notice to the insurance carrier or carriers of this mutual waiver of subrogation, and shall cause its respective insurance carriers to waive all rights of subrogation against the other. This waiver shall not apply to the extent of the deductible amounts to any such policies or to the extent of liabilities exceeding the limits of such policies. 17. INDEMNIFICATION. Tenant shall defend, indemnify, and hold Landlord harmless against all liabilities, damages, costs, and expenses, including attorneys' fees, arising from any negligent or wrongful act or omission of Tenant or Tenant's officers, contractors, licensees, agents, servants, employees, guests, invitees, or visitors on or around the Premises, or arising from any breach of this Lease by Tenant. Tenant shall use legal counsel acceptable to Landlord in defense of any action within Tenant's defense obligation. Landlord shall defend, indemnify and hold Tenant harmless against all liabilities, damages, costs, and expenses, including attorneys' fees, arising from any negligent or wrongful act or omission of Landlord or Landlord's officers, contractors, licensees, agents, servants, employees, guests, invitees, or visitors on or around the Premises or arising from any breach of this Lease by Landlord. Landlord shall use legal counsel acceptable to Tenant in defense of any action within Landlord's defense obligation. The provisions of this section 17 shall survive expiration or termination of this Lease. 18. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, sublet, mortgage, encumber or otherwise transfer any interest in this Lease (collectively referred to as a "Transfer") or any part of the Premises without first obtaining Landlord's written consent, which shall not be unreasonably withheld or delayed. No Transfer shall relieve Tenant of any liability under this Lease notwithstanding Landlord's consent to such Transfer. Consent to any Transfer shall not operate as a waiver of the necessity for Landlord's consent to any subsequent Transfer. If Tenant is a partnership, limited liability company, corporation, or other entity, transfer of this Lease by merger, consolidation, redemption or liquidation, or any change(s) in the ownership of, or power to vote, which singularly or collectively represents a majority of the beneficial interest in Tenant, shall constitute a Transfer under this Section. 5 LEASE AGREEMENT (CONTINUED) As a condition of Landlord's approval, if given, any potential assignee or sublessee otherwise approved by Landlord shall assume all obligations of Tenant under this Lease and shall be jointly and severally liable with Tenant and any guarantor, if required, for the payment of Rent and performance of all terms of this Lease. In connection with any Transfer, Tenant shall provide Landlord with copies of all assignments, subleases and assumption instruments. 19. LIENS. Tenant shall keep the Premises free from any liens created by or through Tenant. Tenant shall indemnify and hold Landlord harmless from liability from any such liens including, without limitation, liens arising from any Alterations. If a lien is filed against the Premises by any person claiming by, through or under Tenant, Tenant shall, upon request of Landlord, at Tenant's expense, immediately furnish to Landlord a bond in form and amount and issued by a surety satisfactory to Landlord, indemnifying Landlord and Premises against all liabilities, costs and expenses, including attorneys' fees, which Landlord could reasonably incur as a result of such liens(s). 20. DEFAULT. The following occurrences shall be deemed an Event of Default by Tenant: A. FAILURE TO PAY. Tenant fails to pay and sum, including Rent, due under this Lease following five (5) days written notice from Landlord of the failure to pay. B. VACATION/ABANDONMENT. Tenant vacates the Premises (defined as an absence for at least fifteen (15) consecutive days without prior notice to Landlord), or Tenant abandons the Premises (defined as an absence of five (5) days or more while Tenant is in breach of some other term of this Lease). Tenant's vacation or abandonment of the Premises shall not be subject to any notice or right to cure. C. INSOLVENCY. Tenant becomes insolvent, voluntarily or involuntarily bankrupt, or a receiver, assignee or other liquidating officer is appointed for Tenant's business, provided that in the event of any involuntary bankruptcy or other insolvency proceeding, the existence of such proceeding shall constitute an Event of Default only if such proceeding is not dismissed or vacated within sixty (60) days after its institution or commencement. D. LEVY OR EXECUTION. Tenant's interest in this Lease or the Premises, or any part thereof, is taken by execution or other process of law directed against Tenant, or is taken or subjected to any attachment by any creditor of Tenant, if such attachment is not discharged within fifteen (15) days after being levied. E. OTHER NON-MONETARY DEFAULTS. Tenant breaches any agreement, term or covenant of this Lease other than one requiring the payment of money and not otherwise enumerated in this Section, and the breach continues for a period of thirty (30) days after notice by Landlord to Tenant of the breach. F. FAILURE TO TAKE POSSESSION. Tenant fails to take possession of the Premises on the Commencement Date. 21. REMEDIES. Landlord shall have the following remedies upon an Event of Default. Landlord's rights and remedies under this Lease shall be cumulative, and none shall exclude any other right or remedy allowed by law. A. TERMINATION OF LEASE. Landlord may terminate Tenant's interest under the Lease, but no act by Landlord other than written notice from Landlord to Tenant of termination shall terminate this Lease. The Lease shall terminate on the date specified in the notice of termination. Upon termination of this Lease, Tenant will remain liable to Landlord for damages in an amount equal to the rent and other sums that would have been owing by Tenant under this Lease for the balance of the Lease term, less the net proceeds, if any, of any reletting of the premises by Landlord subsequent to the termination, after deducting all Landlord's Reletting Expenses (as defined below). Landlord shall be entitled to either collect damages from Tenant monthly on the days on which rent or other amounts would have been payable under the Lease, or alternatively, Landlord may accelerate Tenant's obligations under the Lease and recover from Tenant: (i) unpaid rent which had been earned at the time of termination; (ii) the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of rent loss that Tenant proves could reasonably have been avoided; (iii) the amount by which the unpaid rent for the balance of the term of the Lease after the time of award exceeds the amount of rent loss that Tenant proves could reasonably be avoided (discounting such amount by the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus 1%); and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under the Lease, or which in the ordinary course would be likely to result from the Event of Default, including without limitation Reletting Expenses described in Section 21b. B. RE-ENTRY AND RELETTING. Landlord may continue this Lease in full force and effect, and without demand or notice, re-enter and take possession of the Premises or any part thereof, expel the Tenant from the Premises and anyone claiming through or under the Tenant, and remove the personal property of either. Landlord may relet the Premises, or any part of them, in Landlord's or Tenant's name for the account of Tenant, for such period of time and at such other terms and conditions, as Landlord, in its discretion, may determine. Landlord may collect and receive the rents for the Premises. Re-entry or taking possession of the Premises by Landlord under this Section shall not be construed as an election on Landlord's part to terminate this Lease, unless a written notice of termination is given to Tenant. Landlord reserves the right following any re-entry or reletting, or both, under this Section to exercise its right to terminate the Lease. During the Event of Default, Tenant will pay Landlord the rent and other sums which would be payable under this Lease if repossession had not occurred, plus the net proceeds, if any, after reletting the Premises, after deducting Landlord's Reletting Expenses. "Reletting Expenses" is defined to include all expenses incurred by Landlord in connection with reletting the Premises, including without limitation, all repossession costs, brokerage commissions, attorneys' fees, remodeling and repair costs, costs for removing and storing Tenant's property and equipment, and rent concessions granted by Landlord to any new Tenant, prorated over the life of the new lease. C. WAIVER OF REDEMPTION RIGHTS. Tenant, for itself, and on behalf of any and all persons claiming through or under Tenant, including creditors of all kinds, hereby waives and surrenders all rights and privileges which they may have under any present or future law, to redeem the Premises or to have a continuance of this Lease for the Lease term, as it may have been extended. 6 LEASE AGREEMENT (CONTINUED) D. NONPAYMENT OF ADDITIONAL RENT. All costs which Tenant agrees to pay to Landlord pursuant to this Lease shall in the event of nonpayment be treated as if they were payments of Rent, and Landlord shall have all the rights herein provided for in case of nonpayment of Rent. E. FAILURE TO REMOVE PROPERTY. If Tenant fails to remove any of its property from the Premises at Landlord's request following an uncured Event of Default, Landlord may, at its option, remove and store the property at Tenant's expense and risk. If Tenant does not pay the storage cost within five (5) days of Landlord's request, Landlord may, at its option, have any or all of such property sold at public or private sale (and Landlord may become a purchaser at such sale), in such manner as Landlord deems proper, without notice to Tenant. Landlord shall apply the proceeds of such sale: (i) to the expense of such sale, including reasonable attorneys' fees actually incurred; (ii) to the payment of the costs or charges for storing such property; (iii) to the payment of any other sums of money which may then be or thereafter become due Landlord from Tenant under any of the terms hereof; and (iv) the balance, if any, to Tenant. Nothing in this Section shall limit Landlord's right to sell Tenant's personal property as permitted by law to foreclose Landlord's lien for unpaid rent. 22. MORTGAGE SUBORDINATION AND ATTORNMENT. This Lease shall automatically be subordinate to any mortgage or deed of trust created by Landlord which is now existing or hereafter placed upon the Premises including any advances, interest, modifications, renewals, replacements or extensions ("Landlord's Mortgage"), provided the holder of any Landlord's Mortgage or any person(s) acquiring the Premises at any sale or other proceeding under any such Landlord's Mortgage shall elect to continue this Lease in full force and effect. Tenant shall attorn to the holder of any Landlord's Mortgage or any person(s) acquiring the Premises at any sale or other proceeding under any Landlord's Mortgage provided such person(s) assume the obligations of Landlord under this Lease. Tenant shall promptly and in no event later than fifteen (15) days execute, acknowledge and deliver documents which the holder of any Landlord's Mortgage may reasonably require as further evidence of this subordination and attornment. Notwithstanding the foregoing, Tenant's obligations under this Section are conditioned on the holder of each of Landlord's Mortgage and each person acquiring the Premises at any sale or other proceeding under any such Landlord's Mortgage not disturbing Tenant's occupancy and other rights under this Lease, so long as no uncured Event of Default exists. 23. NON-WAIVER. Landlord's waiver of any breach of any term contained in this Lease shall not be deemed to be a waiver of the same term for subsequent acts of Tenant. The acceptance by Landlord of Rent or other amounts due by Tenant hereunder shall not be deemed to be a waiver of any breach by Tenant preceding such acceptance. 24. HOLDOVER. If Tenant shall, without the written consent of Landlord, hold over after the expiration or termination of the Term, such tenancy shall be deemed to be on a month-to-month basis and may be terminated according to Washington law. During such tenancy, Tenant agrees to pay to Landlord one hundred twenty-five percent (125%) the rate of rental last payable under this Lease, unless a different rate is agreed upon by Landlord. All other terms of the Lease shall remain in effect. 25. NOTICES. All notices under this Lease shall be in writing and effective (i) when delivered in person, (ii) three (3) days after being sent by registered or certified mail to Landlord or Tenant, as the case may be, at the Notice Addresses set forth in Section 1(h); or (iii) upon confirmed transmission by facsimile to such persons at the facsimile numbers set forth in Section 1(h) or such other addresses/facsimile numbers as may from time to time be designated by such parties in writing. 26. COSTS AND ATTORNEYS' FEES. If Tenant or Landlord engage the services of an attorney to collect monies due or to bring any action for any relief against the other, declaratory or otherwise, arising out of this Lease, including any suit by Landlord for the recovery of Rent or other payments, or possession of the Premises, the losing party shall pay the prevailing party a reasonable sum for attorneys' fees in such suit, at trial and on appeal. 27. ESTOPPEL CERTIFICATES. Tenant shall, from time to time, upon written request of Landlord, execute, acknowledge and deliver to Landlord or its designee a written statement specifying the following, subject to any modifications necessary to make such statements true and complete: (i) the date the Lease term commenced and the date it expires; (ii) the amount of minimum monthly Rent and the date to which such Rent has been paid; (iii) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way; (iv) that this Lease represents the entire agreement between the parties; (v) that all conditions under this Lease to be performed by Landlord have been satisfied; (vi) that there are no existing claims, defenses or offsets which the Tenant has against the enforcement of this Lease by Landlord; (vii) that no Rent has been paid more than one month in advance; and (viii) that no security has been deposited with Landlord (or, if so, the amount thereof). Any such statement delivered pursuant to this Section may be relied upon by a prospective purchaser of Landlord's interest or assignee of any mortgage or new mortgagee of Landlord's interest in the Premises. If Tenant shall fail to respond within ten (10) days of receipt by Tenant of a written request by Landlord as herein provided, Tenant shall be deemed to have given such certificate as above provided without modification and shall be deemed to have admitted the accuracy of any information supplied by Landlord to a prospective purchaser or mortgagee. 28. TRANSFER OF LANDLORD'S INTEREST. This Lease shall be assignable by Landlord without the consent of Tenant. In the event of any transfer or transfers of Landlord's interest in the Premises, other than a transfer for security purposes only, upon the assumption of this Lease by the transferee, Landlord shall be automatically relieved of obligations and liabilities accruing from and after the date of such transfer, except for any retained security deposit or prepaid rent, and Tenant shall attorn to the transferee. 29. RIGHT TO PERFORM. If Tenant shall fail to timely pay any sum or perform any other act on its part to be performed hereunder, Landlord may make any such payment or perform any such other act on Tenant's part to be made or performed as provided in this Lease. Tenant shall, on demand, reimburse Landlord for its expenses incurred in making such payment or performance. Landlord shall (in addition to any other right or remedy of Landlord provided by law) have the same rights and remedies in the event of the nonpayment of sums due under this Section as in the case of default by Tenant in the payment of Rent. 30. HAZARDOUS MATERIAL. Landlord represents and warrants to Tenant that, to the best of Landlord's knowledge, there is no "Hazardous Material" (as defined below) on, in or under the Premises as the Commencement Date except as otherwise disclosed to Tenant in writing before the execution of this Lease. If there is any Hazardous Material on, in or under the Premises as of the Commencement Date which has been or thereafter becomes unlawfully released through no fault of Tenant, then Landlord shall indemnify, defend and hold Tenant harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses including without limitation sums paid in settlement of 7 LEASE AGREEMENT (CONTINUED) claims, attorneys' fees and expert fees, incurred or suffered by Tenant either during or after the Lease term as the result of such contamination. Tenant shall not cause or permit any Hazardous Material to be brought upon, kept, or used in or about, or disposed of on the Premises by Tenant, its agents, employees, contractors or invitees, except in strict compliance with all applicable federal, state and local laws, regulations, codes and ordinances. If Tenant breaches the obligations stated in the preceding sentence, then Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses including, without limitation, diminution in the value of the Premises, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises, or elsewhere, damages arising from any adverse impact on marketing of space at the Premises, and sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees incurred or suffered by Landlord either during or after the Lease term. These indemnifications by Landlord and Tenant include, without limitation, costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work, whether or not required by any federal, state or local governmental agency or political subdivision, because of Hazardous Material present in the Premises, or in soil or ground water on or under the Premises. Tenant shall immediately notify Landlord of any inquiry, investigation or notice that Tenant may receive form any third party regarding the actual suspected presence of Hazardous Material on the Premises. Without limiting the foregoing, if the presence of any Hazardous Material brought upon, kept or used in or about the Premises by Tenant, its agents, employees, contractors or invitees, results in any unlawful release of Hazardous Materials on the Premises or any other property, Tenant shall promptly take all actions, at its sole expense, as are necessary to return the Premises or any other property, to the condition existing prior to the release of any such Hazardous Material; provided that Landlord's approval of such actions shall first be obtained, which approval may be withheld at Landlord's sole discretion. As used herein, the term "Hazardous Material" means any hazardous, dangerous, toxic or harmful substance, material or waste including biomedical waste which is or becomes regulated by any local governmental authority, the State of Washington or the United States Government, due to its potential harm to the health, safety or welfare of humans or the environment. The provisions of this Section 30 shall survive expiration or termination of this Lease. 31. QUIET ENJOYMENT. So long as Tenant pays the Rent and performs all of its obligations in this Lease, Tenant's possession of the Premises will not be disturbed by Landlord or anyone claiming by, through or under Landlord, or by the holders of any Landlord's Mortgage or any successor thereto. 32. GENERAL. A. HEIRS AND ASSIGNS. This Lease shall apply to and be binding upon Landlord and Tenant and their respective heirs, executors, administrators, successors and assigns. B. ENTIRE AGREEMENT. This Lease contains all of the covenants and agreements between Landlord and Tenant relating to the Premises. No prior or contemporaneous agreements or understanding pertaining to the Lease shall be valid or of any force or effect and the covenants and agreements of this Lease shall not be altered, modified or added to except in writing signed by Landlord and Tenant. C. SEVERABILITY. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision of this Lease. D. FORCE MAJEURE. Time periods for either party's performance under any provisions of this Lease (excluding payment of Rent) shall be extended for periods of time during which the party's performance is prevented due to circumstances beyond such party's control, including without limitation, fires, floods, earthquakes, lockouts, strikes, embargoes, governmental regulations, acts of God, public enemy, war or other strife. E. GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the state of Washington. F. MEMORANDUM OF LEASE. Except for the pages containing the Commission Agreement, the parties signatures and attached Exhibits A and B, this Lease shall not be recorded. However, Landlord and Tenant shall, at the other's request, execute and record a memorandum of Lease in recordable form that identifies Landlord and Tenant, the commencement and expiration dates of the Lease, and the legal description of the Premises as set forth on attached Exhibit B. G. SUBMISSION OF LEASE FORM NOT AN OFFER. One party's submission of this Lease to the other for review shall not constitute an offer to Lease the Premises. This Lease shall not become effective and binding upon Landlord and Tenant until it has been fully signed by both Landlord and Tenant. H. NO LIGHT, AIR OR VIEW EASEMENT. Tenant has not been granted an easement or other right for light, air or view to or from the Premises. Any diminution or shutting off of light, air or view by any structure which may be erected on or adjacent to the Building shall in no way affect this Lease or the obligations of Tenant hereunder or impose any liability on Landlord. I. AUTHORITY OF PARTIES. Any individual signing this Lease on behalf of an entity represents and warrants to the other that such individual has authority to do so and, upon such individual's execution, that this Lease shall be binding upon and enforceable against the party on behalf of whom such individual is signing. 33. EXHIBITS AND RIDERS. The following exhibits and riders are made a part of this Lease: Exhibit A: Legal Description Exhibit B: Tenant Improvement Schedule Exhibit C: Renewal Option and Early Access 8 LEASE AGREEMENT (CONTINUED) CHECK THE BOX FOR ANY OF THE FOLLOWING THAT WILL APPLY. ANY RIDERS CHECKED SHALL BE EFFECTIVE ONLY UPON BEING INITIALED BY THE PARTIES AND ATTACHED TO THE LEASE. CAPITALIZED TERMS USED IN THE RIDERS SHALL HAVE THE MEANING GIVEN TO THEM IN THE LEASE. [ ] Rent Rider [ ] Retail Use Rider [ ] Arbitration Rider [ ] Limitation Rider [ ] Guaranty of Tenant's Lease Obligations Rider [ ] Parking Rider [ ] Option to Extend Rider [ ] Rules and Regulations 34. AGENCY DISCLOSURE. At the signing of this Lease, Landlord' Agent: Daniel Seger, Pacific Real Estate Partners Represents The International Union of Operating Engineers Local 302 and Tenant's Licensee Bill Neil, GVA Kidder Mathews represents NW Biotherapeutics, a Delaware Corporation If Tenant's Licensee and Landlord's Agent are different salespersons affiliated with the same Broker, then both Tenant and Landlord confirm their consent to that Broker acting as a dual agent. If Tenant's Licensee and Landlord's Agent are the same salesperson representing both parties, then both Landlord and Tenant confirm their consent to that salesperson and his/her Broker acting as dual agents. If Tenant's Licensee, Landlord's Agent, or their Broker are dual agents, Landlord and Tenant consent to Tenant's Licensee, Landlord's Agent and their Broker being compensated based on a percentage of the rent or as otherwise disclosed on an attached addendum. Neither Tenant's Licensee, Landlord's Agent or their Broker are receiving compensation form more than one party to this transaction unless otherwise disclosed on an attached addendum, in which case Landlord and Tenant consent to such compensation. Landlord and Tenant confirm receipt of the pamphlet entitled "The Law of Real Estate Agency." 35. COMMISSION AGREEMENT. Landlord agrees to pay a commission to Landlord's Broker (identified in the Agency Disclosure paragraph above ) as follows: [ ] $_____________________ [X] 7.5% of the gross rent payable pursuant to the Lease. [ ] $_____________________ per square foot of the Premises [ ] Other: Landlord's Broker [ ] shall [X] shall not (shall not if not filled in) be entitled to a commission upon the extension by Tenant of the Lease term pursuant to any right reserved to Tenant under the Lease calculated [ ] as provided above or [ ] as follows ____________________ (if no box is checked, as provided above). Landlord's Broker [ ] shall [X] shall not (shall not if not filled in) be entitled to a commission upon any expansion of Premises pursuant to any right reserved to Tenant under the Lease, calculated [ ] as provided above or [ ] as follows ____________________ (if no box is checked, as provided above). Any commission shall be earned upon occupancy of the Premises by Tenant, and paid one-half upon execution of the Lease and one-half upon occupancy of the Premises by Tenant. Landlord's Broker shall pay to Tenant's Broker (identified in the Agency Disclosure paragraph above) the amount stated in a separate agreement between them or, if there is no agreement, $____________________/____________________% (complete only one) of any commission paid to Landlord's Broker, within five (5) days after receipt by Landlord's Broker. If any other lease or sale is entered into between Landlord and Tenant pursuant to a right reserved to Tenant under the Lease, Landlord [ ] shall [X] shall not (shall not if not filled in) pay an additional commission according to any commission agreement or, in the absence of one, according to the commission schedule of Landlord's Broker in effect as of the execution of this Lease. Landlord's successor shall be obligated to pay any unpaid commissions upon any transfer of this Lease and any such transfer not release form liability to pay such commissions. 36. BROKER PROVISIONS. LANDLORD'S AGENT, TENANT'S LICENSEE AND THEIR BROKERS HAVE MADE NO REPRESENTATIONS OR WARRANTIES CONCERNING THE PREMISES, THE MEANING OF THE TERMS AND CONDITIONS OF THIS LEASE, LANDLORD'S OR TENANT'S FINANCIAL STANDING, ZONING, COMPLIANCE OF THE PREMISES WITH APPLICABLE LAWS, SERVICE OR CAPACITY OF UTILITIES, OPERATING EXPENSES, OR HAZARDOUS MATERIALS. LANDLORD AND TENANT ARE EACH ADVISED TO SEEK INDEPENDENT LEGAL ADVICE ON THESE AND OTHER MATTERS ARISING UNDER THIS LEASE. IN WITNESS WHEREOF this Lease has been executed the date and year first written above. 9 LEASE AGREEMENT (CONTINUED) - ------------------------------------- ---------------------------------------- LANDLORD: TENANT: - ------------------------------------- ---------------------------------------- LANDLORD: TENANT: - ------------------------------------- ---------------------------------------- BY: BY: - ------------------------------------- ---------------------------------------- ITS: ITS: 10 LEASE AGREEMENT (CONTINUED) STATE OF WASHINGTON ) )ss. COUNTY OF _________ ) I certify that I know or have satisfactory evidence that ______________________________ is the person who appeared before me and said person acknowledged that __________________________________ signed this instrument, on oath stated that _____________________________________ was authorized to execute the instrument and acknowledged it as the _____________________________ of ________________________________ to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: _________________, ___________ (Seal or stamp) ________________________________________ Printed Name: __________________________ NOTARY PUBLIC in and for the State of Washington residing at: ________________ My commission expires: _________________ STATE OF WASHINGTON ) )ss. COUNTY OF _________ ) I certify that I know or have satisfactory evidence that ______________________________ is the person who appeared before me and said person acknowledged that __________________________________ signed this instrument, on oath stated that _____________________________________ was authorized to execute the instrument and acknowledged it as the _____________________________ of ________________________________ to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: ________________, ___________ (Seal or stamp) ________________________________________ Printed Name: __________________________ NOTARY PUBLIC in and for the State of Washington residing at: ________________ My commission expires: _________________ 11 LEASE AGREEMENT (CONTINUED) EXHIBIT A (Legal Description) EXHIBIT A Lot A of that certain Lot Line Adjustment, City of Bothell, No. D-86-40, as recorded with the King County Department of Records and Elections, No. 9703020690, otherwise described as follows: BEGINNING at the center line intersection of 120th Avenue WE and North Creek Parkway of the plat of Quadrant Business Park - Bothell, City of Bothell, as recorded in Volume 131 of Plats, at pages 87-91, Records of Xing County, Washington; THENCE North 00-02-04 East, 16.60 feet along the center line of 120th Avenue NE, THENCE Northerly 392.06 feet along the arc of the 120th Avenue center line to the left, having a radius of 600.00 feet to the point of tangent of the curve; THENCE South 52-41-42 West, 40 feet to the west margin of 120th Avenue NE. THENCE North 37-18-18 West along the west margin of 120th Avenue NE, 11.05 feet to the TRUE POINT OF BEGINNING. THENCE North 37-18-18 West along the west margin of 120th Avenue NE, 318-91 feet; THENCE South 64-25-04 West, 250.00 feet; THENCE South 22-23-55 East, 250.00 feet; THENCE North 68-20-36 East, 332-68 feet to the TRUE POINT OF BEGINNING. 12 LEASE AGREEMENT (CONTINUED) EXHIBIT B (Tenant Improvement Schedule) 1. Landlord agrees to remove the half wall from the office space. 2. Landlord agrees to clean the office space to meet a good office environment. EXHIBIT C (Renewal Option and Early Access) 1. Tenant shall have the ability to renew their lease for one year with three months prior written notice. Rates shall be at then market conditions. 2. Upon full execution of the lease and delivery of certificate of insurance, Tenant shall have the right to access the space starting December 15, 2005. 13 EX-10.35 14 v16023exv10w35.htm EXHIBIT 10.35

EXHIBIT 10.35

CLINICAL STUDY AGREEMENT

     THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, on behalf of its Los Angeles Campus (hereinafter “University”), and Northwest Biotherapeutics Inc., (hereinafter “Company”), agree that University will perform for a clinical study (hereinafter “the Study”) in accordance with the protocol entitled “Phase 1 Clinical Trial Evaluating Booster Vaccinations of DCVax^®-Brain for Treatment of Glioblastoma” (attached as Exhibit A) on the following terms and conditions:

1. INVESTIGATOR; INVESTIGATOR OBLIGATIONS:

A. Linda Liau, M.D., Ph.D., is the named principal investigator (“Investigator”) and will be responsible for conducting the Study; Company is not a “Sponsor”, as that term is defined by the Food and Drug Administration (“FDA”) Federal Code of Regulations 21 CFR 312.3(b), of the Study. Investigator will not represent in the informed consent or elsewhere that Company is the Study Sponsor.

B. Company acknowledges that Investigator is the author of the Study protocol and research design. The Study protocol and design shall be the property of the University, but Company shall have certain rights of access to and use of Study data in accordance with this Agreement. The Investigator will inform the Company of any changes in the Protocol that significantly affect the Study objectives or Study subject safety and any other material changes.

C. The Study will be conducted in accordance with the Protocol, FDA defined Good Clinical Practice Guidelines (GCPs) and all applicable laws and regulations. Investigator, to the extent required to do so by applicable law, will obtain and maintain: (a) an Investigational New Drug application (“IND”) pursuant to FDA regulations, (b) University’s institutional review board (“IRB”) review and approval or exemption, and/or (c) written patient informed consent (“Informed Consent”) approved by the IRB and signed by the Study patient or Study patient legal representative as required. The University and Investigator are fully responsible for the adequacy of the Informed Consent and Company has no liability related to nor obligation to review or comment on that document.

D. University through Investigator shall provide Company with a final report of the research efforts under this Agreement as described in Exhibit B.

E. As Study Sponsor, INSTITUTION and INVESTIGATOR are solely responsible for reporting any adverse events or safety reports in connection with the Study that may be required by applicable law to be made to the FDA or other regulatory authority. INSTITUTION and INVESTIGATOR shall provide Company with a copy of any such reports simultaneously with submission to the FDA or other agency.

F. The Investigator shall limit the use and evaluation of Study Drug, as defined herein, to activities directly related to the Protocol and shall not transfer any Company Study Drug to any third party, without the prior written consent of Company.

2. COMPANY OBLIGATIONS:

A. Company will not provide DCVax-Brain (“Study Drug”) for use in this Study. Such Study Drug will continue to be prepared by Investigator.

B. Payment. The cost to Company for the Study is $215,829.00 USD (inclusive of University’s applicable overhead rate for investigator initiated studies), to be paid in accordance with the schedule attached as Exhibit C. The total amount will be adjusted if needed, according to actual patient visits as outlined in Exhibit C. Additional testing, treatment or other procedures not specifically authorized by Company or set forth in this Agreement, will not be reimbursed by the Company unless prior approval by the parties is made in writing.

3. TERM: This Agreement shall become effective as of the last date of signing by the last party to sign and shall continue until completion of the Study or until termination pursuant to Article 13.

4. PAYMENTS:

All payments will be made payable to:

The Regents of the University of California
Tax I.D. Number: 95-6006143
All payments will be mailed to:	UCLA Remittance Center
	10920 Wilshire Boulevard
	Suite 107
	Los Angeles, California 90024-1406
Payments shall reference:	Investigator Name and Study Title

5. CONFIDENTIALITY: Company will not disclose its confidential information unless it is necessary to the Study. Any information Company discloses to University and considers confidential will be clearly marked in writing, as “Confidential”, or if orally disclosed to University, will be clearly identified as “Confidential”. Except as required by law, University will not disclose such Company confidential information for a period of five (5) years from the expiration or termination of this Agreement. This obligation to maintain confidentiality does not apply to information that: (a) was known to University prior to its receipt from Company, (b) the University independently develops, (c) is now public knowledge or subsequently becomes such through no breach of this Agreement, (d) is rightfully disclosed by third parties to University, or (e) University is required by law to disclose. University will use reasonable efforts to protect the confidentiality of such information while in its possession.

6. PUBLICATION: University may publish Study results or present Study results at meetings, seminars, or the like, but will not disclose confidential information received from Company. University agrees to submit a copy of all manuscripts, abstracts, and /or presentation materials which report results of the Study, to Company for review and comment forty-five (45) days prior to its publication. Company will have said forty-five days to review publication. Company will have no editorial rights over manuscripts, but may comment on and request redaction of confidential or proprietary information.

7.  UNIVERSITY AND COMPANY NAMES: California Education Code section 92000 prohibits use of University’s names to suggest that University endorses a product or service. Company will not use University’s names, including “UCLA,” without the express prior written approval, except to identify University as the Study site when required to do so by law. University will not use Company’s names without the express prior written approval of Company, except when required to do so by law.

8. INVENTIONS:

A. Inventorship of developments or discoveries first conceived and reduced to practice under this Agreement (“Subject Inventions”) will be determined in accordance with U.S. Patent Law. All rights to Subject Inventions made solely by employees of University will belong solely to University. All rights to Subject Inventions made solely by employees of Company will belong solely to Company. All rights to Subject Inventions made jointly by employees of University and employees of Company will belong jointly to University and Company. To the extent that Company pays all direct and indirect costs of University’s performance hereunder, and to the extent that the University is legally able, Company will be granted a 120-day first right to negotiate an option or license to University’s rights in any Subject Invention that belongs either solely to University or jointly to University and Company.

2

B. University will promptly disclose to Company any Subject Inventions. Company will hold such disclosure on a confidential basis and will not disclose the information to any third party without consent of University. Company will advise the University in writing within sixty (60) days of such disclosure to Company whether or not it wishes to secure an option or commercial license (“Election Period”). Company will have 120 days from the date of election to conclude an option or license agreement with University (“Negotiation Period”). If such option or license is not concluded within the Negotiation Period, neither party will have any further obligations to the other with respect to such Subject Invention. If Company does not elect to secure such option or license; rights to such Subject Invention will be disposed of in accordance with University’s policies, with no further licensing obligation to Company with respect to such Subject Invention.

C. Nothing contained in this Agreement shall be deemed to grant either directly or by implication, estoppel, or otherwise, any rights under any patents, patent applications or other proprietary interests, whether dominant or subordinate, or any other invention, discovery or improvement of either party, other than the specific rights covering Subject Inventions under this Agreement.

9. DATA: The University shall own all Study data. The Company will have a right to access and use the Study data, and other data obtained by the Investigator and/or University relating to the patients treated under the Study (including, without limitation, survival data), to the maximum extent permitted under University policy and applicable laws. Nothing herein shall prevent University from using or sharing information and data generated hereunder for ordinary research and educational purposes of a university. Company may, upon prior notice and at reasonable times, access Study data in whatever form available, however, consistent with applicable law, individual subject identifiers shall not be made available to Company. If Study data must be redacted for the purpose of allowing Company access, then Company agrees to reimburse University for the reasonable cost of generating such redacted reports.

10. INDEMNIFICATION:

A. University will indemnify, defend and hold harmless Company, its trustees, officers, agents, and employees from and against any and all liability, loss, expense (including reasonable attorney’s fees), or claims for injury or damages arising out of the performance of this Agreement, but only in proportion to and to the extent such liability, loss, expense, attorney’s fees, or claims for injury or damages are caused by or result from the negligent or intentional acts or omissions of University, its trustees, officers, agents or employees.

B. Company will indemnify, defend and hold harmless University, its trustees, officers, agents, and employees from and against any and all liability, loss, expense (including reasonable attorney’s fees), or claims for injury or damages arising out of the performance of this Agreement, but only in proportion to and to the extent such liability, loss, expense, attorney’s fees, or claims for injury or damages are caused by or result from the negligent or intentional acts or omissions of Company, its directors, officers, agents or employees.

C. An indemnified party shall give prompt notice of any claim to the other party and the indemnified party shall control the defense, settlement, or compromise of any such claim. Notwithstanding the aforementioned, neither party shall have the right to admit the guilt or fault of the other party in any such settlement.

11. INSURANCE: Each party hereto represents that it maintains a policy or program of insurance or self-insurance at levels sufficient to support its obligations assumed herein. Upon request, Company will provide evidence of its insurance to University. Company will provide to University written notice of cancellation of its coverage at least thirty (30) days prior to such cancellation.

12. TERMINATION: Either party may terminate this Agreement upon thirty (30) days written notice. The parties will work together to safely withdraw Study subjects from the Study over a mutually agreeable

3

period if thirty (30) days notice is insufficient, based upon evaluation of risks to subjects. If Company terminates the Study, before its completion, Company shall reimburse University for all costs incurred in the conduct of the Study, including non-cancelable commitments undertaken up to the point of termination. The amount of this final payment will include the costs incurred for each patient not completing the full course of the Study at the time it is terminated. University will retain payment for non-cancelable obligations incurred through the termination date. The provisions of Articles 5, 7, 8, 9, 10 of this Agreement will remain in effect after the termination or expiration of this Agreement, for any occurrences arising out of the performance of the Agreement prior to termination.

13. ORDER OF PRECEDENCE: To the extent that any of the terms and conditions of this Agreement are in conflict with the language of the Protocol attached, the terms and conditions of this Agreement shall govern.

14. APPLICABLE LAW: The laws of the State of California govern this Agreement.

15. NOTICE: Any notice given pursuant to this Agreement will be written and sent to:

UNIVERSTIY:	COMPANY:
University of California	Northwest Biotherapeutics, Inc.
Office Clinical Trials	18701 120th Avenue NE, Suite 101
10920 Wilshire Boulevard, Suite 1200	Bothell, WA 98011
Los Angeles, California 90024
ATTENTION: Industry Contract Officer	ATTENTION: Alton L. Boynton
If by Fax: (310) 794-0631

Or such other address or number as shall be furnished in writing by any such party, and such notice or communication shall, if properly addressed be deemed to have been given as of the date delivered in person or sent by facsimile, one day after deposition with an overnight courier or 4 business days after deposition into the US mail.

16. COMPLIANCE WITH LAWS: The parties hereto acknowledge that they will comply with laws, rules and regulations applicable to the performance of the Study. Applicable laws shall include but not be limited to: Food and Drug Administration, Heath Insurance Portability and Accountability Act, California Medical Information Act and other applicable laws.

17. FORCE MAJEURE: If a party fails to perform its obligations because of acts of God, governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy or hostile government action, civil commotion, telecommunications failure (including, without limitation, Internet failures), fires or other casualty or causes beyond the reasonable control of the party obligated to perform, then that party’s performance shall be excused provided that such party notifies the other party as soon as practicable of the existence of such condition and uses reasonable efforts to resume performance in an expeditious manner.

18. RELATIONSHIP OF PARTIES: The parties hereto are independent contractors. Neither party shall act nor represent itself, directly or by implication, as an agent of the other. Each party shall be responsible for the direction and control of its employees, subcontractors, and/or consultants and nothing under this Agreement shall create any relationship between the employees, subcontractors and/or consultants of University and Company respectively.

19. ASSIGNMENT: Neither party will assign its rights or duties under this Agreement to another without the prior express written consent of the other party; provided, however, that Company may assign this Agreement to a successor in ownership of all or substantially all its business assets in the field to which this Agreement relates. Such successor will expressly assume in writing the obligation to perform in

4

accordance with the terms and conditions of this Agreement. Any other purported assignment will be void.

20. ENTIRE AGREEMENT; AMENDMENT: This Agreement represents the entire understanding of the parties with respect to the subject matter. There are no representations, warranties, understandings or agreements among the parties with respect to the subject matter contained herein and therein, which are not fully expressed in this Agreement. This Agreement and the exhibits attached hereto supersede all prior agreements and understandings between the parties with respect to such subject matter. Any modification of this Agreement must be in writing and signed by the parties.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

5

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate as of the date last signed below.

COMPANY: NORTHWEST BIOTHERAPEUTICS			THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:			By:
		(Signature)			(Signature)
By:	Alton L. Boynton		By:	Ann Ciminera
		(Typed Name)			(Typed Name)
President			Industry Contract Offier
		(Title)			(Title)
Date:	2/14/2006		Date:	1/24/2006

READ AND ACKNOWLEGDED BY INVESTIGATOR:
By:
		(Signature)
By:	Linda M. Liau
		(Typed Name)
Date:	1/20/2006

6

EXHIBIT A – PROTOCOL

7

EXHIBIT B – FINAL REPORT

Final report of the study will include:

• data related time of progression of disease

• overall survival of patients

• immunological data related to the study drug and stimulation of an immune response

• completed case report forms including data related to adverse events, serious adverse events, etc.

8

EXHIBIT C – PAYMENT SCHEDULE

20% up front within 30 days of signing of agreement

12% per each booster cycle for 10 patients

20% upon final completion of CRF’s and study report

9

EX-3.1

                                                                     EXHIBIT 3.1

                           SIXTH AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION

                                       OF

                         NORTHWEST BIOTHERAPEUTICS INC.

     The undersigned, Daniel O. Wilds and Alton L. Boynton, hereby certify that:

     1. They are the duly elected and acting President and Secretary,
respectively, of Northwest Biotherapeutics, Inc., a Delaware corporation.

     2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on July 29, 1998.

     3. The First Amended and Restated Certificate of Incorporation of this
corporation was filed with the Secretary of State of Delaware on September 15,
1998.

     4. The Second Amended and Restated Certificate of Incorporation of this
corporation was filed with the Secretary of State of Delaware on March 26, 1999.

     5. The Third Amended and Restated Certificate of Incorporation of this
corporation was filed with the Secretary of State of Delaware on October 24,
2000.

     6. The Fourth Amended and Restated Certificate of Incorporation of this
corporation was filed with the Secretary of State of Delaware on June 1, 2001.

     7. The Fifth Amended and Restated Certificate of Incorporation of this
corporation was filed with the Secretary of State of Delaware on June 26, 2001.

     8. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:

                                    ARTICLE I

     The name of the corporation is Northwest Biotherapeutics Inc. (the
"Corporation").

                                   ARTICLE II

     The address of the Corporation's registered office in the State of Delaware
is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.



                                   ARTICLE III

     The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.

                                   ARTICLE IV

                                 CAPITALIZATION

     1. Authorized Capital.

          (a) The total number of shares of stock that the Corporation shall
have the authority to issue is one hundred forty million (140,000,000) shares of
capital stock, consisting of (i) fifteen million (15,000,000) shares of
preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii)
one hundred twenty-five million (125,000,000) shares of common stock, par value
$0.001 per share (the "Common Stock").

          (b) Subject to the provisions of this Certificate of Incorporation and
the Preferred Stock Designation (as defined below) creating any series of
Preferred Stock, the Corporation may issue shares of its capital stock from time
to time for such consideration (not less than the par value thereof) as may be
fixed by the Board of Directors of the Corporation (the "Board of Directors"),
which is expressly authorized to fix the same in its absolute discretion subject
to the foregoing conditions. Shares so issued for which the consideration shall
have been paid or delivered to the Corporation shall be deemed fully paid stock
and shall not be liable to any further call or assessment thereon, and the
holders of such shares shall not be liable for any further payments in respect
of such shares.

          (c) The right to cumulate votes for the election of directors as
provided in Section 214 of the DGCL shall not be granted and is hereby expressly
denied.

          (d) No stockholder of the Corporation shall by reason of his/her/its
holding shares of any class of capital stock of the Corporation have any
preemptive or preferential right to acquire or subscribe for any additional,
unissued or treasury shares (whether now or hereafter acquired) of any class of
capital stock of the Corporation now or hereafter to be authorized, or any
notes, debentures, bonds or other securities convertible into or carrying any
right, option or warrant to subscribe for or acquire shares of any class of
capital stock of the Corporation now or hereafter to be authorized, whether or
not the issuance of any such shares or such notes, debentures, bonds or other
securities would adversely affect the dividends or voting or other rights of
that stockholder.

     2. Preferred Stock.

          (a) The Preferred Stock may be issued from brae to time in one or more
series. Authority is hereby expressly granted to and vested in the Board of
Directors to authorize from time to time the issuance of Preferred Stock in one
or more series. With respect to each


                                        2



series of Preferred Stock authorized by it, the Board of Directors shall be
authorized to establish by resolution or resolutions, and by filing a
certificate pursuant to applicable law of the State of Delaware (the "Preferred
Stock Designation"), the following to the fullest extent now or hereafter
permitted by the DGCL:

               (1) the designation of such series;

               (2) the number of shares to constitute such series;

               (3) whether such series is to have voting rights (full, special
     or limited) or is to be without voting rights;

               (4) if such series is to have voting rights, whether or not such
     series is to be entitled to vote as a separate class either alone or
     together with the holders of the Common Stock or one or more other series
     of Preferred Stock;

               (5) the preferences and relative, participating, optional,
     conversion or other special rights (if any) of such series and the
     qualifications, limitations or restrictions (if any) with respect to such
     series;

               (6) the redemption rights and price(s), if any, of such series,
     and whether or not the shares of such series shall be subject to the
     operation of retirement or sinking funds to be applied to the purchase or
     redemption of such shares for retirement and, if such retirement or sinking
     funds or funds are to be established, the periodic amount thereof and the
     terms and provisions relative to the operation thereof,

               (7) the dividend rights and preferences (if any) of such series,
     including, without limitation, (i) the rates of dividends payable thereon,
     (ii) the conditions upon which and the time when such dividends are
     payable, (iii) whether or not such dividends shall be cumulative or
     noncumulative and, if cumulative, the date or dates from which such
     dividends shall accumulate and (iv) whether or not the payment of such
     dividends shall be preferred to the payment of dividends payable on the
     Common Stock or any other series of Preferred Stock;

               (8) the preferences (if any), and the amounts thereof, which the
     holders of such series shall be entitled to receive upon the voluntary or
     involuntary liquidation, dissolution or winding-up of, or upon any
     distribution of the assets of, the Corporation;

               (9) whether or not the shares of such series, at the option of
     the Corporation or the holders thereof or upon the happening of any
     specified event, shall be convertible into or exchangeable for (i) shares
     of Common Stock, (ii) shares of any other series of Preferred Stock or
     (iii) any other stock or securities of the Corporation;

               (10) if such series is to be convertible or exchangeable, the
     price or prices or ratio or ratios or rate or rates at which such
     conversion or exchange may be


                                        3



     made and the terms and conditions (if any) upon which such price or prices
     or ratio or ratios or rate or rates may be adjusted; and

               (11) such other rights, powers and preferences with respect to
     such series as may to the Board of Directors seem advisable.

     Any series of Preferred Stock may vary from any other series of Preferred
Stock in any or all of the foregoing respects and in any other manner.

          (b) The Board of Directors may, with respect to any existing series of
Preferred Stock but subject to the Preferred Stock Designation creating such
series, (i) increase the number of shares of Preferred Stock designated for such
series by a resolution adding to such series authorized and unissued shares of
Preferred Stock not designated for any other series and (ii) decrease the number
of shares of Preferred Stock designated for such series by a resolution
subtracting from such series shares of Preferred Stock designated for such
series (but not below the number of shares of such series then outstanding), and
the shares so subtracted shall become authorized, unissued and undesignated
shares of Preferred Stock.

          (c) No vote of the holders of the Common Stock or the Preferred Stock
shall, unless otherwise expressly provided in a Preferred Stock Designation
creating any series of Preferred Stock, be a prerequisite to the issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Certificate of Incorporation. Shares of any series of
Preferred Stock that have been authorized for issuance pursuant to this
Certificate of Incorporation and that have been issued and reacquired in any
manner by the Corporation (including upon conversion or exchange thereof) shall
be restored to the status of authorized and unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors and a Preferred Stock
Designation as set forth above.

     3. Common Stock.

          (a) The holders of shares of the Common Stock shall be entitled to
vote upon all matters submitted to a vote of the common stockholders of the
Corporation and shall be entitled to one vote for each share of the Common Stock
held.

          (b) Subject to the prior rights and preferences (if any) applicable to
shares of Preferred Stock of any series, the holders of shares of the Common
Stock shall be entitled to receive such dividends (payable in cash, stock or
otherwise) as may be declared thereon by the Board of Directors at any time and
from time to time out of any funds of the Corporation legally available
therefor.

          (c) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, after payment or provision for
payment of the debts and other liabilities of the Corporation and subject to the
preferential or other rights (if any) of the holders of shares of the Preferred
Stock in respect thereof, the holders of shares of the Common Stock shall be
entitled to receive all the remaining assets of the Corporation available for
distribution to


                                        4



its stockholders, ratably in proportion to the number of shares of the Common
Stock held by them. For purposes of this paragraph (c), a liquidation,
dissolution or winding-up of the Corporation shall not be deemed to be
occasioned by or to include (i) any consolidation or merger of the Corporation
with or into another corporation or other entity or (ii) a sale, lease, exchange
or conveyance of all or a part of the assets of the Corporation.

     4. Stock Options, Warrants, etc. Unless otherwise expressly prohibited in
the Preferred Stock Designation creating any series of Preferred Stock, the
Corporation shall have authority to create and issue warrants, rights and
options entitling the holders thereof to purchase from the Corporation shares of
the Corporation's capital stock of any class or series or other securities of
the Corporation for such consideration and to such persons, firms or
corporations as the Board of Directors, in its sole discretion, may determine,
setting aside from the authorized but unissued capital stock of the Corporation
the requisite number of shares for issuance upon the exercise of such warrants,
rights or options. Such warrants, rights and options shall be evidenced by one
or more instruments approved by the Board of Directors. The Board of Directors
shall be empowered to set the exercise price, duration, time for exercise and
other terms of such warrants, rights or options; provided, however, that the
consideration to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.

                                    ARTICLE V

     The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal Bylaws or adopt new Bylaws; provided however, that the Board of
Directors may not repeal or amend any bylaw that stockholders have expressly
provided may not be amended or repealed by the Board of Directors. The
stockholders shall also have the power to adopt, amend or repeal the Bylaws of
this Corporation by the affirmative vote of the holders of not less than
two-thirds of the outstanding shares entitled to vote thereon and, to the
extent, if any, provided by resolution adopted by the Board of Directors
authorizing the issuance of a class of series of Common Stock or Preferred
Stock, by the affirmative vote of the holders of not less than two-thirds of the
outstanding shares of such class or series, voting as a separate group.

                                   ARTICLE VI

     (A) Board Of Directors. The business and affairs of the Corporation shall
be managed under the direction of a Board of Directors, the number of which
shall be fixed from time to time exclusively by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board for
adoption) (the "Whole Board"). The Directors shall be classified with respect to
the time for which they shall severally hold office by dividing them into three
classes, Class I, Class II and Class III, each consisting as nearly as possible
of one-third of the Whole Board. All Directors shall hold office until their
successors are elected and qualified, or until their earlier death, resignation,
disqualification or removal. Class I Directors shall be elected for a term of
one year; Class II Directors shall be elected for a term of two years; and Class
III Directors shall be elected for a term of three years; and at each annual
stockholders' meeting thereafter, successors to the Directors whose terms


                                        5



shall expire that year shall be elected to hold office for a term of three
years, so that the term of office of one class of Directors shall expire in each
year. Any vacancy on the Board of Directors that results from an increase in the
number of Directors may be filled by the affirmative vote of a majority of the
Directors then in office and a majority of the Continuing Directors, voting
separately and as a subclass of Directors, and any other vacancy on the Board of
Directors may be filled by the affirmative vote of a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director.
Any Director elected to fill a vacancy not resulting from an increase in the
number of Directors shall serve for a term equivalent to the remaining unserved
portion of the term of such newly elected Director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of preferred stock issued by the Corporation shall have the right,
voting separately by class or series, to elect Directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such Directorships shall be governed by the terms of this
Amended and Restated Certificate of Incorporation applicable thereto, and such
Directors shall not be divided into classes pursuant to this Section (A) unless
expressly provided by such terms.

     (B) Removal of Directors by Stockholders. A Director may be removed from
office only for "cause" at a special meeting of stockholders called for that
purpose, by the affirmative vote of the holders of not less than two-thirds of
the shares entitled to elect the Director or Directors whose removal is being
sought. The vacancy created by the removal of any Director under this Section
(B) shall be filled only by the affirmative vote of the holders of at least
two-thirds of the shares entitled to elect the Director who was removed. As used
herein, "cause" shall mean (a) willful and continued material failure, refusal
or inability to perform the Director's duties to the corporation or the willful
engaging in gross misconduct that is materially and demonstrably damaging to the
corporation; or (b) conviction for any crime involving moral turpitude or any
other illegal act that materially and adversely reflects upon the business,
affairs or reputation of the corporation or on the Director's ability to perform
the Director's duties to the corporation.

                                   ARTICLE VII

     (A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.

     (B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.

     (C) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII
in respect of any matter occurring, or any


                                        6



action or proceeding accruing or arising or that, but for this Article VII,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision

                                  ARTICLE VIII

     (A) Amendments to Restated Certificate of Incorporation. The following
Articles and Sections may be amended or repealed only upon the affirmative vote
of the holders of at least two-thirds of the outstanding shares and, to the
extent, if any, provided by resolution adopted by the Board of Directors
authorizing the issuance of a class or series of Common Stock or Preferred
Stock, by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of such class or series, voting as a separate voting group:

     Article V ("Bylaws");

     Article VI ("Directors");

     Article VII ("Limitation of Director Liability");

     Article VIII ("Amendments to Restated Certificate of Incorporation");

     Article IX ("Business Combinations").

                                   ARTICLE IX

     (A) Business Combinations.

          1. Definitions. For the purposes of this Article IX:

               a. "Business Combination" means (i) a merger, share exchange or
consolidation of this corporation or any of its Subsidiaries with any other
corporation; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition or encumbrance, whether in one transaction or a series of
transactions, by this corporation or any of its Subsidiaries of all or a
substantial part of this corporation's assets otherwise than in the usual and
regular course of business; or (iii) any agreement, contract or other
arrangement providing for any of the foregoing transactions.

               b. "Subsidiary" means a domestic or foreign corporation, a
majority of the outstanding voting shares of which are owned, directly or
indirectly, by this corporation.

          2. Information Considered by Board of Directors. In considering a
Business Combination, the Board of Directors may take into account factors in
addition to potential economic benefits to the stockholders, including without
limitation (i) comparison of the proposed consideration to be received by
stockholders in relation to the then current market price of the corporation's
capital stock, the estimated current value of the corporation in a freely
negotiated transaction and the estimated future value of the corporation as an
independent entity,


                                        7



and (ii) the impact of such a transaction on the employees, suppliers and
customers of the corporation and its effect on the communities in which the
corporation operates.

     The foregoing Fifth Amended and Restated Certificate of Incorporation has
been duly adopted by the Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.

     Executed at Seattle, Washington, on June 21, 2001.


                                        /s/ Daniel O. Wilds
                                        ----------------------------------------
                                        Daniel O. Wilds, President


                                        /s/ Alton L. Boynton
                                        ----------------------------------------
                                        Alton L. Boynton, Secretary


                                        8



                            CERTIFICATE OF AMENDMENT
                        OF THE SIXTH AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                          OF NORTHWEST BIOTHERAPEUTICS

                         Pursuant to Section 242 of the
                         General Corporation Law of the
                                State of Delaware

     Northwest Biotherapeutics, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"),

     DOES HEREBY CERTIFY:

     That, by written action of the Board of Directors of the Corporation, a
resolution was duly adopted, pursuant to Section 242 of the General Corporation
Law of the State of Delaware, setting forth an amendment to the Certificate of
Incorporation, as amended, of the Corporation and declaring such amendment to be
advisable. The stockholders of the Corporation duly approved said proposed
amendment by written consent in accordance with Sections 228 and 242 of the
General Corporation Law of the State of Delaware, and written notice of such
consent has been given to all stockholders who have not consented in writing to
such amendment. The resolution setting forth the amendment is as follows:

     RESOLVED: That Article IV, Section 1(a) of the Sixth Amended and Restated
Certificate of Incorporation of the Corporation, be and hereby is deleted in its
entirety and the following Article IV, Section 1(a) is inserted in lieu thereof.

                                   ARTICLE IV

     (a) The total number of shares that the Corporation shall have the
authority to issue is four hundred million (400,000,000) shares of capital
stock, consisting of (i) one hundred million (100,000,000) shares of preferred
stock, par value $0.001 per share (the "Preferred Stock"), and (ii) three
hundred million (300,000,000) shares of common stock, par value $0.001 per share
(the "Common Stock").

     Executed at Seattle, Washington, on December 29, 2004.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By
                                           -------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President, Chief Executive
                                               Officer and Secretary

EX-3.3

                                                                     Exhibit 3.3

               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

                                       OF

                         NORTHWEST BIOTHERAPEUTICS, INC.

                         (Pursuant to Section 151 of the

                        Delaware General Corporation Law)

     Northwest Biotherapeutics, Inc. (the "COMPANY"), a corporation organized
and existing under the laws of the State of Delaware, hereby certifies that,
pursuant to authority conferred on its Board of Directors (the "BOARD") by the
Sixth Amended and Restated Certificate of Incorporation, as amended, of the
Company, the following resolution was adopted by the Board by unanimous written
consent dated January 26, 2005, which resolution remains in full force and
effect on the date hereof:

     RESOLVED, that there is hereby established a series of the Company's
authorized Preferred Stock (the "PREFERRED STOCK") having a par value of $0.001
per share, which series shall be designated as "Series A Cumulative Convertible
Preferred Stock" (the "SERIES A PREFERRED") and shall consist of fifty million
(50,000,000) shares. The shares of Series A Preferred shall have the voting
powers, designations, preferences and other special rights, and qualifications,
limitations and restrictions thereof set forth below:

     1. DIVIDEND RIGHTS.

          (A) Holders of Series A Preferred, in preference to the holders of
Common Stock, shall be entitled to receive, when, as and if declared by the
Board, but only out of funds that are legally available therefor, cash dividends
at the rate of ten percent (10%) of the Original Issue Price (as defined below)
per annum on each outstanding share of Series A Preferred. Such dividends shall
be cumulative, whether or not earned or declared, shall be compounded quarterly,
and shall be payable as and when declared by the Board, and upon the occurrence
of a Liquidation Event, Acquisition or Asset Transfer (each as defined below).

          (B) The "ORIGINAL ISSUE PRICE" of the Series A Preferred shall be four
cents ($0.04) per share (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares after the
filing date hereof).

          (C) So long as any shares of Series A Preferred are outstanding, the
Company shall not pay or declare any dividend, whether in cash or property, or
make any other distribution on the Common Stock or any other securities issued
by the Company other than the Series A Preferred, or purchase, redeem or
otherwise acquire for value any shares of Common Stock or any other securities
issued by the Company other than the Series A Preferred until all


                                       1.



dividends as set forth in Section 1(a) above on the Series A Preferred shall
have been paid or declared an set apart, except for:

               (I) acquisitions of up to $100,000 of Common Stock by the Company
per year from employees, officers, directors, consultants, advisors or other
persons performing services for the Company pursuant to agreements which permit
the Company to repurchase such shares at cost upon termination of services to
the Company;

               (II) subject to approval of the holders of a majority of the
outstanding shares of Series A Preferred in accordance with Section 2(b)(vi)
hereof, acquisitions of Common Stock in exercise of the Company's right of first
refusal to repurchase such shares; or

               (III) distributions to holders of Common Stock in accordance with
Sections 3 and 4.

          (D) In the event dividends are paid on any share of Common Stock or
any other securities issued by the Company, the Company shall pay an additional
dividend on all outstanding shares of Series A Preferred in a per share amount
equal (on an as-if-converted to Common Stock basis) to the amount paid or set
aside for each share of Common Stock or any other securities issued by the
Company, respectively.

          (E) The provisions of Sections 1(c) and 1(d) shall not apply to a
dividend payable solely in Common Stock to which the provisions of Section 5(f)
hereof are applicable.

     2. VOTING RIGHTS.

          (A) GENERAL RIGHTS. Each holder of shares of the Series A Preferred
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series A Preferred could be converted (pursuant
to Section 5 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock and shall be entitled to notice of any stockholders' meeting in
accordance with the bylaws of the Company. Except as otherwise provided herein
or as required by law, the Series A Preferred shall vote together with the
Common Stock at any annual or special meeting of the stockholders and not as a
separate class, and may act by written consent in the same manner as the Common
Stock.

          (B) SEPARATE VOTE OF SERIES A PREFERRED. For so long as at least
1,000,000 shares of Series A Preferred (subject to adjustment for any stock
split, reverse stock split or other similar event affecting the Series A
Preferred after the filing date hereof) remain outstanding, in addition to any
other vote or consent required herein or by law, the approval of the Board and
the vote or written consent of the holders of at least a majority of the
outstanding Series A Preferred shall be necessary for effecting or validating
the following actions (whether by merger, recapitalization or otherwise):


                                       2.



               (I) Any amendment, alteration, or repeal of any provision of the
Certificate of Incorporation or the Bylaws of the Company (including any filing
of a Certificate of Designation);

               (II) Any issuance of shares of Series A Preferred or any other
securities exercisable for or convertible into Series A Preferred;

               (III) Any increase or decrease (other than by conversion) in the
designated number of shares of Series A Preferred;

               (IV) Any increase or decrease (other than by conversion) in the
authorized number of shares of Common Stock or Preferred Stock;

               (V) Any authorization, designation or issuance, whether by
recapitalization, reclassification or otherwise, of any class or series of
equity securities or any other securities exercisable for or convertible into
equity securities of the Company that has redemption rights or that ranks on a
parity with or senior to the Series A Preferred in right of liquidation
preference, voting rights, dividend rights or any other rights, preferences or
privileges, or any increase in the authorized or designated number of any such
new class or series;

               (VI) Any redemption, repurchase, acquisition (or payment into or
setting aside for a sinking fund for such purpose), payment or declaration of
dividends or other distributions with respect to Common Stock or common stock
equivalents (except for acquisitions of Common Stock by the Company permitted by
Section 1(c)(i) hereof);

               (VII) Any agreement by the Company or its stockholders regarding
an Asset Transfer or Acquisition (each as defined in Section 4 hereof);

               (VIII) Any dissolution, liquidation or winding up of the Company;

               (IX) Any increase or decrease in the authorized number of members
of the Board;

               (X) Any sale, lease, assignment, transfer or other conveyance of,
or any encumbrance granted upon, all or substantially all of the assets of the
Company or any of its subsidiaries in one or more related transactions;

               (XI) Any reclassification, recapitalization or other change of
any capital stock of the Company;

               (XII) Any issuance of shares of Common Stock or Convertible
Securities after the Original Issue Date to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary other than pursuant
to stock purchase or stock option plans or other arrangements that are approved
by the Board and the holders of a majority of the outstanding shares of Series A
Preferred; or


                                       3.



               (XIII) Any agreement, promise, commitment, obligation or
undertaking to do any of the foregoing.

     3. LIQUIDATION RIGHTS.

          (A) Upon any liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary (a "LIQUIDATION EVENT"), before any
distribution or payment shall be made to the holders of any Common Stock or
other equity security, the holders of Series A Preferred shall be entitled to be
paid out of the assets of the Company legally available for distribution for
each share of Series A Preferred held by them, an amount per share of Series A
Preferred equal to the Original Issue Price plus (to the extent of current
and/or retained earnings) all accrued and unpaid dividends and declared and
unpaid dividends on the Series A Preferred (or such lesser amount as is the
maximum amount acceptable under applicable U.S. Small Business Administration
and Securities and Exchange Commission rules and regulations). If, upon any such
Liquidation Event, the assets of the Company shall be insufficient to make
payment in full to all holders of Series A Preferred of the liquidation
preference set forth in this Section 3(a), then such assets (or consideration)
shall be distributed among the holders of Series A Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.

          (B) After the payment of the full liquidation preference of the Series
A Preferred as set forth in Section 3(a) above, the assets of the Company
legally available for distribution in such Liquidation Event (or the
consideration received by the Company or its stockholders in such Acquisition or
Asset Transfer), if any, shall be distributed ratably to the holders of the
Common Stock and Series A Preferred on an as-if-converted to Common Stock basis.

     4. ASSET TRANSFER OR ACQUISITION RIGHTS.

          (A) In the event that the Company is a party to an Acquisition or
Asset Transfer (as hereinafter defined), then each holder of Series A Preferred
shall be entitled to receive, for each share of Series A Preferred then held,
out of the proceeds of such Acquisition or Asset Transfer, the greater of the
amount of cash, securities or other property to which such holder would be
entitled to receive in a Liquidation Event pursuant to (i) Section 3(a) and 3(b)
above or (ii) the amount of cash, securities or other property to which such
holder would be entitled to receive in a Liquidation Event with respect to such
shares if such shares had been converted to Common Stock immediately prior to
such Acquisition or Asset Transfer.

          (B) For the purposes of this Section 4: (i) "ACQUISITION" shall mean
(A) any consolidation or merger of the Company with or into any other
corporation or other entity or person, or any other corporate reorganization,
other than any such consolidation, merger or reorganization in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, continue to hold at least a majority of the voting power of the
surviving entity in substantially the same proportions (or, if the surviving
entity is a wholly owned subsidiary, its parent) immediately after such
consolidation, merger or reorganization; or (B) any transaction or series of
related transactions to which the Company is a party in which in


                                       4.



excess of fifty percent (50%) of the Company's voting power is transferred;
provided that an Acquisition shall not include (x) any issuance of Series A
Preferred contemplated by the Amended and Restated Recapitalization Agreement,
dated as of July 30, 2004, by and between the Company and Toucan Capital Fund
II, L.P., as such agreement may be amended from time to time (the
"Recapitalization Agreement"), the conversion of any of the Notes representing
Bridge Funding, or exercise of any Bridge Warrants or Preferred Stock Warrants
(each as defined in the Recapitalization Agreement) and (y) any transaction or
series of transactions specifically deemed not to constitute an "Acquisition" by
the vote or written consent of the holders of a majority of the outstanding
shares of Series A Preferred; and (ii) "ASSET TRANSFER" shall mean a sale,
lease, exclusive license or other disposition of all or substantially all of the
assets of the Company.

          (C) In any Acquisition or Asset Transfer, if the consideration
received is other than cash, the value of such consideration will be deemed its
fair market value as determined in good faith by the Board, provided that any
securities shall be valued as follows:

               (I) Securities not subject to investment letter or other similar
restrictions on free marketability (which shall be covered by (ii) below):

                    (A) If traded on a securities exchange or through the Nasdaq
Stock Market, the value shall be deemed to be the average of the closing sale
prices of the securities on such quotation system over the ten (10) day period
ending three (3) days prior to the closing;

                    (B) If actively traded over-the-counter, the value shall be
deemed to be the average of the last reported sales price of the securities over
the ten (10) day period ending three (3) days prior to the closing; and

                    (C) If there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board.

               (II) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as determined in good faith by the Board.

               (III) Notwithstanding anything to the contrary in this Section 4,
if the definitive transaction documents for an Acquisition or Asset Transfer
provide for a different method of valuation, the method of valuation set forth
in such documents shall control.

     5. CONVERSION RIGHTS.

          The holders of the Series A Preferred shall have the following rights
with respect to the conversion of the Series A Preferred into shares of Common
Stock (the "CONVERSION RIGHTS"):


                                       5.



          (A) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "SERIES A PREFERRED CONVERSION RATE" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A
Preferred being converted.

          (B) SERIES A PREFERRED CONVERSION RATE. The conversion rate in effect
at any time for conversion of the Series A Preferred (the "SERIES A PREFERRED
CONVERSION RATE") shall be the quotient obtained by dividing the Original Issue
Price of the Series A Preferred by the "Series A Preferred Conversion Price,"
calculated as provided in Section 5(c).

          (C) SERIES A PREFERRED CONVERSION PRICE. The conversion price for the
Series A Preferred shall initially be the Original Issue Price of the Series A
Preferred (the "SERIES A PREFERRED CONVERSION PRICE"). Such initial Series A
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 5. All references to the Series A Preferred Conversion Price
herein shall mean the Series A Preferred Conversion Price as so adjusted.

          (D) MECHANICS OF CONVERSION. Each holder of Series A Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series A Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series A
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor or to the extent that the holder so elects, in Common Stock
(at the Common Stock's fair market value determined by the Board as of the date
of such conversion), any declared and unpaid dividends and accrued and unpaid
dividends on the shares of Series A Preferred being converted and (ii) in cash
(at the Common Stock's fair market value determined by the Board as of the date
of conversion) the value of any fractional share of Common Stock otherwise
issuable to any holder of Series A Preferred. For the purposes of this Section
5(d), the fair market value of the Company's Common Stock shall be the last
reported sales price reported on the NASD over-the-counter bulletin board (or if
the Common Stock is traded on another securities market, the last reported sales
price of the Common Stock on such securities market) on the date of conversion.
If the Common Stock is not publicly traded on the date of conversion, the fair
market value of the Company's Common Stock for the purposes of this Section 5(d)
shall be the fair market value as determined in good faith by the Board. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series A
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.


                                       6.



          (E) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any time or
from time to time on or after the date that the first share of Series A
Preferred is issued (the "ORIGINAL ISSUE DATE") the Company effects a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Series A Preferred, the Series A Preferred Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if at any time or from time to time after the Original Issue Date
the Company combines the outstanding shares of Common Stock into a smaller
number of shares without a corresponding combination of the Series A Preferred,
the Series A Preferred Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 5(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

          (F) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If at any
time or from time to time on or after the Original Issue Date the Company pays
to holders of Common Stock a dividend or other distribution in additional shares
of Common Stock without a corresponding dividend or other distribution to
holders of Preferred Stock, the Series A Preferred Conversion Price then in
effect shall be decreased as of the time of such issuance, as provided below:

               (I) The Series A Preferred Conversion Price shall be adjusted by
multiplying the Series A Preferred Conversion Price then in effect by a fraction
equal to:

                    (A) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance, and

                    (B) the denominator of which is the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance plus the number of shares of Common Stock issuable in payment of such
dividend or distribution;

               (II) If the Company fixes a record date to determine which
holders of Common Stock are entitled to receive such dividend or other
distribution, the Series A Preferred Conversion Price shall be fixed as of the
close of business on such record date and the number of shares of Common Stock
shall be calculated immediately prior to the close of business on such record
date; and

               (III) If such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the
Series A Preferred Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Series A Preferred
Conversion Price shall be adjusted pursuant to this Section 5(f) to reflect the
actual payment of such dividend or distribution.

          (G) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, SUBSTITUTION,
REORGANIZATION, MERGER OR CONSOLIDATION. If at any time or from time to time on
or after the Original Issue Date the Common Stock issuable upon the conversion
of the Series A Preferred is changed into the same or a different number of
shares of any class or classes of stock, whether by


                                       7.



recapitalization, reclassification, merger, consolidation or otherwise (other
than an Acquisition or Asset Transfer as defined in Section 4 or a subdivision
or combination of shares or stock dividend provided for elsewhere in this
Section 5), in any such event each holder of Series A Preferred shall then have
the right to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification,
merger, consolidation or other change by holders of the maximum number of shares
of Common Stock into which such shares of Series A Preferred could have been
converted immediately prior to such recapitalization, reclassification, merger,
consolidation or change, all subject to further adjustment as provided herein or
with respect to such other securities or property by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
A Preferred after the capital reorganization to the end that the provisions of
this Section 5 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series A
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.

          (H) SALE OF SHARES BELOW SERIES A PREFERRED CONVERSION PRICE.

               (I) If at any time or from time to time on or after the Original
Issue Date the Company issues or sells, or is deemed by the express provisions
of this Section 5(h) to have issued or sold, Additional Shares of Common Stock
(as defined below), other than as provided in Section 5(e), 5(f) or 5(g) above,
for an Effective Price (as defined below) less than the then effective Series A
Preferred Conversion Price (a "Qualifying Dilutive Issuance"), then and in each
such case, the then existing Series A Preferred Conversion Price shall be
reduced, as of the opening of business on the date of such issue or sale, to a
price equal to such Effective Price.

               (II) For the purpose of making any adjustment required under this
Section 5(h), the aggregate consideration received by the Company for any issue
or sale of securities (the "AGGREGATE CONSIDERATION") shall be defined as: (A)
to the extent it consists of cash, be computed at the gross amount of cash
received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company, (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as
defined below) or rights or options to purchase either Additional Shares of
Common Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.

               (III) For the purpose of the adjustment required under this
Section 5(h), if the Company issues or sells (x) Preferred Stock or other stock,
options, warrants, purchase rights or other securities convertible into,
Additional Shares of Common Stock (such convertible stock or securities being
herein referred to as "CONVERTIBLE SECURITIES") or (y) rights


                                       8.



or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series A Preferred Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities plus:

                    (A) in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options; and

                    (B) in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company upon the conversion
thereof (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities); provided that if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.

                    (C) If the minimum amount of consideration payable to the
Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.

                    (D) No further adjustment of the Series A Preferred
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock or the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A Preferred
Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Series A Preferred Conversion
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities


                                       9.



or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities, provided that such readjustment shall not apply to
prior conversions of Series A Preferred.

               (IV) For the purpose of making any adjustment to the Conversion
Price of the Series A Preferred required under this Section 5(h), "ADDITIONAL
SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued by the
Company or deemed to be issued pursuant to this Section 5(h) (including shares
of Common Stock subsequently reacquired or retired by the Company), other than:

                    (A) shares of Common Stock issued upon conversion of the
Series A Preferred;

                    (B) shares of Common Stock or Convertible Securities issued
after the Original Issue Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary that are (i) issued
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board; and (ii) designated as excluded from the definition of
"Additional Shares of Common Stock" by the vote or written consent of the
holders of a majority of the outstanding shares of Series A Preferred;

                    (C) up to 35,000 shares of Common Stock issued pursuant to
the exercise of options with an exercise price of $0.0001 per share that were
outstanding on April 26, 2004 and held by members of the Board;

                    (D) shares of Common Stock or Convertible Securities issued
pursuant to the exercise of the Initial Bridge Warrants (as defined in the
Recapitalization Agreement); and

                    (E) such additional shares of Common Stock or Convertible
Securities that are designated as excluded from the definition of "Additional
Shares of Common Stock" by the vote or written consent of the holders of a
majority of the outstanding shares of Series A Preferred.

               References to Common Stock in the subsections of this clause (iv)
above shall mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this Section 5(h). The "EFFECTIVE PRICE" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold by the Company under this Section 5(h), into the Aggregate
Consideration received, or deemed to have been received by the Company for such
issue under this Section 5(h), for such Additional Shares of Common Stock. In
the event that the number of shares of Additional Shares of Common Stock or the
Effective Price cannot be ascertained at the time of issuance, such Additional
Shares of Common Stock shall be deemed issued immediately upon the occurrence of
the first event that makes such number of shares or the Effective Price, as
applicable, ascertainable.


                                       10.



               (V) In the event that the Company issues or sells, or is deemed
to have issued or sold, Additional Shares of Common Stock in a Qualifying
Dilutive Issuance (the "FIRST DILUTIVE ISSUANCE"), then in the event that the
Company issues or sells, or is deemed to have issued or sold, Additional Shares
of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive
Issuance as a part of the same transaction or series of related transactions as
the First Dilutive Issuance (a "SUBSEQUENT DILUTIVE ISSUANCE"), then and in each
such case upon a Subsequent Dilutive Issuance the Series A Preferred Conversion
Price shall be reduced to the Series A Preferred Conversion Price that would
have been in effect had the First Dilutive Issuance and each Subsequent Dilutive
Issuance all occurred on the closing date of the First Dilutive Issuance.

          (I) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series A
Preferred, if the Series A Preferred is then convertible pursuant to this
Section 5, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and shall, upon request,
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by first class mail, postage prepaid, to each registered
holder of Series A Preferred so requesting at the holder's address as shown in
the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or deemed to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (ii) the Series A
Preferred Conversion Price at the time in effect, (iii) the number of Additional
Shares of Common Stock and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Series A Preferred.
Failure to request or provide such notice shall have no effect on any such
adjustment.

          (J) NOTICES OF RECORD DATE. Upon (i) 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, or (ii) any Acquisition (as defined in Section 4) or other capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company with or
into any other corporation, or any Asset Transfer (as defined in Section 4), or
any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Series A Preferred at least
ten (10) days prior to (x) the record date, if any, specified therein; or (y) if
no record date is specified, the date upon which such action is to take effect
(or, in either case, such shorter period approved by the holders of a majority
of the outstanding Series A Preferred) a notice specifying (A) the date on which
any such record is to be taken for the purpose of such dividend or distribution
and a description of such dividend or distribution, (B) the date on which any
such Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up is expected to
become effective, and (C) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.


                                       11.



          (K) AUTOMATIC CONVERSION.

               (I) Each share of Series A Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, at any time upon the affirmative election of the
holders of at least two-thirds of the outstanding shares of the Series A
Preferred. Upon such automatic conversion, any declared and unpaid dividends and
accrued and unpaid dividends shall be paid in accordance with the provisions of
Section 5(d).

               (II) Upon the occurrence of the event specified in Section
5(k)(i) above, the outstanding shares of Series A Preferred shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Company or its transfer agent; provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless the certificates evidencing such shares of Series A
Preferred are either delivered to the Company or its transfer agent as provided
below, or the holder notifies the Company or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A Preferred, the holders of Series A Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series A Preferred. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A Preferred surrendered were convertible on the date on which such
automatic conversion occurred, and any declared and unpaid dividends and accrued
and unpaid dividends shall be paid in accordance with the provisions of Section
5(d).

          (L) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the fair market value of one share of Common Stock (as determined
by the Board) on the date of conversion.

          (M) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred, the
Company will take such corporate


                                       12.



action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.

          (N) NOTICES. Any notice required by the provisions of this Section 5
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed electronic
mail or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.

          (O) PAYMENT OF TAXES. The Company will pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.

     6. NO REISSUANCE OF SERIES A PREFERRED.

     No shares or shares of Series A Preferred acquired by the Company by reason
of redemption, purchase, conversion or otherwise shall be reissued.

     7. AMENDMENTS.

     This Certificate of Designations may only be amended with the prior written
consent of the holders of at least a majority of the outstanding Series A
Preferred; provided, however, that Section 5(k)(i) hereof and this Section 7 may
only be amended with the prior written consent of the holders of at least
two-thirds of the outstanding Series A Preferred. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the holders of at least a majority
(or, in the case of actions prohibited or required to be performed by Section
5(k)(i) hereof or this Section 7, at least two-thirds) of the outstanding Series
A Preferred.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       13.



     IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be duly executed as of the 26th day of January, 2005.

                                         NORTHWEST BIOTHERAPEUTICS, INC.


                                         /s/ Alton L. Boynton
                                         ---------------------------------------
                                         Name: Alton L. Boynton
                                         Title: President


                                       14.



                            CERTIFICATE OF AMENDMENT

                                       TO

               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

                                       OF

                         NORTHWEST BIOTHERAPEUTICS, INC.

     Northwest Biotherapeutics, Inc., a corporation organized and existing under
the laws of the State of Delaware, does hereby certify as follows, in accordance
with the provisions of Section 151 of the Delaware General Corporation Law:

     FIRST: The name of the corporation is Northwest Biotherapeutics, Inc. (the
"CORPORATION")

     SECOND: The date on which the Certificate of Incorporation of the
Corporation was originally filed with the Secretary of State of the State of
Delaware was on July 3, 2002.

     THIRD: The Corporation's Certificate of the Designations, Preferences and
Rights of the Series A Cumulative Convertible Preferred Stock of the Corporation
was originally filed with the Delaware Secretary of State on January 26, 2005
(the "SERIES A CERTIFICATE OF DESIGNATION").

     FOURTH: The Board of Directors of the Corporation, acting in accordance
with the provisions of Sections 141 and 242 of the General Corporation Law of
the State of Delaware, adopted resolutions amending the Certificate of
Designation as follows:

     The Series A Certificate of Designation is hereby amended by striking out
Section 1, subparagraphs (b), (c) and (d) thereof and by substituting in lieu of
said subparagraphs the following new subparagraphs:

     (b) The original issue price of the Series A Preferred shall be four cents
($0.04) per share, as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares after the filing date
hereof (the "ORIGINAL ISSUE PRICE").

     (c) So long as any shares of Series A Preferred are outstanding, the
Company shall not pay or declare any dividend, whether in cash or property, or
make any other distribution on the Common Stock or any other securities issued
by the Company other than the Series A Preferred or the Series A-1 Cumulative
Convertible Preferred Stock ("SERIES A-1 PREFERRED"), or purchase, redeem or
otherwise acquire for value any shares of Common Stock or any other securities
issued by the Company other than the Series A Preferred Series or the A-1
Preferred until all dividends as set forth in Section 1(a) above on the Series A
Preferred shall have been paid or declared and set apart, except for:

                    (I) acquisitions of up to $100,000 of Common Stock by the
Company per year from employees, officers, directors, consultants, advisors or
other persons performing services for the Company pursuant to agreements which
permit the Company to repurchase such shares at cost upon termination of
services to the Company;



                    (II) subject to approval of the holders of a majority of the
outstanding shares of Series A Preferred in accordance with Section 2(b)(vi)
hereof, acquisitions of Common Stock in exercise of the Company's right of first
refusal to repurchase such shares; or

                    (III) distributions to holders of Common Stock in accordance
with Sections 3 and 4.

     (d) In the event dividends are paid on any share of Common Stock or any
other securities issued by the Company other than the Series A-1 Preferred, the
Company shall pay an additional dividend on all outstanding shares of Series A
Preferred in a per share amount equal (on an as-if-converted to Common Stock
basis) to the amount paid or set aside for each share of Common Stock or any
other securities issued by the Company, respectively.

The Series A Certificate of Designation is hereby further amended by striking
out Section 2, subparagraph (b)(vi) thereof and by substituting in lieu of said
subparagraph the following new subparagraph:

     (vi) Any redemption, repurchase, acquisition (or payment into or setting
aside for a sinking fund for such purpose), payment or declaration of dividends
or other distributions with respect to Common Stock or common stock equivalents
(except for acquisitions of Common Stock by the Company permitted by Section
1(c)(i) hereof and except for payment and declaration of dividends on Series A
Preferred or Series A-1 Preferred);

The Series A Certificate of Designation is hereby further amended by striking
out Section 3 thereof and by substituting in lieu of said section the following
new section:

          3. LIQUIDATION RIGHTS.

               (a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), the holders
of Series A Preferred shall be entitled to receive on a pari passu basis with
the Series A-1 Preferred (collectively, with Series A Preferred, the "SERIES
PREFERRED") before any distribution or payment shall be made to the holders of
any Common Stock and any other equity security not expressly made senior to or
pari passu with the holders of Series Preferred (the "JUNIOR STOCK"), out of the
assets of the Company legally available for distribution for each share of
Series Preferred held by them, an amount per share of Series A Preferred equal
to the Original Issue Price plus (to the extent of current and/or retained
earnings) all accrued and unpaid dividends and declared and unpaid dividends on
the Series Preferred (or such lesser amount as is the maximum amount acceptable
under applicable U.S. Small Business Administration and Securities and Exchange
Commission rules and regulations). If, upon any such Liquidation Event, the
assets of the Company shall be insufficient to make payment in full to all
holders of Series Preferred of the liquidation preference set forth in this
Section 3(a), then such assets (or consideration) shall be distributed among the
holders of Series Preferred at the time outstanding, ratably in proportion to
the full amounts to which they would otherwise be respectively entitled.

               (b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above and any other class or
series of stock of the Company ranking upon liquidation senior or pari passu
with the Series Preferred, the assets of the



Company legally available for distribution in such Liquidation Event (or the
consideration received by the Company or its stockholders in such Acquisition or
Asset Transfer), if any, shall be distributed ratably to the holders of Junior
Stock and Series Preferred on an as-if-converted to Common Stock basis.

The Series A Certificate of Designation is hereby further amended by striking
out Section 5 subparagraph (h)(iv)(A) thereof and by substituting in lieu of
said subparagraph the following new subparagraph:

               (A) shares of Common Stock issued upon conversion of the Series A
Preferred and Series A-1 Preferred;

     FIFTH: That the Corporation's holders of Series A Preferred waived notice
of the time, place and purpose of a special meeting of the holders of Series A
Preferred and duly approved the above amendment by written consent in accordance
with Sections 228 and 242 of the General Corporation Law of the State of
Delaware.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by Alton Boynton, its President, this 17th day of
April, 2006.

                                         NORTHWEST BIOTHERAPEUTICS, INC.


                                         By: /s/ Alton Boynton
                                             -----------------------------------
                                         Name: Alton Boynton
                                         Title: President

EX-3.4

                                                                     EXHIBIT 3.4

               CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

                                       OF

                SERIES A-1 CUMULATIVE CONVERTIBLE PREFERRED STOCK

                                       OF

                         NORTHWEST BIOTHERAPEUTICS, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

          Northwest Biotherapeutics, Inc. (the "COMPANY"), a corporation
organized and existing under the laws of the State of Delaware, hereby certifies
that, pursuant to authority conferred on its Board of Directors (the "BOARD") by
the Sixth Amended and Restated Certificate of Incorporation, as amended, of the
Company, the following resolution was adopted by the Board by unanimous written
consent dated April 17, 2006, which resolution remains in full force and effect
on the date hereof:

          RESOLVED, that there is hereby established a series of the Company's
authorized Preferred Stock (the "PREFERRED STOCK") having a par value of $0.001
per share, which series shall be designated as "Series A-1 Cumulative
Convertible Preferred Stock" (the "SERIES A-1 PREFERRED") and shall consist of
ten million (10,000,000) shares. The shares of Series A-1 Preferred shall have
the voting powers, designations, preferences and other special rights, and
qualifications, limitations and restrictions thereof set forth below:

          1.   DIVIDEND RIGHTS.

               (A) Holders of Series A-1 Preferred, in preference to the holders
of Common Stock, shall be entitled to receive, when, as and if declared by the
Board, but only out of funds that are legally available therefor, cash dividends
at the rate of ten percent (10%) of the Original Issue Price (as defined below)
per annum on each outstanding share of Series A-1 Preferred. Such dividends
shall be cumulative, whether or not earned or declared, shall be compounded
quarterly, and shall be payable as and when declared by the Board, and upon the
occurrence of a Liquidation Event, Acquisition or Asset Transfer (each as
defined below).

               (B) The original issue price of the Series A-1 Preferred shall be
one dollar and sixty cents ($1.60) per share, as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares after the filing date hereof (the "ORIGINAL ISSUE PRICE").

               (C) So long as any shares of Series A-1 Preferred are
outstanding, the Company shall not pay or declare any dividend, whether in cash
or property, or make any other


                                       1.



distribution on the Common Stock or any other securities issued by the Company
other than the Series A-1 Preferred or the Series A Cumulative Convertible
Preferred Stock ("SERIES A PREFERRED"), or purchase, redeem or otherwise acquire
for value any shares of Common Stock or any other securities issued by the
Company other than the Series A-1 Preferred or the Series A Preferred until all
dividends as set forth in Section 1(a) above on the Series A-1 Preferred shall
have been paid or declared an set apart, except for:

                    (I) acquisitions of up to $100,000 of Common Stock by the
Company per year from employees, officers, directors, consultants, advisors or
other persons performing services for the Company pursuant to agreements which
permit the Company to repurchase such shares at cost upon termination of
services to the Company;

                    (II) subject to approval of the holders of a majority of the
outstanding shares of Series A-1 Preferred in accordance with Section 2(b)(vi)
hereof, acquisitions of Common Stock in exercise of the Company's right of first
refusal to repurchase such shares; or

                    (III) distributions to holders of Common Stock in accordance
with Sections 3 and 4.

               (D) In the event dividends are paid on any share of Common Stock
or any other securities issued by the Company other than the Series A Preferred,
the Company shall pay an additional dividend on all outstanding shares of Series
A-1 Preferred in a per share amount equal (on an as-if-converted to Common Stock
basis) to the amount paid or set aside for each share of Common Stock or any
other securities issued by the Company, respectively.

               (E) The provisions of Sections 1(c) and 1(d) shall not apply to a
dividend payable solely in Common Stock to which the provisions of Section 5(f)
hereof are applicable.

          2.   VOTING RIGHTS.

               (A) GENERAL RIGHTS. Each holder of shares of the Series A-1
Preferred shall be entitled to the number of votes equal to the number of shares
of Common Stock into which such shares of Series A-1 Preferred could be
converted (pursuant to Section 5 hereof) immediately after the close of business
on the record date fixed for such meeting or the effective date of such written
consent and shall have voting rights and powers equal to the voting rights and
powers of the Common Stock and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of the Company. Except as otherwise
provided herein or as required by law, the Series A-1 Preferred shall vote
together with the Common Stock at any annual or special meeting of the
stockholders and not as a separate class, and may act by written consent in the
same manner as the Common Stock.

               (B) SEPARATE VOTE OF SERIES A-1 PREFERRED. For so long as at
least 1,000,000 shares of Series A-1 Preferred (subject to adjustment for any
stock split, reverse stock split or other similar event affecting the Series A-1
Preferred after the filing date hereof) remain


                                       2.


outstanding, in addition to any other vote or consent required herein or by law,
the approval of the Board and the vote or written consent of the holders of at
least a majority of the outstanding Series A-1 Preferred shall be necessary for
effecting or validating the following actions (whether by merger,
recapitalization or otherwise):

                    (I) Any amendment, alteration, or repeal of any provision of
the Certificate of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Designation);

                    (II) Any issuance of shares of Series A-1 Preferred or any
other securities exercisable for or convertible into Series A-1 Preferred;

                    (III) Any increase or decrease (other than by conversion) in
the designated number of shares of Series A-1 Preferred;

                    (IV) Any increase or decrease (other than by conversion) in
the authorized number of shares of Common Stock or Preferred Stock;

                    (V) Any authorization, designation or issuance, whether by
recapitalization, reclassification or otherwise, of any class or series of
equity securities or any other securities exercisable for or convertible into
equity securities of the Company that has redemption rights or that ranks on a
parity with or senior to the Series A-1 Preferred in right of liquidation
preference, voting rights, dividend rights or any other rights, preferences or
privileges, or any increase in the authorized or designated number of any such
new class or series;

                    (VI) Any redemption, repurchase, acquisition (or payment
into or setting aside for a sinking fund for such purpose), payment or
declaration of dividends or other distributions with respect to Common Stock or
common stock equivalents (except for acquisitions of Common Stock by the Company
permitted by Section 1(c)(i) hereof and except for payment and declaration of
dividends on Series A Preferred or Series A-1 Preferred);

                    (VII) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 4
hereof);

                    (VIII) Any dissolution, liquidation or winding up of the
Company;

                    (IX) Any increase or decrease in the authorized number of
members of the Board;

                    (X) Any sale, lease, assignment, transfer or other
conveyance of, or any encumbrance granted upon, all or substantially all of the
assets of the Company or any of its subsidiaries in one or more related
transactions;

                    (XI) Any reclassification, recapitalization or other change
of any capital stock of the Company;


                                       3.



                    (XII) Any issuance of shares of Common Stock or Convertible
Securities after the Original Issue Date to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary other than pursuant
to stock purchase or stock option plans or other arrangements that are approved
by the Board and the holders of a majority of the outstanding shares of Series
A-1 Preferred; or

                    (XIII) Any agreement, promise, commitment, obligation or
undertaking to do any of the foregoing.

          3.   LIQUIDATION RIGHTS.

               (a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), the holders
of Series A-1 Preferred shall be entitled to receive on a pari passu basis with
the Series A Preferred (collectively, with Series A Preferred, the "SERIES
PREFERRED") before any distribution or payment shall be made to the holders of
any Common Stock and any other equity security not expressly made senior to or
pari passu with the holders of Series Preferred (the "JUNIOR STOCK"), out of the
assets of the Company legally available for distribution for each share of
Series Preferred held by them, an amount per share of Series Preferred equal to
the Original Issue Price plus (to the extent of current and/or retained
earnings) all accrued and unpaid dividends and declared and unpaid dividends on
the Series Preferred (or such lesser amount as is the maximum amount acceptable
under applicable U.S. Small Business Administration and Securities and Exchange
Commission rules and regulations). If, upon any such Liquidation Event, the
assets of the Company shall be insufficient to make payment in full to all
holders of Series Preferred of the liquidation preference set forth in this
Section 3(a), then such assets (or consideration) shall be distributed among the
holders of Series Preferred at the time outstanding, ratably in proportion to
the full amounts to which they would otherwise be respectively entitled.

               (b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above and any other class or
series of stock of the Company ranking upon liquidation senior or pari passu
with the Series Preferred, the assets of the Company legally available for
distribution in such Liquidation Event (or the consideration received by the
Company or its stockholders in such Acquisition or Asset Transfer), if any,
shall be distributed ratably to the holders of Junior Stock and Series Preferred
on an as-if-converted to Common Stock basis.

          4.   ASSET TRANSFER OR ACQUISITION RIGHTS.

               (A) In the event that the Company is a party to an Acquisition or
Asset Transfer (as hereinafter defined), then each holder of Series A-1
Preferred shall be entitled to receive, for each share of Series A-1 Preferred
then held, out of the proceeds of such Acquisition or Asset Transfer, the
greater of the amount of cash, securities or other property to which such holder
would be entitled to receive in a Liquidation Event pursuant to (i) Section 3(a)
and 3(b) above or (ii) the amount of cash, securities or other property to which
such holder would be entitled to receive in a Liquidation Event with respect to
such shares if such shares had been converted to Common Stock immediately prior
to such Acquisition or Asset Transfer.


                                       4.



               (B) For the purposes of this Section 4: (i) "ACQUISITION" shall
mean (A) any consolidation or merger of the Company with or into any other
corporation or other entity or person, or any other corporate reorganization,
other than any such consolidation, merger or reorganization in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, continue to hold at least a majority of the voting power of the
surviving entity in substantially the same proportions (or, if the surviving
entity is a wholly owned subsidiary, its parent) immediately after such
consolidation, merger or reorganization; or (B) any transaction or series of
related transactions to which the Company is a party in which in excess of fifty
percent (50%) of the Company's voting power is transferred; provided that an
Acquisition shall not include (x) any issuance of Series A-1 Preferred
contemplated by the Amended and Restated Recapitalization Agreement, dated as of
July 30, 2004, by and between the Company and Toucan Capital Fund II, L.P., as
such agreement may be amended from time to time (the "Recapitalization
Agreement"), the conversion of any of the Notes representing Bridge Funding, or
exercise of any Bridge Warrants or Preferred Stock Warrants (each as defined in
the Recapitalization Agreement) and (y) any transaction or series of
transactions specifically deemed not to constitute an "Acquisition" by the vote
or written consent of the holders of a majority of the outstanding shares of
Series A-1 Preferred; and (ii) "ASSET TRANSFER" shall mean a sale, lease,
exclusive license or other disposition of all or substantially all of the assets
of the Company.

               (C) In any Acquisition or Asset Transfer, if the consideration
received is other than cash, the value of such consideration will be deemed its
fair market value as determined in good faith by the Board, provided that any
securities shall be valued as follows:

                    (I) Securities not subject to investment letter or other
similar restrictions on free marketability (which shall be covered by (ii)
below):

                         (A) If traded on a securities exchange or through the
Nasdaq Stock Market, the value shall be deemed to be the average of the closing
sale prices of the securities on such quotation system over the ten (10) day
period ending three (3) days prior to the closing;

                         (B) If actively traded over-the-counter, the value
shall be deemed to be the average of the last reported sales price of the
securities over the ten (10) day period ending three (3) days prior to the
closing; and

                         (C) If there is no active public market, the value
shall be the fair market value thereof, as determined in good faith by the
Board.

                    (II) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as determined in good faith by the Board.


                                       5.



                    (III) Notwithstanding anything to the contrary in this
Section 4, if the definitive transaction documents for an Acquisition or Asset
Transfer provide for a different method of valuation, the method of valuation
set forth in such documents shall control.

          5.   CONVERSION RIGHTS.

               The holders of the Series A-1 Preferred shall have the following
rights with respect to the conversion of the Series A-1 Preferred into shares of
Common Stock (the "CONVERSION RIGHTS"):

               (A) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Series A-1 Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "SERIES A-1 PREFERRED CONVERSION RATE" then in
effect (determined as provided in Section 5(b)) by the number of shares of
Series A-1 Preferred being converted.

               (B) SERIES A-1 PREFERRED CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A-1 Preferred (the "SERIES A-1
PREFERRED CONVERSION RATE") shall be the quotient obtained by dividing the
Original Issue Price of the Series A-1 Preferred by the "Series A-1 Preferred
Conversion Price," calculated as provided in Section 5(c).

               (C) SERIES A-1 PREFERRED CONVERSION PRICE. The conversion price
for the Series A-1 Preferred shall initially be four cents ($0.04) (the "SERIES
A-1 PREFERRED CONVERSION PRICE"). Such initial Series A-1 Preferred Conversion
Price shall be adjusted from time to time in accordance with this Section 5. All
references to the Series A-1 Preferred Conversion Price herein shall mean the
Series A-1 Preferred Conversion Price as so adjusted.

               (D) MECHANICS OF CONVERSION. Each holder of Series A-1 Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 5 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series A-1
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series A-1 Preferred being converted. Thereupon, the Company shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay (i) in cash or, to the extent sufficient funds are not then
legally available therefor or to the extent that the holder so elects, in Common
Stock (at the Common Stock's fair market value determined by the Board as of the
date of such conversion), any declared and unpaid dividends and accrued and
unpaid dividends on the shares of Series A-1 Preferred being converted and (ii)
in cash (at the Common Stock's fair market value determined by the Board as of
the date of conversion) the value of any fractional share of Common Stock
otherwise issuable to any holder of Series A-1 Preferred. For the purposes of
this Section 5(d), the fair market value of the Company's Common Stock shall be
the last reported sales price reported on the NASD over-the-counter bulletin
board (or if the


                                       6.



Common Stock is traded on another securities market, the last reported sales
price of the Common Stock on such securities market) on the date of conversion.
If the Common Stock is not publicly traded on the date of conversion, the fair
market value of the Company's Common Stock for the purposes of this Section 5(d)
shall be the fair market value as determined in good faith by the Board. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series A-1
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.

               (E) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any time
or from time to time on or after the date that the first share of Series A-1
Preferred is issued (the "ORIGINAL ISSUE DATE") the Company effects a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Series A-1 Preferred, the Series A-1 Preferred Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if at any time or from time to time after the Original Issue Date
the Company combines the outstanding shares of Common Stock into a smaller
number of shares without a corresponding combination of the Series A-1
Preferred, the Series A-1 Preferred Conversion Price in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 5(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.

               (F) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
at any time or from time to time on or after the Original Issue Date the Company
pays to holders of Common Stock a dividend or other distribution in additional
shares of Common Stock without a corresponding dividend or other distribution to
holders of Preferred Stock, the Series A-1 Preferred Conversion Price then in
effect shall be decreased as of the time of such issuance, as provided below:

                    (I) The Series A-1 Preferred Conversion Price shall be
adjusted by multiplying the Series A-1 Preferred Conversion Price then in effect
by a fraction equal to:

                         (A) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and

                         (B) the denominator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance plus the number of shares of Common Stock issuable in payment of
such dividend or distribution;

                    (II) If the Company fixes a record date to determine which
holders of Common Stock are entitled to receive such dividend or other
distribution, the Series A-1 Preferred Conversion Price shall be fixed as of the
close of business on such record date and the number of shares of Common Stock
shall be calculated immediately prior to the close of business on such record
date; and


                                       7.



                    (III) If such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Series A-1 Preferred Conversion Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Series A-1
Preferred Conversion Price shall be adjusted pursuant to this Section 5(f) to
reflect the actual payment of such dividend or distribution.

               (G) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, SUBSTITUTION,
REORGANIZATION, MERGER OR CONSOLIDATION. If at any time or from time to time on
or after the Original Issue Date the Common Stock issuable upon the conversion
of the Series A-1 Preferred is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification, merger, consolidation or otherwise (other than an Acquisition
or Asset Transfer as defined in Section 4 or a subdivision or combination of
shares or stock dividend provided for elsewhere in this Section 5), in any such
event each holder of Series A-1 Preferred shall then have the right to convert
such stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification, merger, consolidation
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series A-1 Preferred could have been converted immediately
prior to such recapitalization, reclassification, merger, consolidation or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of Series A-1 Preferred
after the capital reorganization to the end that the provisions of this Section
5 (including adjustment of the Series A-1 Preferred Conversion Price then in
effect and the number of shares issuable upon conversion of the Series A-1
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.

               (H) SALE OF SHARES BELOW SERIES A-1 PREFERRED CONVERSION PRICE.

                    (I) If at any time or from time to time on or after the
Original Issue Date the Company issues or sells, or is deemed by the express
provisions of this Section 5(h) to have issued or sold, Additional Shares of
Common Stock (as defined below), other than as provided in Section 5(e), 5(f) or
5(g) above, for an Effective Price (as defined below) less than the then
effective Series A-1 Preferred Conversion Price (a "QUALIFYING DILUTIVE
ISSUANCE"), then and in each such case, the then existing Series A-1 Preferred
Conversion Price shall be reduced, as of the opening of business on the date of
such issue or sale, to a price equal to such Effective Price.

                    (II) For the purpose of making any adjustment required under
this Section 5(h), the aggregate consideration received by the Company for any
issue or sale of securities (the "AGGREGATE CONSIDERATION") shall be defined as:
(A) to the extent it consists of cash, be computed at the gross amount of cash
received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company, (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as
defined below) or rights or options to purchase either


                                       8.



Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board to be
allocable to such Additional Shares of Common Stock, Convertible Securities or
rights or options.

                    (III) For the purpose of the adjustment required under this
Section 5(h), if the Company issues or sells (x) Preferred Stock or other stock,
options, warrants, purchase rights or other securities convertible into,
Additional Shares of Common Stock (such convertible stock or securities being
herein referred to as "CONVERTIBLE SECURITIES") or (y) rights or options for the
purchase of Additional Shares of Common Stock or Convertible Securities and if
the Effective Price of such Additional Shares of Common Stock is less than the
Series A-1 Preferred Conversion Price, in each case the Company shall be deemed
to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities plus:

                         (A) in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options; and

                         (B) in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company upon the conversion
thereof (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities); provided that if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.

                         (C) If the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.

                         (D) No further adjustment of the Series A-1 Preferred
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock or the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A-1 Preferred
Conversion Price


                                       9.



as adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the Series A-1 Preferred Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, plus the consideration, if
any, actually received by the Company for the granting of all such rights or
options, whether or not exercised, plus the consideration received for issuing
or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series A-1 Preferred.

                    (IV) For the purpose of making any adjustment to the
Conversion Price of the Series A-1 Preferred required under this Section 5(h),
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued
by the Company or deemed to be issued pursuant to this Section 5(h) (including
shares of Common Stock subsequently reacquired or retired by the Company), other
than:

                         (A) shares of Common Stock issued upon conversion of
the Series A Preferred and Series A-1 Preferred;

                         (B) shares of Common Stock or Convertible Securities
issued after the Original Issue Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary that are (i) issued
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board; and (ii) designated as excluded from the definition of
"Additional Shares of Common Stock" by the vote or written consent of the
holders of a majority of the outstanding shares of Series A-1 Preferred;

                         (C) up to 35,000 shares of Common Stock issued pursuant
to the exercise of options with an exercise price of $0.0001 per share that were
outstanding on April 26, 2004 and held by members of the Board;

                         (D) shares of Common Stock or Convertible Securities
issued pursuant to the exercise of the Initial Bridge Warrants (as defined in
the Recapitalization Agreement); and

                         (E) such additional shares of Common Stock or
Convertible Securities that are designated as excluded from the definition of
"Additional Shares of Common Stock" by the vote or written consent of the
holders of a majority of the outstanding shares of Series A-1 Preferred.

          References to Common Stock in the subsections of this clause (iv)
above shall mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this Section 5(h). The "EFFECTIVE PRICE" of Additional
Shares of Common Stock shall mean the


                                      10.



quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Company under
this Section 5(h), into the Aggregate Consideration received, or deemed to have
been received by the Company for such issue under this Section 5(h), for such
Additional Shares of Common Stock. In the event that the number of shares of
Additional Shares of Common Stock or the Effective Price cannot be ascertained
at the time of issuance, such Additional Shares of Common Stock shall be deemed
issued immediately upon the occurrence of the first event that makes such number
of shares or the Effective Price, as applicable, ascertainable.

                    (V) In the event that the Company issues or sells, or is
deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying
Dilutive Issuance (the "FIRST DILUTIVE ISSUANCE"), then in the event that the
Company issues or sells, or is deemed to have issued or sold, Additional Shares
of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive
Issuance as a part of the same transaction or series of related transactions as
the First Dilutive Issuance (a "SUBSEQUENT DILUTIVE ISSUANCE"), then and in each
such case upon a Subsequent Dilutive Issuance the Series A-1 Preferred
Conversion Price shall be reduced to the Series A-1 Preferred Conversion Price
that would have been in effect had the First Dilutive Issuance and each
Subsequent Dilutive Issuance all occurred on the closing date of the First
Dilutive Issuance.

               (I) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A-1 Preferred Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series A-1 Preferred, if the Series A-1 Preferred is then convertible pursuant
to this Section 5, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and shall, upon request,
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by first class mail, postage prepaid, to each registered
holder of Series A-1 Preferred so requesting at the holder's address as shown in
the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or deemed to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (ii) the Series A-1
Preferred Conversion Price at the time in effect, (iii) the number of Additional
Shares of Common Stock and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Series A-1 Preferred.
Failure to request or provide such notice shall have no effect on any such
adjustment.

               (J) NOTICES OF RECORD DATE. Upon (i) 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, or (ii) any Acquisition (as defined in Section 4) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
4), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series A-1 Preferred at
least ten (10) days prior to (x) the record date, if any, specified therein; or
(y) if no record date is specified, the date upon which such action is to take
effect (or, in either case, such shorter period approved by the holders of a
majority of the


                                      11.



outstanding Series A-1 Preferred) a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.

               (K) AUTOMATIC CONVERSION.

                    (I) Each share of Series A-1 Preferred shall automatically
be converted into shares of Common Stock, based on the then-effective Series A-1
Preferred Conversion Price, at any time upon the affirmative election of the
holders of at least two-thirds of the outstanding shares of the Series A-1
Preferred. Upon such automatic conversion, any declared and unpaid dividends and
accrued and unpaid dividends shall be paid in accordance with the provisions of
Section 5(d).

                    (II) Upon the occurrence of the event specified in Section
5(k)(i) above, the outstanding shares of Series A-1 Preferred shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Company or its transfer agent; provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless the certificates evidencing such shares of Series
A-1 Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A-1 Preferred, the holders of Series A-1 Preferred
shall surrender the certificates representing such shares at the office of the
Company or any transfer agent for the Series A-1 Preferred. Thereupon, there
shall be issued and delivered to such holder promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A-1 Preferred surrendered were convertible on the date on which such
automatic conversion occurred, and any declared and unpaid dividends and accrued
and unpaid dividends shall be paid in accordance with the provisions of Section
5(d).

               (L) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Series A-1 Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A-1 Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the fair


                                      12.



market value of one share of Common Stock (as determined by the Board) on the
date of conversion.

               (M) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A-1 Preferred, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A-1 Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A-1 Preferred, the
Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.

               (N) NOTICES. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with verification of receipt.
All notices shall be addressed to each holder of record at the address of such
holder appearing on the books of the Company.

               (O) PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A-1 Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A-1
Preferred so converted were registered.

          6.   NO REISSUANCE OF SERIES A-1 PREFERRED.

          No shares or shares of Series A-1 Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.

          7.   AMENDMENTS.

          This Certificate of Designations may only be amended with the prior
written consent of the holders of at least a majority of the outstanding Series
A-1 Preferred; provided, however, that Section 5(k)(i) hereof and this Section 7
may only be amended with the prior written consent of the holders of at least
two-thirds of the outstanding Series A-1 Preferred. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the holders of at least a majority
(or, in the case of actions prohibited or required to be performed by Section
5(k)(i) hereof or this Section 7, at least two-thirds) of the outstanding Series
A-1 Preferred.


                                      13.



     IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be duly executed as of the 17th day of April, 2006.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        /s/ Alton L. Boynton
                                        ----------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                      14.

EX-10.2

                                                                    Exhibit 10.2

              AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC.
                     LOAN AGREEMENT, SECURITY AGREEMENT AND
                           10% SECURED PROMISSORY NOTE

$250,000.00                                                       APRIL 17, 2006

SECTION 1. GENERAL.

For value received, NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the
"MAKER" or the "COMPANY"), hereby promises to pay to the order of Toucan
Partners, LLC or its assigns (collectively, the "HOLDER"), the principal amount
of Two Hundred Fifty Thousand Dollars ($250,000) upon written demand by Holder
made at any time on or after the first anniversary of execution of the Original
Issue Date (as defined below) of this Amended and Restated Loan Agreement,
Security Agreement and 10% Secured Promissory Note (this "NOTE" or this
"AGREEMENT"), or such earlier date as may be applicable under Sections 3 and 4
hereof (the "MATURITY DATE").

This Note amends and restates in its entirety that certain Northwest
Biotherapeutics, Inc. Loan Agreement, Security Agreement and 10% Secured
Promissory Note dated December 30, 2005 ("ORIGINAL ISSUE DATE") in the principal
amount of $250,000 issued by the Maker in favor of Holder (the "ORIGINAL NOTE").
This Note shall not constitute a novation of the Original Note or an accord and
satisfaction of the obligations of Maker evidence thereby. The Original Note is
being amended and restated hereby in partial consideration for the Holder's
agreement to consent to the Company's issuance of shares of Common Stock and
warrants to purchase Common Stock to certain accredited investors in a private
placement pursuant to that certain Note and Warrant Purchase Agreement dated as
of March 30, 2006.

Maker shall pay interest on the unpaid principal amount of this Note, accruing
from and after the Original Issue Date at the rate of ten percent (10%) per
annum, compounding annually (computed on the basis of a 365-day year and the
actual number of days elapsed) (the "INTEREST RATE"). Accrued interest shall be
payable upon the payment of the principal of this Note. The principal of, and
interest on, this Note shall be payable in lawful currency of the United States
of America by wire transfer in immediately available funds to the account of
Holder, as provided in writing to Maker by Holder. All payments shall be applied
first to fees, costs and charges relating to this Note (including, without
limitation, any costs of collection), then to accrued and unpaid interest, and
thereafter to principal. This loan is made by Holder to Maker in anticipation of
an equity financing. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Recapitalization Agreement.

SECTION 2. PRE-PAYMENT.

This Note may be pre-paid in whole or in part prior to the Maturity Date;
provided Maker provides Holder with 30 days prior written notice thereof, and
provided further that Holder shall have the option to convert this note in
accordance with Section 12 hereof by notifying Maker of Holder's election on or
before the expiration of such thirty (30) day notice period. In the event



of prepayment, Maker shall pay a penalty in the amount of 1% of the principal
and accrued interest then outstanding under this Note, unless a greater or
lesser penalty is established or approved by the U.S. Small Business
Administration ("SBA"). Conversion of this Note shall not be deemed a
prepayment.

SECTION 3. DEFAULT INTEREST.

Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
principal amount and accrued and unpaid interest shall bear interest payable on
demand at the lesser of (i) fourteen percent (14%) per annum, (ii) the maximum
rate permitted under applicable rules and regulations of the SBA, or (iii) the
maximum rate allowed by law (the "DEFAULT INTEREST"). Such interest shall
accrue, commencing upon the occurrence of an Event of Default and continuing
until such Event of Default is cured or waived.

SECTION 4. DEFAULTS.

     4.1 Definitions. Each occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT":

          (a) if a default occurs in the payment of any principal of, interest
on, or other obligation with respect to, this Note, whether at the due date
thereof or upon acceleration thereof, and such default remains uncured for five
(5) business days after written notice thereof from Holder;

          (b) if any representation or warranty of Maker made herein shall have
been false or misleading in any material respect, or shall have contained any
material omission, as of the date hereof;

          (c) if a default occurs in the due observance or performance of any
covenant or agreement on the part of Maker to be observed or performed pursuant
to the terms of this Note and such default remains uncured for five (5) business
days after written notice thereof from Holder;

          (d) if a default occurs in Maker's performance of any of the terms and
conditions of that certain Amended and Restated Recapitalization Agreement,
dated as of July 30, 2004 and as amended on October 22, 2004, November 10, 2004,
December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16,
2005, July 26, 2005, September 7, 2005 and November 14, 2005 (the
"RECAPITALIZATION AGREEMENT") or any Related Recapitalization Document;

          (e) if Maker shall (i) discontinue its business, (ii) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of
Maker or any of its property, (iii) make a general assignment for the benefit of
creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization or an arrangement with creditors, or take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation laws or statutes, or file an answer admitting the
material allegations of


                                        2



a petition filed against it in any proceeding under any such law, provided,
however, that insolvency of Maker shall not constitute a default, or the basis
for a default, during the Bridge Period;

          (f) if there shall be filed against Maker an involuntary petition
seeking reorganization of Maker or the appointment of a receiver, trustee,
custodian or liquidator of Maker or a substantial part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect (any of the foregoing
petitions being hereinafter referred to as an "INVOLUNTARY PETITION") and such
Involuntary Petition shall not have been dismissed within ninety (90) days after
it was filed, provided, however, that insolvency of Maker shall not constitute a
default, or the basis for a default, during the Bridge Period;

          (g) if final judgment(s) for the payment of money in excess of an
aggregate of $25,000 (excluding any portion thereof that an insurance company of
nationally recognized standing and creditworthiness has agreed to pay) shall be
rendered against Maker and the same shall remain undischarged for a period of
thirty (30) days;

          (h) if there occurs any event that may have a material adverse effect
on the business, affairs, prospects, operations, properties, assets,
liabilities, structure or condition, financial or otherwise, of the Company (as
such business is presently currently conducted and/or as it is proposed to be
conducted), or on any material assets or any Intellectual Property or other
Collateral developed, owned, controlled, licensed, possessed, or used by Maker,
or to which Maker has any right, option, entitlement or claim, provided,
however, that ongoing weakening of Maker's financial condition due to ongoing
expenditures and Maker's failure to obtain equity financing shall not constitute
a default, or the basis for a default, during the Bridge Period; or

          (i) if Maker deviates, during the period covered by such budget, more
than $10,000 in aggregate from the budget included in the Disclosure Schedule
(as defined herein), or takes any action or makes any promise, undertaking or
commitment that would result in Maker incurring or accumulating payables and/or
other financial obligations of any kind, whether current or deferred, direct or
indirect, for purposes other than as set forth in budgets expressly agreed to by
Holder, and/or in any amounts in excess of the amounts set forth in such agreed
budgets, which equal or exceed $10,000 in aggregate, and which have not been
approved in writing in advance by Holder.

     4.2 Cross-Default: Maker acknowledges that the financing contemplated by
this Note is part of an integrated Recapitalization Plan, as set forth in the
Recapitalization Agreement and the Related Recapitalization Documents. Maker
further acknowledges and agrees that this Note is subject to all terms and
conditions set forth in the Recapitalization Agreement and the Related
Recapitalization Documents, and that the Recapitalization Agreement and the
Related Recapitalization Documents are subject to all of the terms and
conditions of this Note. Maker agrees that any default by Maker under any
provision of this Note, the Recapitalization Agreement or any of the Related
Recapitalization Documents will constitute a default under each other Related
Recapitalization Document and the Recapitalization Agreement.


                                        3



     4.3 Remedies on Default.

          (a) Upon each and every such Event of Default and at any time
thereafter during the continuance of such Event of Default: (i) any and all
indebtedness of Maker to Holder under this Note or otherwise shall immediately
become due and payable, both as to principal and interest (including any
deferred interest and any accrued and unpaid interest and any Default Interest);
and (ii) Holder may exercise all the rights of a creditor under applicable state
and/or federal law.

          (b) In case any one or more Events of Default shall occur and be
continuing, and acceleration of this Note or any other indebtedness of Maker to
Holder shall have occurred, Holder may, inter alia, proceed to protect and
enforce its rights by an action at law, suit in equity and/or other appropriate
proceeding, whether for the specific performance of any agreement contained in
this Note, or for an injunction against a violation of any of the terms hereof
or thereof or in furtherance of the exercise of any power granted hereby or
thereby or by law. No right conferred upon Holder by this Note shall be
exclusive of any other right referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.

SECTION 5. DEFENSES.

     5.1 No Offsets. The obligations of Maker under this Note shall not be
subject to reduction, limitation, impairment, termination, defense, set-off,
counterclaim or recoupment for any reason.

     5.2 Usury Limitations. It is the intention of the parties hereto to comply
with all applicable usury laws; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this Note or any other agreements or
instruments between them, in no event shall such agreements or instruments
require the payment or permit the collection of interest (which term, for
purposes hereof, shall include any amount which, under applicable law, is deemed
to be interest, whether or not such amount is characterized by the parties as
interest) in excess of the maximum amount permitted by such laws. If any excess
of interest is unintentionally contracted for, charged or received under the
Note or under the terms of any other agreement or instrument between the
parties, the effective rate of interest shall be automatically reduced to the
maximum lawful rate of interest allowed under the applicable usury laws as now
or hereafter construed by the courts having jurisdiction thereof.

SECTION 6. REPLACEMENT OF NOTE.

     Upon receipt by Maker of reasonable evidence of the loss, theft,
destruction, or mutilation of this Note, Maker will deliver a new Note
containing the same terms and conditions in lieu of this Note. Any Note
delivered in accordance with the provisions of this Section 6 shall be dated as
of the date of this Note.


                                        4



SECTION 7. EXTENSION OF MATURITY.

     Should the principal of or interest on this Note become due and payable on
other than a business day, the due date thereof shall be extended to the next
succeeding business day, and, in the case of principal, interest shall be
payable thereon at the rate per annum herein specified during such extension.
For the purposes of the preceding sentence, a business day shall be any day that
is not a Saturday, Sunday, or legal holiday in the State of Delaware.

SECTION 8. ATTORNEYS' FEES AND COLLECTION FEES.

     Should the indebtedness evidenced by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings, arbitration or mediation, or any settlement of any of the
foregoing, Maker agrees to pay, in addition to principal and interest due and
payable hereon, all costs of collection, including, without limitation,
reasonable attorneys' fees and expenses, incurred by Holder in collecting or
enforcing this Note.

SECTION 9. WAIVERS; CONSENT TO JURISDICTION.

     9.1 Waivers by Maker. Maker hereby waives presentment, demand for payment,
notice of dishonor, notice of protest and all other notices or demands in
connection with the delivery, acceptance, performance or default of this Note.

     9.2 Actions of Holder not a Waiver. No delay by Holder in exercising any
power or right hereunder shall operate as a waiver of any power or right, nor
shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right hereunder
or otherwise; and no waiver or modification of the terms hereof shall be valid
unless set forth in writing by Holder and then only to the extent set forth
therein.

     9.3 Consent to Jurisdiction. Maker hereby irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Delaware over
any suit, action, or proceeding arising out of or relating to this Note or any
other agreements or instruments with respect to Holder. Maker hereby irrevocably
waives, to the fullest extent permitted by law, any objection that Maker may now
or hereafter have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient forum.
Final judgment in any such suit, action, or proceeding brought in any such court
shall be conclusive and binding upon Maker and may be enforced in any court in
which Maker is subject to jurisdiction by a suit upon such judgment, provided
that service of process is effected upon Maker as provided in this Note or as
otherwise permitted by applicable law.

     9.4 Waiver of Jury Trial. MAKER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN
MAKER AND HOLDER RELATING TO THE SUBJECT MATTER OF THIS NOTE. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS NOTE,
INCLUDING,


                                        5



WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENT OR AGREEMENT RELATING TO THE LOAN.

     9.5 Service of Process. Maker hereby consents to process being served in
any suit, action, or proceeding instituted in connection with this Note by
delivery of a copy thereof by certified mail, postage prepaid, return receipt
requested, to Maker, and/or by delivery of a copy thereof to a registered agent
of Maker. Refusal to accept delivery, and/or avoidance of delivery, shall be
deemed to constitute delivery. Maker irrevocably agrees that service in
accordance with this Section 9.5 shall be deemed in every respect effective
service of process upon Maker in any such suit, action or proceeding, and shall,
to the fullest extent permitted by law, be taken and held to be valid personal
service upon Maker. Nothing in this Section 9.5 shall affect the right of Holder
to serve process in any manner otherwise permitted by law or limit the right of
Holder otherwise to bring proceedings against Maker in the courts of any
jurisdiction or jurisdictions.

SECTION 10. COVENANTS.

     10.1 Affirmative Covenants. So long as this Note shall remain outstanding:

          (a) Office. Maker shall maintain its principal office, and the
majority of its employees, assets and operations, in the United States.

          (b) Use of Proceeds. Maker will use the proceeds from this Note only
for the following purposes:

     (i) General operating expenses, expenses for the development and protection
     of its intellectual property, and other usual and customary commercial and
     business expenses incurred in pursuing its business plan and strategy, on
     and after the effective date hereof;

     (ii) Audit expenses and regular and special SEC filing expenses, for audits
     and filings occurring on or after the effective date hereof, including,
     without limitation, SEC filings relating to solicitation of any shareholder
     consents to the recapitalization of Maker; and

     (iii) Expenses of accountants, attorneys, consultants and other
     professionals (including, without limitation, the expenses of Investor
     described in Section 4.11 of the Recapitalization Agreement) relating to
     the recapitalization of Maker,

in each case only to the extent that both the nature and the amount of such
expenses are in conformity with the budget approved in advance in writing by
Holder and included in the Disclosure Schedule. Maker will not use the proceeds
from this Note for any other purpose. Without limiting the generality of the
foregoing, none of the proceeds will be used, without prior written agreement by
the Holder, (i) to purchase or carry (or refinance any borrowing, the proceeds
of which were used to purchase or carry) any "security" within the meaning of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), (ii) to repay any
indebtedness or


                                        6



discharge any obligation to an person or entity, other than trade payables
incurred in the ordinary course of business on or after the effective date
hereof, and consistent with Maker's operating plans and budgets fully disclosed
to the Holder prior to the Closing, or (iii) to engage in business activities
which would cause a violation of 13 CFR 107.720. This latter limitation
prohibits, without limitation, the use of proceeds: (i) directly or indirectly,
for providing funds to others; (ii) for the purchase or discounting of debt
obligations; (iii) for factoring or long-term leasing of equipment with no
provision for maintenance or repair; (iv) for engaging in real estate
transactions such that Maker could reasonably be classified under Major Group 65
(Real Estate) of the SIC Manual; (v) for business activities wherein the assets
of the business of Maker (the "BUSINESS") will be reduced or consumed, generally
without replacement, as the life of the Business progresses, and the nature of
the Business does not require that a stream of cash payments be made to the
financing sources of the Business, on a basis associated with the continuing
sale of assets (examples of such businesses would include real estate
development projects, the financing and production of motion pictures, and oil
and gas well exploration, development and production); (vi) for a foreign
operation; (vii) to provide capital to a corporation licensed or sub-licensed
under the Small Business Investment Act, (viii) to acquire farm land, (ix) to
fund production of a single item or defined limited number of items generally
over a defined production period, such production to constitute the majority, of
the activities of Maker (examples include electric generating plants), or (x)
for any purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law) or inconsistent with free competitive
enterprise, in each case, within the meaning of Section 107.720 of Title 13 of
the Code of Federal Regulations.

          (c) Seniority. Except as otherwise expressly provided, and except for
security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11
of the Disclosure Schedule attached hereto as Exhibit B (the "DISCLOSURE
SCHEDULE"), the indebtedness evidenced by this Note: (i) shall be senior in all
respects to all other indebtedness or obligations of Maker of any kind, direct
or indirect, contingent or otherwise, other than obligations of Maker owed
directly to the state or federal government, and other than any other
indebtedness or obligations of Maker to Holder; (ii) shall not be made
subordinate or subject in right of payment to the prior payment of any other
indebtedness or obligation of any kind, direct or indirect, contingent or
otherwise, other than obligations of Maker owed directly to the state or federal
government, and other than any other indebtedness or obligations of Maker to
Holder.

          (d) No Conflicting Agreements. Maker shall not enter into any
agreement that would materially impair, interfere or conflict with Maker's
obligations hereunder. Without Holder's prior written consent, Maker shall not
permit the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way result in the creation of a security
interest in any assets of Maker, including without limitation any Collateral (as
defined in Exhibit A hereto).

          (e) Disclosure of Material Adverse Events. Within three (3) business
days of Maker obtaining knowledge thereof, Maker will notify Holder in writing
of any event that may have a material adverse effect on the business, affairs,
prospects, operations, properties, assets, liabilities, structure or condition,
financial or otherwise, of the Company (as such business is presently conducted
and/or as it is proposed to be conducted), or on any material assets or any


                                        7



Intellectual Property or other Collateral developed, owned, controlled,
licensed, possessed, or used by Maker, or to which Maker has any right, option,
entitlement or claim. Operating expenditures in the ordinary course of business
and in accordance with operating budgets approved by Maker's Board of Directors
and fully disclosed to Holder prior to the effective date hereof shall not be
deemed to be material adverse events solely because they weaken Maker's
financial condition in the absence of new equity financing of Maker.

          (f) Financial Information. So long as any principal and/or interest
under this Note shall remain outstanding:

               (i) Promptly after the end of each fiscal year (but in any event
     prior to February 28 of each year) and at such other times as Holder may
     reasonably request, Maker shall deliver to Holder a written assessment, in
     form and substance satisfactory to Holder, of the economic impact of such
     Holder's financing hereunder, specifying the full-time equivalent jobs
     created or retained in connection with such investment, and the impact of
     the financing on Maker's business in terms of revenues and profits and on
     taxes paid by Maker and its employees.

               (ii) Maker shall provide on a timely basis to Holder all
     financial information requested from time to time by Holder, including
     without limitation its quarterly and annual balance sheet and income
     statement. Such financial information shall be certified by a member of
     Maker's senior management. Financial information required shall also
     include such information as would be necessary for Holder to file form 468
     with the SBA, if it were applicable.

               (iii) In addition to the information specified in Section
     10.1(f)(i) and (ii) above, upon request, Maker agrees promptly to provide
     Holder with sufficient additional information to provide any other
     information reasonably requested or required by any governmental agency
     asserting jurisdiction over Holder.

               (iv) Maker shall report its cash position and all expenditures
     and agreements, commitments or undertakings for expenditures to Holder on a
     bi-weekly basis.

          (g) Access. So long as any principal and/or interest under this Note
shall remain outstanding, Maker shall permit Holder and its agents or
representatives to visit and inspect Maker's properties, to examine its books of
account and records and to discuss Maker's affairs, finances and accounts with
its officers, all at such times during normal business hours as reasonably may
be requested by Holder.

          (h) [Reserved]

          (i) Business Activity. As long as this Note shall remain outstanding,
Maker shall make no change in its business activity that would make it or any of
its business activities non-compliant with SBA regulations and guidelines.


                                        8



     10.2 Negative Covenants. So long as this Note shall remain outstanding:

          (a) Indebtedness. Maker shall not incur additional indebtedness,
beyond the indebtedness already existing as of the date hereof, for borrowed
money in excess of $10,000, in aggregate.

          (b) Liens. Maker shall not grant to any person or entity a security
interest, lien, license, or other encumbrance of any kind, direct or indirect,
contingent or otherwise, in, to or upon any assets of Maker, including, without
limitation, any intellectual property of any kind, as defined in Exhibit A
hereto (the "INTELLECTUAL PROPERTY").

          (c) Sale or License of Assets. Maker shall not sell, lease, transfer,
assign or otherwise dispose of or encumber (including, without limitation
through licensing or partnering arrangements) or abandon, conceal, injure or
destroy any material assets (whether tangible or intangible) of Maker
(including, without limitation, any Collateral (as defined in Section 11)),
other than with the prior written approval of Holder and in the ordinary course
of business.

          (d) Issuance of Capital Stock. Except for (a) any transaction pursuant
to an Unsolicited Proposal that Maker accepts in accordance with the fiduciary
exception provided in Section 3.2 of the Recapitalization Agreement or (b)
shares of capital stock issuable upon exercise or conversion of warrants or
convertible securities outstanding prior to February 1, 2004, Maker shall not
without Holder's prior written approval: (i) issue any shares of capital stock
or other securities, or any instruments exercisable for or convertible into
capital stock or other securities, or (ii) make any promises, commitments,
undertakings, agreements or letters of intent for any of the issuances described
in (i) hereof.

          (e) Distributions and Redemptions. Maker shall not declare or pay any
dividends or make any distributions of cash, property or securities of Maker
with respect to any shares of its common stock, preferred stock or any other
class or series of its stock, or, directly or indirectly (except for repurchases
of common stock by Maker in accordance with the terms of employee benefit plans
or written agreement between Maker and any of its employees approved by the
Board of Directors of Maker prior to February 1, 2004), redeem, purchase, or
otherwise acquire for any consideration any shares of its common stock or any
other class of its stock.

          (f) Hiring. Maker shall not hire, engage, retain, or agree to hire,
engage or retain, any Personnel, except with Holder's express prior written
approval, on a case by case basis.

          (g) Severance. Maker shall not enter into, increase, expand, extend,
renew or reinstate any severance, separation, retention, change of control or
similar agreement with any Personnel, or agree, promise, commit or undertake to
do so, except with Holder's prior written approval, on a case by case basis.

          (h) Facilities. Maker shall not purchase, lease, hire, rent or
otherwise acquire directly or indirectly any rights in or to any asset or
facility outside of the ordinary course of business in an amount in excess of
$10,000, in aggregate, or agree, promise or commit to do so,


                                        9



except in accordance with the Maker's budget that has been approved by the
Maker's board of directors and the Holder.

                    (i) Expenses. Maker shall make no expenditures in excess of
$10,000 in aggregate other than in accordance with a budget pre-approved by
Holder. Maker shall not deviate, during the period covered by such budget, more
than $10,000 in aggregate from the budget included in the Disclosure Schedule,
nor take any action or make any promise, undertaking or commitment that would
result in Maker incurring or accumulating payables and/or other financial
obligations of any kind, whether current or deferred, direct or indirect, for
purposes other than as set forth in budgets expressly agreed to by Holder,
and/or in any amounts in excess of the amounts set forth in such agreed budgets,
which equal or exceed $10,000 in aggregate, and which have not been approved in
writing in advance by Holder.

          (j) Other Limitations.

               (i) Maker shall not change the nature of its business activity in
a manner that would cause a violation of 13 C.F.R. Section 107.720 and/or
Section 107.760(b) (including, without limitation, by undertaking real estate,
film production or oil and gas exploration activities). In the event that Maker
changes the nature of its business activity such that such change would render
Maker ineligible for financing pursuant to applicable SBA rules and regulations,
Maker agrees to use its best efforts to facilitate a transfer or redemption of
any securities then held by Holder.

               (ii) Maker will at all times comply with the non-discrimination
requirements of 13 C.F.R. Parts 112, 113 and 117.

               (iii) For a period of at least one year after the date of this
Note, Maker will locate no more than 49 percent of the employees or tangible
assets of Maker outside the United States.

     10.3 Additional Covenant. Until the later of the expiration of the
Standstill Period (as defined in Section 13 below) or the date on which this
Note has been discharged in full, Maker shall not sell, license, loan or
otherwise in any way transfer or distribute Maker's Tangential Flow Filtration
("TFF") devices or any similar device, or any specifications, diagrams,
description or other information about the TFF devices, to any third party, or
commit or promise or enter into any understanding of any kind, direct or
indirect, contingent or otherwise, to do any of the foregoing in regard to
Maker's TFF devices or any similar device, without the prior written consent of
Holder in each case.

SECTION 11. SECURITY INTEREST.

     11.1 First Priority in All Collateral. To secure its obligations under this
Note whether at stated maturity, by acceleration or otherwise, Maker hereby
grants and pledges to Holder a first priority senior security interest in all of
Maker's right, title and interest in, to and under all of Maker's tangible and
intangible property, whether now owned, licensed or held or hereafter


                                       10



acquired, licensed, developed, held or arising, as described in Exhibit A hereto
(the "COLLATERAL"), and all proceeds of any kind from any disposition of any
such Collateral. Such security interest shall be senior to any security interest
in the Collateral granted the holders of the Management Notes pursuant to any
subordination agreement between Holder, the holders of the Management Notes,
Toucan Capital Fund II, L.P. or Maker, and shall be senior to any other security
interest of any kind, direct or indirect, contingent or otherwise, in the
Collateral except for the security interests and liens described in items 2, 3,
4 and 5 of Schedule 14.11 of the Disclosure Schedule (only to the amounts set
forth on such schedule) and any other indebtedness or obligations of Maker to
Holder. If certificates of title are now, or hereafter become, issued or
outstanding with respect to any of the Collateral, Maker promptly shall cause
the senior security interest of Holder to be properly noted thereon. Maker
agrees that the security interest herein granted has attached and shall continue
until Maker's obligations under this Note have been paid, performed and
indefeasibly discharged in full.

     11.2 Rights Cumulative. The rights and remedies of Holder with respect to
the senior security interest granted hereby are in addition to those which are
now or may hereafter be available to Holder as a matter of law or equity. Each
right, power and remedy of Holder provided for herein, or now or hereafter
existing at law or in equity, shall be cumulative and concurrent and shall be in
addition to every right, power and remedy provided for herein, and the exercise
by Holder of any one or more of the rights, powers and/or remedies provided for
in this Note, or now or hereafter existing at law or in equity, shall not
preclude the simultaneous or later exercise by any person, including a grantee,
of any or all other rights, powers and/or remedies.

     11.3 Documentation of Security Interest. Maker shall execute, deliver,
file, amend, and re-file any financing statements, instruments (including
without limitation stock certificates), continuation statements, assignments, or
other security agreements that Holder may require from time to time to confirm
the liens arising out of this Note with respect to the Collateral. Maker agrees
to pay all reasonable costs associated with filing and/or re-filing of any
financing statements, continuation statements or other security agreements
required to perfect and to continue perfection of Holder's security interest in
the Collateral and all reasonable costs required to evidence the first priority
of the security interest, including, without limitation, reasonable attorneys'
fees. Maker authorizes Holder to file financing statements under the UCC with
respect to the security interest granted hereby and agrees, upon request of
Holder, to promptly and duly execute and deliver any and all such further
instruments and documents, and to take such further action, as Holder may
reasonably deem necessary or desirable to obtain the full benefits of this grant
of security interest.

     11.4 No Conflicting Agreements. Maker shall not enter into any agreement on
or after the effective date of this Note that would materially impair or
conflict with Maker's obligations hereunder without Holder's prior written
consent. Without Holder's prior written consent, Maker shall not permit the
inclusion in any material contract to which it becomes a party on or after the
effective date of this Note, of any provisions that could or might in any way
prevent the creation, perfection and maintenance of a first priority security
interest in Maker's rights and interest in any property included within the
definition of the Collateral acquired under such contracts. Maker represents and
warrants that, as of the effective date of this Note, there are no existing
agreements or undertakings that would materially impair or conflict with Maker's
obligations


                                       11



hereunder or that could or might in any way prevent the creation, perfection and
maintenance of a first priority security interest in Maker's rights and interest
in any property included within the definition of the Collateral acquired under
such contracts; except for existing equipment leases described in item 2 of
Schedule 14.11 and the statutory liens described in items 3 and 4 of the
Disclosure Schedule.

     11.5 Notification Requirements. Within two (2) business days of any
officer, director or employee of Maker obtaining knowledge thereof, Maker will
promptly notify Holder in writing of any event that materially adversely affects
the value of any material Collateral, the ability of Maker to dispose of any
material Collateral, or the rights and remedies of Holder in relation thereto,
including the levy of any legal process against any of the Collateral.

     11.6 Foreclosure Remedy. Notwithstanding anything to the contrary herein or
in the Recapitalization Agreement or any other agreement or document, in the
event that Maker is unable to pay and discharge this Note in full on the
Maturity Date, subject to the compliance with the requirements of the Delaware
Uniform Commercial Code, nothing herein or in the Recapitalization Agreement or
any other agreement or document shall be deemed to preclude, limit or restrict
Holder from requiring the delivery of some or all of the Collateral in full or
partial satisfaction of Maker's obligation under the Note. Alternatively, Holder
may, in its sole discretion, elect to cause some or all of the Collateral to be
sold, and the sale proceeds to be used to pay and discharge the Note in full.

SECTION 12. CONVERSION.

     12.1 Holder's Election. Notwithstanding any other provision of this Note or
any applicable agreement or document, until, and/or in the absence of, purchases
for cash of a minimum of $15 million of Convertible Preferred Stock, by Other
Investors (as defined in the Recapitalization Agreement), on the terms and
conditions set forth in the Recapitalization Agreement and the Convertible
Preferred Stock Term Sheet, Holder may, in its sole discretion, elect to convert
any or all of the principal and/or interest due under the Note into any Equity
Security and/or Debt Security (each as defined below) and/or any combination
thereof, in each case that Holder shall designate in Holder's sole discretion
(the securities so elected being the "HOLDER DESIGNATED SECURITIES"). Holder may
make such determinations from time to time and at any time before this Note has
been discharged in full, and, as applicable, at any time on or before the
expiration of the thirty (30) day notice period required under this Note in the
event the Maker wishes to prepay this Note. For purposes hereof, (i) the term
"Equity Security" means any class or series of equity security, or any
combination of classes and/or series of equity securities, of the Maker that
have been authorized under the Maker's certificate of incorporation, as amended
and/or restated, including by any certificate of designation (the "Charter"), or
any new class or series of equity security, or any combination of new and/or
existing classes and/or series of equity securities, of the Maker for which the
Maker has undertaken any agreement, obligation, promise, commitment or letter of
intent to obtain such authorization and (ii) the term "Debt Security" means any
evidence of indebtedness of the Maker that the Maker has authorized, created or
incurred, or that the Maker has undertaken any agreement, obligation, promise,
commitment or letter of intent to authorize, create or incur.


                                       12


     12.2 Automatic Conversion. The principal amount of, and accrued and unpaid
interest on, this Note shall automatically convert into Convertible Preferred
Stock, upon the terms and conditions set forth herein and in the
Recapitalization Agreement, only in the event, and upon the closing of, the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments), on the
terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by
Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a
minimum of $15 million of Convertible Preferred Stock.

     12.3 Information for Holder's Election. Maker shall provide to Holder,
within two (2) business days after notice of each request by Holder, all
information reasonably requested by Holder in connection with any Equity
Securities and/or Debt Securities, to enable Holder to make decisions regarding
one or more conversions. In the event that Maker seeks to prepay this Note,
Maker shall deliver to Holder, simultaneously and together with the notice
required under Section 2 of this Note of Maker's interest in prepaying the Note,
a summary of all material information, terms and conditions relating to all
Equity Securities and Debt Securities (including any "side" letters or
agreements or separate agreements).

     12.4 Conversion Price. The conversion price for any conversion pursuant to
Section 12.2 shall be the lowest nominal or effective price per share paid by
the Other Investors who acquire such Convertible Preferred Stock (with the
exception of shares issuable upon exercise of the Initial Bridge Warrants). The
conversion price for any conversion into any equity or debt security pursuant to
Section 12.1 shall be the lowest of (i) the lowest nominal or effective price
per share paid by any investor at any time on or after the date one year prior
to the Effective Date (with the exception of (x) purchases of up to 35,000
shares of Common Stock pursuant to certain options to purchase, at a purchase
price of $0.0001, that were outstanding on the Effective Date and held by
members of the Board of Directors, as set forth in Schedule 2.7(d) to the
Recapitalization Agreement, and (y) shares issuable upon the exercise of the
Initial Bridge Warrants, each of which shall be excluded from consideration
under this section), (ii) the lowest nominal or effective price at which any
investor is entitled to acquire shares (including, without limitation, through
purchase, exchange, conversion or exercise) pursuant to any other security,
instrument, or promise, undertaking, commitment, agreement or letter of intent
of the Maker outstanding on or after the Effective Date or granted, issued,
extended or otherwise made available by the Maker at any time on or after the
date one year prior to the Effective Date (regardless of whether currently
exercisable or convertible) (with the exception of (x) certain options to
purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that
were outstanding on the Effective Date and held by members of the Board of
Directors as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and
(y) the Initial Bridge Warrants, each of which shall be excluded from
consideration under this section); and (iii) the lesser of $0.10 per share or
35% discount to the average closing price per share of the Common Stock during
any twenty consecutive trading days (beginning with the twenty consecutive
trading days prior to the Effective Date); provided, however, that in no event
shall the price per share calculated pursuant to this clause (iii) be less than
$.04 per share. The calculation required by clause (ii) hereof shall initially
be based upon Schedule 2.7(d) to the Recapitalization Agreement. All other
rights, preferences, privileges, terms and conditions received by Holder in
connection with any conversion and/or any securities issued by the Maker to
Holder upon


                                       13



conversion, shall be no less favorable to Holder than the rights, preferences,
privileges, terms and conditions any other investor in the Maker has received or
is entitled to receive with respect to the security into which Holder is
converting pursuant to any other security, instrument, promise, undertaking,
commitment, agreement or letter of intent of the Maker, whether or not such
rights, preferences, privileges, terms and conditions for any other investor are
incorporated into the agreements or documents relating to any conversion or any
issuance of the security or other instrument to that investor or are provided
separately, at any time on or after one year prior to the Effective Date. In
regard to each conversion hereunder, the Maker hereby agrees to take and/or
arrange for all necessary corporate and related action to enable the execution
of each such conversion elected by Holder.

     12.5 No Impairment. Maker shall not, by amendment of its Charter or through
a reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities, or any other voluntary action, omission or agreement,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by Maker under and/or in connection with this Note, but
shall at all times in good faith use best efforts to assist in carrying out of
all the provisions of and/or relating to this Note and in taking all such action
as may be necessary or appropriate to protect Holder's rights, preferences and
privileges under and/or in connection with the Note against impairment. Holder's
rights, preferences and privileges granted under and/or in connection with any
Holder Designated Securities may not be amended, modified or waived without the
Holder's prior written consent, and the documentation providing for such rights,
preferences and privileges will specifically provide as such.

SECTION 13. STANDSTILL, EXCLUSIVITY AND CONFIDENTIALITY.

During the Bridge Period and the Equity Financing Period, as defined in the
Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet,
but excluding the periods from February 18, 2004 through February 29, 2004 and
from March 16, 2004 through the Effective Date (collectively, the "STANDSTILL
PERIOD") the parties shall have worked together, and shall continue to work
together, in good faith with best efforts to implement the terms of the
Recapitalization Agreement, upon which the parties shall have reached binding
agreement and which the parties shall have executed as a condition precedent to
the execution and funding of this Note. Except as provided in the fiduciary
exception set forth in Section 3.2 of the Recapitalization Agreement, during the
Standstill Period, the Maker and its officers, directors, employees, agents,
advisers, consultants, partners and collaborators shall work only with Investor
and its agents, advisers and consultants, and shall have had, and shall continue
to have, no discussions, negotiations and/or communications of any kind with any
other parties, regardless of which party initiates or attempts to initiate any
such contact or communication, in regard to any potential equity or debt
financing of the Maker by parties other than Holder, and/or any joint venture,
license, co-development or other business arrangement by or with parties other
than Holder. Notwithstanding the fiduciary exception set forth in Section 3.2 of
the Recapitalization Agreement, during the Standstill Period, the Maker and its
officers, directors, employees, agents, advisers, consultants, partners and
collaborators shall maintain confidentiality, and shall not have, and shall
continue not to provide copies, excerpts, summaries, descriptions, or
communicate in any way with any third parties, either directly or indirectly, as
to any aspects of the recapitalization of Maker and/or any financing by Holder,
including, without


                                       14



limitation, the identity of the parties involved, any terms of the
Recapitalization Agreement, this Note, the Related Recapitalization Documents,
the Convertible Preferred Stock or any other matter relating to the
recapitalization of Maker, or the progress or status of any activities or
processes relating to the recapitalization of Maker; provided, however, nothing
herein shall prohibit the Maker from filing this Note, the Recapitalization
Agreement and any Related Recapitalization Document with the Securities and
Exchange Commission (the "SEC"), if required by the regulations of the SEC
(subject to the covenant in Section 2.5(a) of the Recapitalization Agreement).
During the Standstill Period, the Maker shall not make any sales of equipment or
other assets of any kind, including, without limitation, any non-essential
laboratory equipment, and the Maker shall comply with Section 10.3 in regard to
the TFF devices.

SECTION 14. REPRESENTATIONS AND WARRANTIES.

Except as expressly set forth (with reference to a section in this Note) in the
Disclosure Schedules attached hereto as Exhibit B (as updated as of each closing
contemplated by the Recapitalization Agreement and the Related Recapitalization
Documents), and only to the extent such exceptions are acceptable to Holder in
its sole discretion as of the date of this Note, and independently as of the
date upon which each additional Note is issued to Holder, and as of the date of
each closing, if any, of the Anticipated Equity Financing, Maker represents and
warrants to the following:

     14.1 Organization, Good Standing and Qualification. Maker is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business. Maker is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business, properties, operations, prospects or
condition (financial or otherwise).

     14.2 Authorization of Note, Etc. The execution, delivery and performance by
Maker of this Note has been duly authorized by all requisite corporate action by
Maker in accordance with Delaware law. This Note is a valid and binding
obligation of Maker, enforceable against Maker in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application effecting enforcements of
creditors' rights or general principles of equity.

     14.3 No Conflicts. The execution, delivery, performance, issuance, sale and
delivery of this Note and the Related Recapitalization Documents, and compliance
with the provisions hereof by Maker, will not (a) to the knowledge of Maker,
violate any provision of any law, statute, rule or regulation applicable to
Maker or any ruling, writ, injunction, order, judgment or decree of any court,
arbitrator, administrative agency or other governmental body applicable to Maker
or any of its properties or assets or (b) conflict with or result in any
material breach of any of the terms, conditions or provisions of, or constitute
(with notice or lapse of time or both) a material default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of, any encumbrance upon any of the material assets of Maker under, the


                                       15



Charter or Bylaws of Maker (as they may be amended to date) or any agreement or
instrument to which Maker is a party. As used herein, "encumbrance" shall mean
any liens, charges, encumbrances, equities, claims, options, proxies, pledges,
security interests, licenses or other similar rights of any nature.

     14.4 Compliance with Other Instruments. Maker is not in violation of any
term of Maker's Charter, as amended, including any certificate of designation
filed therewith, and/or Maker's Bylaws. Maker is not, in any material respect,
in violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which Maker
or any of such Collateral is subject. To the best of Maker's knowledge, no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach or violation, in any material respect, under any
applicable judgments, orders, writs, decrees, federal, state and/or local laws,
rules or regulations which would have a material adverse affect on the
condition, financial or otherwise, or operations of Maker (as it is currently
conducted and as it is proposed to be conducted) or on any material assets or
any Intellectual Property or other Collateral owned, controlled, licensed,
possessed, and/or used by Maker. To the best of its knowledge, Maker has avoided
every condition, and has not performed any act, the occurrence of which would
result in Maker's loss of any right granted under any license, distribution
agreement or other agreement or Maker's loss of any rights in or to any
Collateral.

     14.5 Approvals. Maker has obtained all necessary permits, authorizations,
waivers, consents and approvals of or by, and made all necessary notifications
of and/or filings with, all applicable persons (governmental and private), in
connection with the execution, delivery, performance, issuance, sale and/or
delivery of this Note, the Recapitalization Agreement and the Related
Recapitalization Documents, and consummation by Maker of the transactions
contemplated hereby and thereby, except as listed in Schedule 14.5

     14.6 Capitalization. The authorized capital stock of Maker consists of
300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000
shares of Preferred Stock, par value of $0.001 per share. As of the date hereof,
63,553,806 shares of Common Stock are issued and outstanding and 32,500,000
shares of Series A convertible preferred stock are issued and outstanding. No
other shares of any class or series of Maker's capital stock are authorized
and/or issued and outstanding. All issued and outstanding shares of capital
stock of Maker have been duly authorized and validly issued, and are fully paid
and non-assessable, and have been offered, sold and delivered by Maker in
compliance with all applicable federal and state securities laws. Except as set
forth in Schedule 14.6, no subscription, warrant, option, convertible security,
or other right (direct or indirect, contingent or otherwise) to purchase or
otherwise acquire any equity securities of Maker is authorized or outstanding,
and there is no agreement, promise, commitment, undertaking or letter of intent
of any kind (direct or indirect, contingent or otherwise) by Maker to issue any
shares, subscriptions, warrants, options, convertible securities, or other such
rights, or to distribute to holders of any of its equity securities any evidence
of indebtedness or asset. Except as set forth in Schedule 14.6, Maker has no
obligation of any kind (direct or indirect, contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Schedule 14.6 includes a true, accurate and complete statement
describing the total number of shares of Maker outstanding as of the date of


                                       16



this Note (on a fully diluted basis, including, without limitation, all warrants
and options outstanding (whether or not currently exercisable), all convertible
instruments of any kind (whether or not currently convertible), shares of all
classes of stock, and any agreements, promises, commitments, undertakings or
letters of intent to issue any of the foregoing.

     14.7 Authorization of the Shares. Maker has authorized the issuance and
sale of a sufficient number of shares of Convertible Preferred Stock, par value
$0.001 per share, and Common Stock of the Maker to fully implement the
Recapitalization Plan, while maintaining such additional authorized but unissued
shares as reasonably determined by Holder to be appropriate. Of such authorized
shares, a sufficient number of shares shall be reserved for issuance upon any
exercise of the Bridge Warrants and/or Preferred Stock Warrants. If at any time
the number of authorized but unissued shares of Convertible Preferred Stock
and/or of Common Stock is not sufficient to effect the conversion of all then
outstanding convertible Notes and other instruments, and the exercise of all
then outstanding warrants, options and similar instruments, then, in addition to
such other remedies as may be available to Holder, including, without
limitation, the exercise of Holder's right of first refusal set forth in Section
2.7(f) of the Recapitalization Agreement, Maker shall take such corporate action
as may be necessary to increase its authorized but unissued shares of
Convertible Preferred Stock and/or Common Stock to such number of shares as will
be sufficient for such purposes. Such corporate action shall include, without
limitation, obtaining all requisite regulatory approvals and any requisite
shareholder approval of any necessary amendment to Maker's Charter.

     14.8 Litigation. Except as set forth in Schedule 14.8 of the Disclosure
Schedule, there is no action, suit, proceeding or investigation pending or, to
the knowledge of Maker, currently threatened against Maker, and/or its
directors, officers, advisers, agents, properties, assets or business, in each
case relating to Maker and/or its business, assets, operations or properties.
Maker is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by Maker
currently pending or which Maker intends to initiate.

     14.9 No Liens. Except for liens for the benefit of Holder, created by this
Note, and for the benefit of Toucan Partners, LLC created by the
Recapitalization Agreement and/or any of the Related Recapitalization Documents,
and except as set forth in Schedule 14.9 of the Disclosure Schedule, none of the
material assets of Maker, including the Collateral, are subject to any existing
lien, pledge, security interest or other encumbrance of any kind, direct or
indirect, contingent or otherwise.

     14.10 Full Disclosure. Notwithstanding any other provision of this Note,
neither this Note, nor any exhibit hereto, nor any written report, certificate,
instrument or other information furnished to Holder in connection with the
transactions contemplated under and/or in connection with Note contain any
material misstatement (including, without limitation, any material omission), or
is misleading in any material respect.

     14.11 No Other Security Interests or Other Encumbrances. Except as set
forth in Schedule 14.11 (and only to the amounts set forth on such schedule),
there are no existing security interests, pledges, liens or other encumbrances
of any kind, direct or indirect, contingent


                                       17



or otherwise (including without limitation any licensing or partnering
arrangements or agreements), in or relating to any assets of Maker, including,
without limitation, any Intellectual Property (as defined herein) or other
Collateral. All existing security interests, pledges, liens or other
encumbrances of any kind, other than those set forth in Schedule 14.11 hereto
(and only to the amounts set forth on such schedule), are subordinate to the
security interest established pursuant to Section 11 hereof, all necessary
consents, subordination agreements and waivers, if any, have been obtained, and
all amended filings and/or re-filings shall be made immediately upon execution
of this Note.

     14.12 "Small Business".

               (a) Small Business Status. Maker together with its "affiliates"
(as that term is defined in Section 121.103 of Title 13 of Code of Federal
Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within
the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL
BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including
Section 121.301(c) of Title 13, Code of Federal Regulations.

               (b) Information for SBA Reports. Maker has delivered and/or will
deliver to Holder certain information, set forth by and regarding the Maker and
its affiliates in connection with this Note, on SBA Forms 480, 652 and Part A
and B of Form 1031. This information delivered was true, accurate, complete and
correct, and any information yet to be delivered will be true, accurate,
complete and correct, and in form and substance acceptable to Holder.

               (c) Eligibility. Maker is eligible for financing by any Holder
pursuant to Section 107.720 of Title 13 of the Federal Regulations and any other
SBA regulations.

     14.13 Intellectual Property.

          (d) Definitions. "Intellectual Property" means all foreign and
domestic intangible property and rights, owned, licensed, sub-licensed or
otherwise obtained by Maker, including, without limitation, (i) inventions,
discoveries and ideas, whether patentable or not, and all patents, registrations
and applications therefor, including divisions, continuations,
continuations-in-part, requests for continued examination, and renewal
applications, and including renewals, extensions and reissues (collectively,
"PATENTS"); (ii) confidential and proprietary information, trade secrets and
know-how, including without limitation processes, schematics, formulae,
drawings, prototypes, models, designs and customer lists (collectively, "TRADE
SECRETS"); (iii) all data, slides, observations, and laboratory results,
produced by, for or on behalf of Maker, or which Maker has rights to obtain
(collectively, "DATA"); (iv) all FDA applications, registrations, filings and
other rights (collectively, "FDA RIGHTS") and all data and documentation
supporting or relating thereto; (iv) published and unpublished works of
authorship, whether copyrightable or not (including, without limitation,
databases and other compilations of information), copyrights therein and
thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "COPYRIGHTS");
(v) trademarks, service marks, brand names, certification marks, collective
marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress,
assumed names,


                                       18



fictitious names, trade names, and other indicia of origin, all applications and
registrations for the foregoing, and all goodwill associated therewith and
symbolized thereby, including all extensions, modifications and renewals of same
(collectively, "TRADEMARKS"); (vi) all other intellectual property or
proprietary rights, including, without limitation, all claims or causes of
action arising out of or related to any infringement, misappropriation or other
violation of any of the foregoing, including rights to recover for past, present
and future violations thereof (collectively, "OTHER PROPRIETARY RIGHTS").

     "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating
to or affecting the Intellectual Property, including, without limitation,
agreements granting rights to use the Licensed or Sub-Licensed Intellectual
Property, agreements granting rights to use Owned Intellectual Property,
confidentiality agreements, Trademark coexistence agreements, Trademark consent
agreements and non-assertion agreements.

     "LICENSED or SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual
Property that Maker is licensed, sub-licensed or otherwise permitted by other
persons or entities to use.

     "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by
Maker.

     "REGISTERED" means issued, registered, renewed or the subject of a pending
application.

          (e) Schedule 14.13 ("INTELLECTUAL PROPERTY") sets forth a true and
complete list and summary description of (A) all Registered or material Owned
Intellectual Property (each identified as a Patent, Trademark, Trade Secret,
Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or
Sub Licensed Intellectual Property and (C) all Intellectual Property Contracts.

          (f) All Intellectual Property is valid, subsisting and enforceable. No
Owned Intellectual Property has been canceled, suspended, adjudicated invalid,
not maintained, expired or lapsed, or is subject to any outstanding order,
judgment or decree restricting its use or adversely affecting or reflecting
Maker's rights thereto. No Licensed or Sub-Licensed Intellectual Property has
been canceled, suspended, not renewed or extended, adjudicated invalid, not
maintained, expired or lapsed, or is subject to any outstanding order, judgment
or decree restricting its use or adversely affecting or reflecting Maker's
rights thereto.

          (g) The Owned Intellectual Property is owned exclusively by Maker and
has been used with all patent, trademark, copyright, confidential, proprietary
and other Intellectual Property notices and legends prescribed by law or
otherwise permitted.

          (h) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"Suit") is pending or threatened concerning any claim or position:

               (i) that Maker, or another person or entity, has violated any
Intellectual Property rights. To Maker's best knowledge, Maker is not violating
and has not violated any intellectual property rights of any other party.


                                       19



               (ii) that Maker, or another person or entity, has breached any
Intellectual Property Contract. There exists no event, condition or occurrence
which, with the giving of notice or lapse of time, or both, would constitute a
breach or default by Maker, or a breach or default by another person or entity,
under any Intellectual Property Contract. No party to any Intellectual Property
Contract has given Maker notice of its intention to cancel, terminate or fail to
renew any Intellectual Property Contract.

               (iii) that the Intellectual Property has been violated or is
invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or
not owned exclusively by Maker. No such claim has been threatened or asserted.
To Maker's best knowledge, no valid basis for any such Suits or claims exists.

          (i) To Maker's best knowledge, no other person or entity is violating,
infringing upon or claiming rights incompatible with Maker's rights to any
Intellectual Property. Maker has provided to Holder copies of all information
reasonably available to it relevant to intellectual property rights claimed by
third parties and possible infringement thereof including, without limitation,
any freedom to practice or freedom to operate opinions.

          (j) Except as set forth on Schedule 14.13(j), Maker owns or otherwise
holds valid rights to use all Intellectual Property used in its business.

          (k) Maker has timely made all filings and payments with the
appropriate foreign and domestic agencies and other parties required to maintain
in full force and effect all Intellectual Property. Except as set forth on
Schedule 14.13, no due dates for filings or payments concerning the Intellectual
Property (including, without limitation, office action responses, affidavits of
use, affidavits of continuing use, renewals, requests for extension of time,
maintenance fees, application fees and foreign convention priority filings) fall
due within ninety (90) days prior to or after the closing, whether or not such
due dates are extendable. Maker is in compliance with all applicable rules and
regulations of such agencies and other parties with respect to the Intellectual
Property. All documentation necessary to confirm and effect the Intellectual
Property, if acquired from other persons or entities, has been recorded in the
United States Patent and Trademark Office, the United States Copyright Office
and other official offices.

          (l) Maker has undertaken and consistently implemented best efforts to
protect the secrecy, confidentiality and value of all non-public Intellectual
Property used in its business (including, without limitation, entering into
appropriate confidentiality agreements with all officers, directors, employees
and other persons or entities with access to such non-public Intellectual
Property). Maker management has not disclosed any such non-public Intellectual
Property to any persons or entities other than (i) Maker employees or Maker
contractors who had a need to know and use such non-public Intellectual Property
in the ordinary course of employment or contract performance, or (ii)
prospective customers, and in each case who executed appropriate confidentiality
agreements.


                                       20



          (m) Maker has taken all reasonable measures to confirm that no current
or former Maker employee is or was a party to any confidentiality agreement or
agreement not to compete that restricts or forbids, or restricted or forbade at
any time during such employee's employment by Maker, such employee's performance
of Maker's business, or any other activity that such employee was hired to
perform or otherwise performed on behalf of or in connection with such
employee's employment by Maker.

     14.14 SEC Filings; Financial Statements.

     (a) Maker has delivered or made available to Holder accurate and complete
copies of all registration statements, proxy statements and other statements,
reports, schedules, forms and other documents filed by the Maker with the SEC
since January 1, 2003, and all amendments thereto (the "MAKER SEC DOCUMENTS").
Except as set forth on Schedule 14.14(a), all statements, reports, schedules,
forms and other documents required to have been filed by Maker with the SEC have
been so filed on a timely basis. As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Note, then on the
date of such filing): (i) each of the Maker SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the Maker SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

     (b) The financial statements (including any related notes) contained in the
Maker SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end adjustments that will not, individually or in the aggregate, be
material in amount), and (iii) fairly present the consolidated financial
position of Maker and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows of Maker and
its consolidated subsidiaries for the periods covered thereby.

     14.15 Liabilities. As of the date hereof, Maker has the following accrued
liabilities: (i) tax liabilities to the State of Washington in the approximate
amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor,
(iii) future sublease payments to MediQuest Corporation and a contingent lease
liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest
Corporation default on its lease with Benaroya Capital Co. LLC and which is not
yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities
of any nature, either mature or immature, as of the date hereof, not in excess
of $275,000 (excluding amounts payable to Cognate and Investor), of which (x)
approximately $105,000 are currently due payables (including approximately
$85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital
leases payable in monthly installments in the amounts set forth in the budget
included in the Disclosure Schedule through the first calendar quarter of 2006,
decreasing


                                       21


thereafter, the last of which is fully amortized in May 2007, and (z) $90,000
are accrued vacation and sick pay.

     14.16 Compliance with All Standstill Provisions. Maker has complied in all
respects with all standstill, exclusivity and confidentiality provisions of (a)
this Note, the Recapitalization Agreement and the Related Recapitalization
Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between Maker and Toucan Capital Fund II, L.P. dated as of February
2, 2004 and (c) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between Maker and Toucan Capital Fund II, L.P. dated as of March 1,
2004.

     14.17 Recall of TFF Devices. Maker has recalled all units of Maker's TFF
devices, and all specifications, diagrams, description or other information
relating to such TFF devices or any similar devices, from all third parties who
may previously have possessed any of the foregoing, and, as of the Effective
Date of this note, no third party possesses any of the foregoing.

SECTION 15. INDEMNIFICATION

     15.1 Indemnification Agreement.

          (a) In addition to all rights and remedies available to Holder at law
or in equity, Maker shall indemnify Holder and each subsequent holder of this
Note, and their respective affiliates, stockholders, limited partners, general
partners, officers, directors, managers, employees, agents, representatives,
successors and assigns (collectively, the "INDEMNIFIED PERSONS") and save and
hold each of them harmless against and pay on behalf of or reimburse such party
as and when incurred for any loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense (other than any
demand, claim, action or cause of action instituted by Maker), including
interest, penalties, reasonable attorneys' fees and expenses, and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "LOSSES") which any such party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of:

                    (i) any material misrepresentation in, or material omission
          from, or breach of any of the representations, warranties, statements,
          schedules and/or exhibits hereto, certificates or other instruments or
          documents furnished to Holder by Maker in connection with this Note;
          or

                    (ii) any material nonfulfillment or material breach of any
          covenant or agreement on the part of Maker under this Note.

          (b) Notwithstanding the foregoing, Maker shall not be liable for any
portion of Losses resulting from the gross negligence or willful misconduct of
Holder or a subsequent holder of this Note.

          (c) Within twenty (20) days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, Holder shall give
Maker written notice


                                       22



thereof together with a copy of such claim, process or other legal pleading of
such claim. Maker shall have the right to assist in the defense thereof by
representation of its own choosing.

     15.2 Survival. All indemnification rights hereunder shall survive the
execution and delivery of this Note and the consummation of the transactions
contemplated hereby (i) for a period of two years with respect to
representations and warranties made by Maker, and (ii) until fully performed
with respect to covenants and agreements made by Maker, regardless of any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of Holder and/or any of the Indemnified Persons, or the acceptance by Holder of
any certificate or opinion.

     15.3 Payment. Any indemnification of Holder or any other Indemnified Person
by Maker pursuant to this Section 15 shall be effected by wire transfer of
immediately available funds from Maker to an account designated by Holder or
such other Indemnified Person within fifteen (15) days after the determination
thereof.

SECTION 16. INTEGRATION WITH RECAPITALIZATION PLAN

Maker acknowledges and agrees that the funding provided by Holder pursuant to
this Note is only being provided as part of an integrated Recapitalization Plan,
as set forth in the Recapitalization Agreement. Maker further acknowledges and
agrees that this Note is subject to all terms and conditions set forth in the
Recapitalization Agreement.

SECTION 17. MISCELLANEOUS.

     17.1 Notices. All notices, demands and requests of any kind to be delivered
to any party in connection with this Note shall be in writing and shall be
deemed to be effective upon delivery if (i) personally delivered, (ii) sent by
confirmed facsimile with a copy sent by nationally recognized overnight courier,
(iii) sent by nationally recognized overnight courier, or (iv) sent by
registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:

     if to Maker:  Northwest Biotherapeutics, Inc.
                   18701 120th Avenue, NE, Suite 101
                   Bothell, WA 98011
                   Fax: (425) 608 3146
                   Attn: Alton Boynton

     if to Holder: Toucan Partners, LLC
                   7600 Wisconsin Avenue
                   Suite 700
                   Bethesda, MD 20814
                   Fax: (240) 497-4060
                   Attention: Linda F. Powers

or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section.


                                       23



     17.2 Parties In Interest. This Note shall bind and inure to the benefit of
Holder, Maker and their respective successors and permitted assigns. Maker shall
not transfer or assign this Note without the prior written consent of Holder.
Holder may transfer and assign this note without the prior consent of Maker.

     17.3 Entire Agreement. This Note together with the Disclosure Schedules,
Exhibits attached hereto and the Recapitalization Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto.

     17.4 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware (without giving effect to
principles of conflicts of laws of the State of Delaware or any other state).

     17.5 Headings. The section and paragraph headings contained in this Note
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Note.

     17.6 Amendments. No provision of this Note may be amended or waived without
the express written consent of both Maker and Holder, provided, however, that
Holder may waive any provision hereof that inures to the benefit of Holder
without the prior written consent of Maker. Also notwithstanding anything to the
contrary, this Note shall be amended as and to the extent necessary to comply
with the Small Business Investment Act and all regulations, advice, direction
and guidance applicable to SBIC's.

     17.7 Nature of Obligation. This Note is being made for business and
investment purposes, and not for household or other purposes.

     17.8 Expenses. Maker shall pay, reimburse or otherwise satisfy, upon demand
of Holder, all fees, costs and expenses incurred and/or undertaken, and to be
incurred and/or undertaken, by Holder relating to the preparation for,
development of and implementation of the Recapitalization Plan set forth in the
Recapitalization Agreement, including, without limitation, all due diligence
expenses and all expenses relating to the Bridge Funding, the Anticipated Equity
Financing and the transactions contemplated thereby and the documentation of the
foregoing (including, without limitation all legal fees and expenses and costs
incurred and to be incurred in connection with any SBA filings), which shall be
satisfied by Maker upon Holder's demand, including but without limitation upon
each closing of the Bridge Funding or Anticipated Equity Financing. This
obligation shall apply regardless of whether or not all of the transactions
contemplated in the Recapitalization Agreement close. At each closing of Bridge
Funding and/or Anticipated Equity Financing, at Holder's sole discretion, and
with respect to any or all of such fees, costs and expenses accrued through such
closing, Maker shall (a) pay Holder in cash concurrently with such closing (or
at Holder's sole discretion, Holder may withhold such amount from the wire of
investment proceeds), (b) issue a Note in the form hereof in principal amount
equal to such fees, costs and expenses (which at Holder's option may instead be
evidenced as an increase in the principal amount of any Note issued in
connection with such closing); or (c) treat


                                       24



such fees, costs and expenses as an unsecured payable. At any time following
such closing, Holder may require any amounts that it elected to have Maker treat
as unsecured amounts payable to be paid in cash or satisfied by issuance of a
Note in the principal amount of some or all of such unsecured obligation.


                                       25



     IN WITNESS WHEREOF, Maker has caused this Note to be duly executed by its
duly authorized person(s) as of the date first written above.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton Boynton
                                        Title: President

                              CONSENT AND AGREEMENT

     Toucan Partners, LLC consents to the loan and security interest granted by
Maker in the foregoing Note.

                                        HOLDER:

                                        TOUCAN PARTNERS, LLC


                                        By:
                                            ------------------------------------
                                        Name: Linda Powers
                                        Title: Managing Member


                                       26



                                    EXHIBIT A

                            DESCRIPTION OF COLLATERAL

     The "Collateral" consists of all of Maker's right, title and interest (in
each case, whether now owned or hereafter acquired) in and to the following:

     (a) All intellectual property of any kind, whether owned, licensed or
otherwise permitted to be used, and whether now held or hereafter acquired or
developed (the "Intellectual Property"). Such Intellectual Property shall
include, without limitation, all foreign and domestic intangible property and
rights, owned, licensed or otherwise obtained by Maker, including, without
limitation, (i) trademarks, service marks, brand names, certification marks,
collective marks, d/b/a's, Internet domain names, logos, symbols, trade dress,
assumed names, fictitious names, trade names, and other indicia of origin, all
applications and registration for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all extensions, modifications and
renewals of same, including without limitation those items reference on Appendix
1 hereto (collectively, "Trademarks"); (ii) inventions, discoveries and ideas,
whether patentable or not, and all patents, registrations and applications
therefor, including divisions, continuations, continuations-in-part, requests
for continued examination, and renewal applications, and including renewals,
extensions and reissues, including without limitation those items reference on
Appendix 2 hereto (collectively, "Patents"); (iii) confidential and proprietary
information, trade secrets and know-how, including, without limitation,
processes, schematics, formulae, drawings, prototypes, models, designs and
customer lists (collectively, "Trade Secrets"); (iv) published and unpublished
works of authorship, whether copyrightable or not (including, without
limitation, databases and other compilations of information), copyrights therein
and thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "Copyrights");
(v) all FDA applications, registrations, filings and other rights (collectively,
"FDA Rights and Materials"); (vi) all results, information and data arising
from, or obtained in connection with, research, development, pre-clinical work
and/or clinical trials (collectively, "Data"); and (vii) all other intellectual
property or proprietary rights and claims or causes of action arising out of or
related to any infringement, misappropriation or other violation of any of the
foregoing, including rights to recover for past, present and future violations
thereof (collectively, "Other Proprietary Rights").

     (b) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located.

     (c) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Maker's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing an any documents of title representing any of the above.


                                       27



     (d) All contract rights, general intangibles and intellectual property, now
owned or hereafter acquired, including, without limitation, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent
applications, leases, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, computer code, copyrights,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind.

     (e) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Maker
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Maker, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefore, as well as
all merchandise returned to or reclaimed by Maker.

     (f) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Maker's books relating to the foregoing.

     (g) Each item of equipment, or personal property whether now owned or
hereafter acquired, together with all substitutions, renewals or replacements of
and additions, improvements, and accessions to any and all of the foregoing, and
all proceeds from sales, renewals, releases or other dispositions thereof.

     (h) All Maker's books relating to the foregoing and any and all claims,
rights and interests in any of the above, whether now owned or hereafter
acquired, and all substitutions for, additions and accessions to and proceeds
thereof.

Notwithstanding the foregoing, to the extent any of Maker's licensed
Intellectual Property prohibits the transfer or encumbrance of such licensed
Intellectual Property (the "Restricted Intellectual Property") without prior
consent of the owner or licensor thereof, such Restricted Intellectual Property
is hereby conditionally included within the definition of Collateral, subject to
receipt, by or on behalf of Maker, of any required consents. If requested by
Holder, Maker shall use its best efforts to obtain the required consents under
any Restricted Intellectual Property within thirty (30) days of such request.


                                       28



                                   APPENDIX 1

                                   TRADEMARKS


                                       29



                                   APPENDIX 2

                                     PATENTS


                                       30


                                                                       EXHIBIT B


                               DISCLOSURE SCHEDULE
             TO AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC.
                     LOAN AGREEMENT, SECURITY AGREEMENT AND
                    10% CONVERTIBLE, SECURED PROMISSORY NOTE
                              DATED APRIL 17, 2006


      This Disclosure Schedule is made and given pursuant to Section 14 of the
above referenced agreement and updates the representations and warranties of
Maker made in notes issued to Toucan Capital Fund II, L.P. ("TOUCAN") on April
26, 2004, June 11, 2004, July 30, 2004, October 22, 2004, November 10, 2004,
December 27, 2004, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005
and September 7, 2005, respectively, and made in a notes issued to Toucan
Partners, LLC ("TOUCAN PARTNERS") on November 14, 2005, December 30, 2005 and
March 9, 2006, and also updates all Disclosure Schedules delivered by Maker to
Toucan and Toucan Partners in connection with such notes. Nothing in this
Disclosure Schedule constitutes an admission of any liability or obligation of
Maker to any third party, nor an admission to any third party against Maker's
interests.


                                       31



                                  SCHEDULE 14.5
                                    CONSENTS


None




                                  SCHEDULE 14.6
                        CAPITALIZATION, FULLY DILUTED(1)


                                                               
Common Stock as of 3/14/06 (per Mellon Investors Services)        58,545,939
Stock Options Outstanding as of 04/17/06                             743,111
Management Converted Bridge Loan                                   2,687,719
Management Bridge Warrants                                         3,553,480
All other warrants                                                22,089,168
                                                                  ----------
 Total fully diluted shares                                       87,619,417




(1)   Table excludes securities issued or issuable to Toucan.










                                  SCHEDULE 14.8
                                   LITIGATION

On February 3, 2006, Soma Partners, LLC filed another notice of appeal with the
Supreme Court of the State of New York. As of the date of this agreement, the
Supreme Court of New York has yet to act on this matter. On December 30, 2005,
the Notice of Petition to Vacate Arbitration Award with the Supreme Court of the
State of New York, requested that the May 24, 2005 and December 30, 2005
findings of the arbitrator be vacated.



                                  SCHEDULE 14.9
                                    NO LIENS

      1. The Equipment Lessors listed below have security interests in equipment
subject to their respective leases (amounts due are as of February 14, 2006).




CAPITAL LEASES:        AMOUNT           CAPITAL LEASES:                        AMOUNT
                                                                      

CitiCapital            $34,229          VWR Centrifuge 6R, Refrigerated        $2,354
IOS Capital            $21,789          Canon IR5000N                           8,720
                                                                               -------
                                                             Total             $11,074

      2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company,
LLC, under its premises lease has a statutory landlord lien. This is a statutory
lien of general application for all landlords and covers up to two months' rent.
This lien would be triggered upon a default in payment of rent. Maker is not
delinquent as to any rent due under its premises lease.

      3. The State of Washington has a statutory tax lien for real property and
personal property excise taxes that are unpaid in the approximate amount of
$345,000. This is a statutory lien of general application to all taxpayers.
These tax liens would be triggered upon a default in payment of these taxes.
Maker is not delinquent in the payment of any real property or personal property
excise tax.


      4. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes, dated April
26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Note dated July 30,
2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated October 22, 2004 and November 10, 2004,
respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12,
2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005,
July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005,
a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes
dated March 9, 2006, as amended, respectively; plus accrued interest thereon,
and secured by a security interest in Maker's assets issued to Toucan.

      5. A License Agreement dated July 1, 2003 with Dako Cytomation for
worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma
Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen
(PSMA), Clone IG3.

                              SCHEDULE 14.11
                   NO OTHER SECURITY INTERESTS OR ENCUMBRANCES


      1. (a) The Equipment Lessors listed below have security interests in
equipment subject to their respective leases (amounts due are as of February 14,
2006).



CAPITAL LEASES:      AMOUNT             CAPITAL LEASES:                       AMOUNT
                                                                     
CitiCapital          $34,229            VWR Centrifuge 6R, Refrigerated       $2,354
IOS Capital          $21,789            Canon IR5000N                          8,720
                                                                             -------
                                                             Total           $11,074

             (b) A License Agreement dated July 1, 2003 with Dako Cytomation for
worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma
Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen
(PSMA), Clone IG3.

      2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company,
LLC, under its premises lease has a statutory landlord lien. This is a statutory
lien of general application for all landlords and covers up to two months' rent.
This lien would be triggered upon a default in payment of rent. Maker is not
delinquent as to any rent due under its premises lease.

      4. The State of Washington has a statutory tax lien for real property and
personal property excise taxes that are unpaid in the approximate amount of
$345,000. This is a statutory lien of general application to all taxpayers.
These tax liens would be triggered upon a default in payment of these taxes.
Maker is not delinquent in the payment of any real property or personal property
excise tax.

      5. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes, dated April
26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Note dated July 30,
2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated October 22, 2004 and November 10, 2004,
respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12,
2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005,
July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005,
a $250,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes
dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security
Agreement and 10% Secured Promissory Notes dated March 9, 2006, as restated and
amended, respectively; plus accrued interest thereon, and secured by a security
interest in Maker's assets issued to Toucan.


*     All the holders of the 10% Convertible Secured Notes are parties to a
      Subordination Agreement with Toucan executed concurrent with the
      Recapitalization Agreement.






                                SCHEDULE 14.14(A)
                                   SEC FILINGS


1. Maker did not file on a timely basis its annual report on Form 10-K with the
SEC for its fiscal year ended December 31, 2003 and 2005.




                                 SCHEDULE 14.15
                                  LIABILITIES


      As of the date hereof, Maker has the following accrued liabilities: (i)
tax liabilities to the State of Washington in the approximate amount of
$345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii)
future sublease payments to MediQuest Corporation and a contingent lease
liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest
Corporation default on its lease with Benaroya Capital Co. LLC and which is not
yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities
of any nature, either mature or immature, as of the date hereof , not in excess
of $275,000 (excluding amounts payable to Cognate and Investor), of which (x)
approximately $105,000 are currently due payables (including approximately
$85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital
leases payable in monthly installments in the amounts set forth in the budget
included in the Disclosure Schedule through the first calendar quarter of 2006,
decreasing thereafter, the last of which is fully amortized in May 2007, and (z)
$90,000 are accrued vacation and sick pay.

EX-10.3

                                                                    Exhibit 10.3

              AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC.
                     LOAN AGREEMENT, SECURITY AGREEMENT AND
                           10% SECURED PROMISSORY NOTE

$300,000.00                                                       APRIL 17, 2006

SECTION 1. GENERAL.

For value received, NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the
"MAKER" or the "COMPANY"), hereby promises to pay to the order of Toucan
Partners, LLC or its assigns (collectively, the "HOLDER"), the principal amount
of Three Hundred Thousand Dollars ($300,000) upon written demand by Holder made
at any time on or after the first anniversary of execution of the Original Issue
Date (as defined below) of this Amended and Restated Loan Agreement, Security
Agreement and 10% Secured Promissory Note (this "NOTE" or this "AGREEMENT"), or
such earlier date as may be applicable under Sections 3 and 4 hereof (the
"MATURITY DATE").

This Note amends and restates in its entirety that certain Northwest
Biotherapeutics, Inc. Loan Agreement, Security Agreement and 10% Secured
Promissory Note dated March 9, 2006 ("ORIGINAL ISSUE DATE") in the principal
amount of $300,000 issued by the Maker in favor of Holder (the "ORIGINAL NOTE").
This Note shall not constitute a novation of the Original Note or an accord and
satisfaction of the obligations of Maker evidence thereby. The Original Note is
being amended and restated hereby in partial consideration for the Holder's
agreement to consent to the Company's issuance of shares of Common Stock and
warrants to purchase Common Stock to certain accredited investors in a private
placement pursuant to that certain Note and Warrant Purchase Agreement dated as
of March 30, 2006.

Maker shall pay interest on the unpaid principal amount of this Note, accruing
from and after the Original Issue Date at the rate of ten percent (10%) per
annum, compounding annually (computed on the basis of a 365-day year and the
actual number of days elapsed) (the "INTEREST RATE"). Accrued interest shall be
payable upon the payment of the principal of this Note. The principal of, and
interest on, this Note shall be payable in lawful currency of the United States
of America by wire transfer in immediately available funds to the account of
Holder, as provided in writing to Maker by Holder. All payments shall be applied
first to fees, costs and charges relating to this Note (including, without
limitation, any costs of collection), then to accrued and unpaid interest, and
thereafter to principal. This loan is made by Holder to Maker in anticipation of
an equity financing. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Recapitalization Agreement.

SECTION 2. PRE-PAYMENT.

This Note may be pre-paid in whole or in part prior to the Maturity Date;
provided Maker provides Holder with 30 days prior written notice thereof, and
provided further that Holder shall have the option to convert this note in
accordance with Section 12 hereof by notifying Maker of Holder's election on or
before the expiration of such thirty (30) day notice period. In the event



of prepayment, Maker shall pay a penalty in the amount of 1% of the principal
and accrued interest then outstanding under this Note, unless a greater or
lesser penalty is established or approved by the U.S. Small Business
Administration ("SBA"). Conversion of this Note shall not be deemed a
prepayment.

SECTION 3. DEFAULT INTEREST.

Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
principal amount and accrued and unpaid interest shall bear interest payable on
demand at the lesser of (i) fourteen percent (14%) per annum, (ii) the maximum
rate permitted under applicable rules and regulations of the SBA, or (iii) the
maximum rate allowed by law (the "DEFAULT INTEREST"). Such interest shall
accrue, commencing upon the occurrence of an Event of Default and continuing
until such Event of Default is cured or waived.

SECTION 4. DEFAULTS.

     4.1 Definitions. Each occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT":

          (a) if a default occurs in the payment of any principal of, interest
on, or other obligation with respect to, this Note, whether at the due date
thereof or upon acceleration thereof, and such default remains uncured for five
(5) business days after written notice thereof from Holder;

          (b) if any representation or warranty of Maker made herein shall have
been false or misleading in any material respect, or shall have contained any
material omission, as of the date hereof;

          (c) if a default occurs in the due observance or performance of any
covenant or agreement on the part of Maker to be observed or performed pursuant
to the terms of this Note and such default remains uncured for five (5) business
days after written notice thereof from Holder;

          (d) if a default occurs in Maker's performance of any of the terms and
conditions of that certain Amended and Restated Recapitalization Agreement,
dated as of July 30, 2004 and as amended on October 22, 2004, November 10, 2004,
December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16,
2005, July 26, 2005, September 7, 2005 and November 14, 2005 (the
"RECAPITALIZATION AGREEMENT") or any Related Recapitalization Document;

          (e) if Maker shall (i) discontinue its business, (ii) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of
Maker or any of its property, (iii) make a general assignment for the benefit of
creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization or an arrangement with creditors, or take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation laws or statutes, or file an answer admitting the
material allegations of


                                       2



a petition filed against it in any proceeding under any such law, provided,
however, that insolvency of Maker shall not constitute a default, or the basis
for a default, during the Bridge Period;

          (f) if there shall be filed against Maker an involuntary petition
seeking reorganization of Maker or the appointment of a receiver, trustee,
custodian or liquidator of Maker or a substantial part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect (any of the foregoing
petitions being hereinafter referred to as an "INVOLUNTARY PETITION") and such
Involuntary Petition shall not have been dismissed within ninety (90) days after
it was filed, provided, however, that insolvency of Maker shall not constitute a
default, or the basis for a default, during the Bridge Period;

          (g) if final judgment(s) for the payment of money in excess of an
aggregate of $25,000 (excluding any portion thereof that an insurance company of
nationally recognized standing and creditworthiness has agreed to pay) shall be
rendered against Maker and the same shall remain undischarged for a period of
thirty (30) days;

          (h) if there occurs any event that may have a material adverse effect
on the business, affairs, prospects, operations, properties, assets,
liabilities, structure or condition, financial or otherwise, of the Company (as
such business is presently currently conducted and/or as it is proposed to be
conducted), or on any material assets or any Intellectual Property or other
Collateral developed, owned, controlled, licensed, possessed, or used by Maker,
or to which Maker has any right, option, entitlement or claim, provided,
however, that ongoing weakening of Maker's financial condition due to ongoing
expenditures and Maker's failure to obtain equity financing shall not constitute
a default, or the basis for a default, during the Bridge Period; or

          (i) if Maker deviates, during the period covered by such budget, more
than $10,000 in aggregate from the budget included in the Disclosure Schedule
(as defined herein), or takes any action or makes any promise, undertaking or
commitment that would result in Maker incurring or accumulating payables and/or
other financial obligations of any kind, whether current or deferred, direct or
indirect, for purposes other than as set forth in budgets expressly agreed to by
Holder, and/or in any amounts in excess of the amounts set forth in such agreed
budgets, which equal or exceed $10,000 in aggregate, and which have not been
approved in writing in advance by Holder.

     4.2 Cross-Default: Maker acknowledges that the financing contemplated by
this Note is part of an integrated Recapitalization Plan, as set forth in the
Recapitalization Agreement and the Related Recapitalization Documents. Maker
further acknowledges and agrees that this Note is subject to all terms and
conditions set forth in the Recapitalization Agreement and the Related
Recapitalization Documents, and that the Recapitalization Agreement and the
Related Recapitalization Documents are subject to all of the terms and
conditions of this Note. Maker agrees that any default by Maker under any
provision of this Note, the Recapitalization Agreement or any of the Related
Recapitalization Documents will constitute a default under each other Related
Recapitalization Document and the Recapitalization Agreement.


                                       3



     4.3 Remedies on Default.

          (a) Upon each and every such Event of Default and at any time
thereafter during the continuance of such Event of Default: (i) any and all
indebtedness of Maker to Holder under this Note or otherwise shall immediately
become due and payable, both as to principal and interest (including any
deferred interest and any accrued and unpaid interest and any Default Interest);
and (ii) Holder may exercise all the rights of a creditor under applicable state
and/or federal law.

          (b) In case any one or more Events of Default shall occur and be
continuing, and acceleration of this Note or any other indebtedness of Maker to
Holder shall have occurred, Holder may, inter alia, proceed to protect and
enforce its rights by an action at law, suit in equity and/or other appropriate
proceeding, whether for the specific performance of any agreement contained in
this Note, or for an injunction against a violation of any of the terms hereof
or thereof or in furtherance of the exercise of any power granted hereby or
thereby or by law. No right conferred upon Holder by this Note shall be
exclusive of any other right referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.

SECTION 5. DEFENSES.

     5.1 No Offsets. The obligations of Maker under this Note shall not be
subject to reduction, limitation, impairment, termination, defense, set-off,
counterclaim or recoupment for any reason.

     5.2 Usury Limitations. It is the intention of the parties hereto to comply
with all applicable usury laws; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this Note or any other agreements or
instruments between them, in no event shall such agreements or instruments
require the payment or permit the collection of interest (which term, for
purposes hereof, shall include any amount which, under applicable law, is deemed
to be interest, whether or not such amount is characterized by the parties as
interest) in excess of the maximum amount permitted by such laws. If any excess
of interest is unintentionally contracted for, charged or received under the
Note or under the terms of any other agreement or instrument between the
parties, the effective rate of interest shall be automatically reduced to the
maximum lawful rate of interest allowed under the applicable usury laws as now
or hereafter construed by the courts having jurisdiction thereof.

SECTION 6. REPLACEMENT OF NOTE.

     Upon receipt by Maker of reasonable evidence of the loss, theft,
destruction, or mutilation of this Note, Maker will deliver a new Note
containing the same terms and conditions in lieu of this Note. Any Note
delivered in accordance with the provisions of this Section 6 shall be dated as
of the date of this Note.


                                       4



SECTION 7. EXTENSION OF MATURITY.

     Should the principal of or interest on this Note become due and payable on
other than a business day, the due date thereof shall be extended to the next
succeeding business day, and, in the case of principal, interest shall be
payable thereon at the rate per annum herein specified during such extension.
For the purposes of the preceding sentence, a business day shall be any day that
is not a Saturday, Sunday, or legal holiday in the State of Delaware.

SECTION 8. ATTORNEYS' FEES AND COLLECTION FEES.

     Should the indebtedness evidenced by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings, arbitration or mediation, or any settlement of any of the
foregoing, Maker agrees to pay, in addition to principal and interest due and
payable hereon, all costs of collection, including, without limitation,
reasonable attorneys' fees and expenses, incurred by Holder in collecting or
enforcing this Note.

SECTION 9. WAIVERS; CONSENT TO JURISDICTION.

     9.1 Waivers by Maker. Maker hereby waives presentment, demand for payment,
notice of dishonor, notice of protest and all other notices or demands in
connection with the delivery, acceptance, performance or default of this Note.

     9.2 Actions of Holder not a Waiver. No delay by Holder in exercising any
power or right hereunder shall operate as a waiver of any power or right, nor
shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right hereunder
or otherwise; and no waiver or modification of the terms hereof shall be valid
unless set forth in writing by Holder and then only to the extent set forth
therein.

     9.3 Consent to Jurisdiction. Maker hereby irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Delaware over
any suit, action, or proceeding arising out of or relating to this Note or any
other agreements or instruments with respect to Holder. Maker hereby irrevocably
waives, to the fullest extent permitted by law, any objection that Maker may now
or hereafter have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient forum.
Final judgment in any such suit, action, or proceeding brought in any such court
shall be conclusive and binding upon Maker and may be enforced in any court in
which Maker is subject to jurisdiction by a suit upon such judgment, provided
that service of process is effected upon Maker as provided in this Note or as
otherwise permitted by applicable law.

     9.4 Waiver of Jury Trial. MAKER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN
MAKER AND HOLDER RELATING TO THE SUBJECT MATTER OF THIS NOTE. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS NOTE,
INCLUDING,


                                       5



WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENT OR AGREEMENT RELATING TO THE LOAN.

     9.5 Service of Process. Maker hereby consents to process being served in
any suit, action, or proceeding instituted in connection with this Note by
delivery of a copy thereof by certified mail, postage prepaid, return receipt
requested, to Maker, and/or by delivery of a copy thereof to a registered agent
of Maker. Refusal to accept delivery, and/or avoidance of delivery, shall be
deemed to constitute delivery. Maker irrevocably agrees that service in
accordance with this Section 9.5 shall be deemed in every respect effective
service of process upon Maker in any such suit, action or proceeding, and shall,
to the fullest extent permitted by law, be taken and held to be valid personal
service upon Maker. Nothing in this Section 9.5 shall affect the right of Holder
to serve process in any manner otherwise permitted by law or limit the right of
Holder otherwise to bring proceedings against Maker in the courts of any
jurisdiction or jurisdictions.

SECTION 10. COVENANTS.

     10.1 Affirmative Covenants. So long as this Note shall remain outstanding:

          (a) Office. Maker shall maintain its principal office, and the
majority of its employees, assets and operations, in the United States.

          (b) Use of Proceeds. Maker will use the proceeds from this Note only
for the following purposes:

     (i) General operating expenses, expenses for the development and protection
     of its intellectual property, and other usual and customary commercial and
     business expenses incurred in pursuing its business plan and strategy, on
     and after the effective date hereof;

     (ii) Audit expenses and regular and special SEC filing expenses, for audits
     and filings occurring on or after the effective date hereof, including,
     without limitation, SEC filings relating to solicitation of any shareholder
     consents to the recapitalization of Maker; and

     (iii) Expenses of accountants, attorneys, consultants and other
     professionals (including, without limitation, the expenses of Investor
     described in Section 4.11 of the Recapitalization Agreement) relating to
     the recapitalization of Maker,

in each case only to the extent that both the nature and the amount of such
expenses are in conformity with the budget approved in advance in writing by
Holder and included in the Disclosure Schedule. Maker will not use the proceeds
from this Note for any other purpose. Without limiting the generality of the
foregoing, none of the proceeds will be used, without prior written agreement by
the Holder, (i) to purchase or carry (or refinance any borrowing, the proceeds
of which were used to purchase or carry) any "security" within the meaning of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), (ii) to repay any
indebtedness or


                                       6



discharge any obligation to an person or entity, other than trade payables
incurred in the ordinary course of business on or after the effective date
hereof, and consistent with Maker's operating plans and budgets fully disclosed
to the Holder prior to the Closing, or (iii) to engage in business activities
which would cause a violation of 13 CFR 107.720. This latter limitation
prohibits, without limitation, the use of proceeds: (i) directly or indirectly,
for providing funds to others; (ii) for the purchase or discounting of debt
obligations; (iii) for factoring or long-term leasing of equipment with no
provision for maintenance or repair; (iv) for engaging in real estate
transactions such that Maker could reasonably be classified under Major Group 65
(Real Estate) of the SIC Manual; (v) for business activities wherein the assets
of the business of Maker (the "BUSINESS") will be reduced or consumed, generally
without replacement, as the life of the Business progresses, and the nature of
the Business does not require that a stream of cash payments be made to the
financing sources of the Business, on a basis associated with the continuing
sale of assets (examples of such businesses would include real estate
development projects, the financing and production of motion pictures, and oil
and gas well exploration, development and production); (vi) for a foreign
operation; (vii) to provide capital to a corporation licensed or sub-licensed
under the Small Business Investment Act, (viii) to acquire farm land, (ix) to
fund production of a single item or defined limited number of items generally
over a defined production period, such production to constitute the majority, of
the activities of Maker (examples include electric generating plants), or (x)
for any purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law) or inconsistent with free competitive
enterprise, in each case, within the meaning of Section 107.720 of Title 13 of
the Code of Federal Regulations.

          (c) Seniority. Except as otherwise expressly provided, and except for
security interests and liens described in items 2, 3, 4 and 5 of Schedule 14.11
of the Disclosure Schedule attached hereto as Exhibit B (the "DISCLOSURE
SCHEDULE"), the indebtedness evidenced by this Note: (i) shall be senior in all
respects to all other indebtedness or obligations of Maker of any kind, direct
or indirect, contingent or otherwise, other than obligations of Maker owed
directly to the state or federal government, and other than any other
indebtedness or obligations of Maker to Holder; (ii) shall not be made
subordinate or subject in right of payment to the prior payment of any other
indebtedness or obligation of any kind, direct or indirect, contingent or
otherwise, other than obligations of Maker owed directly to the state or federal
government, and other than any other indebtedness or obligations of Maker to
Holder.

          (d) No Conflicting Agreements. Maker shall not enter into any
agreement that would materially impair, interfere or conflict with Maker's
obligations hereunder. Without Holder's prior written consent, Maker shall not
permit the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way result in the creation of a security
interest in any assets of Maker, including without limitation any Collateral (as
defined in Exhibit A hereto).

          (e) Disclosure of Material Adverse Events. Within three (3) business
days of Maker obtaining knowledge thereof, Maker will notify Holder in writing
of any event that may have a material adverse effect on the business, affairs,
prospects, operations, properties, assets, liabilities, structure or condition,
financial or otherwise, of the Company (as such business is presently conducted
and/or as it is proposed to be conducted), or on any material assets or any


                                       7



Intellectual Property or other Collateral developed, owned, controlled,
licensed, possessed, or used by Maker, or to which Maker has any right, option,
entitlement or claim. Operating expenditures in the ordinary course of business
and in accordance with operating budgets approved by Maker's Board of Directors
and fully disclosed to Holder prior to the effective date hereof shall not be
deemed to be material adverse events solely because they weaken Maker's
financial condition in the absence of new equity financing of Maker.

          (f) Financial Information. So long as any principal and/or interest
under this Note shall remain outstanding:

               (i) Promptly after the end of each fiscal year (but in any event
     prior to February 28 of each year) and at such other times as Holder may
     reasonably request, Maker shall deliver to Holder a written assessment, in
     form and substance satisfactory to Holder, of the economic impact of such
     Holder's financing hereunder, specifying the full-time equivalent jobs
     created or retained in connection with such investment, and the impact of
     the financing on Maker's business in terms of revenues and profits and on
     taxes paid by Maker and its employees.

               (ii) Maker shall provide on a timely basis to Holder all
     financial information requested from time to time by Holder, including
     without limitation its quarterly and annual balance sheet and income
     statement. Such financial information shall be certified by a member of
     Maker's senior management. Financial information required shall also
     include such information as would be necessary for Holder to file form 468
     with the SBA, if it were applicable.

               (iii) In addition to the information specified in Section
     10.1(f)(i) and (ii) above, upon request, Maker agrees promptly to provide
     Holder with sufficient additional information to provide any other
     information reasonably requested or required by any governmental agency
     asserting jurisdiction over Holder.

               (iv) Maker shall report its cash position and all expenditures
     and agreements, commitments or undertakings for expenditures to Holder on a
     bi-weekly basis.

          (g) Access. So long as any principal and/or interest under this Note
shall remain outstanding, Maker shall permit Holder and its agents or
representatives to visit and inspect Maker's properties, to examine its books of
account and records and to discuss Maker's affairs, finances and accounts with
its officers, all at such times during normal business hours as reasonably may
be requested by Holder.

          (h) [Reserved]

          (i) Business Activity. As long as this Note shall remain outstanding,
Maker shall make no change in its business activity that would make it or any of
its business activities non-compliant with SBA regulations and guidelines.


                                       8



     10.2 Negative Covenants. So long as this Note shall remain outstanding:

          (a) Indebtedness. Maker shall not incur additional indebtedness,
beyond the indebtedness already existing as of the date hereof, for borrowed
money in excess of $10,000, in aggregate.

          (b) Liens. Maker shall not grant to any person or entity a security
interest, lien, license, or other encumbrance of any kind, direct or indirect,
contingent or otherwise, in, to or upon any assets of Maker, including, without
limitation, any intellectual property of any kind, as defined in Exhibit A
hereto (the "INTELLECTUAL PROPERTY").

          (c) Sale or License of Assets. Maker shall not sell, lease, transfer,
assign or otherwise dispose of or encumber (including, without limitation
through licensing or partnering arrangements) or abandon, conceal, injure or
destroy any material assets (whether tangible or intangible) of Maker
(including, without limitation, any Collateral (as defined in Section 11)),
other than with the prior written approval of Holder and in the ordinary course
of business.

          (d) Issuance of Capital Stock. Except for (a) any transaction pursuant
to an Unsolicited Proposal that Maker accepts in accordance with the fiduciary
exception provided in Section 3.2 of the Recapitalization Agreement or (b)
shares of capital stock issuable upon exercise or conversion of warrants or
convertible securities outstanding prior to February 1, 2004, Maker shall not
without Holder's prior written approval: (i) issue any shares of capital stock
or other securities, or any instruments exercisable for or convertible into
capital stock or other securities, or (ii) make any promises, commitments,
undertakings, agreements or letters of intent for any of the issuances described
in (i) hereof.

          (e) Distributions and Redemptions. Maker shall not declare or pay any
dividends or make any distributions of cash, property or securities of Maker
with respect to any shares of its common stock, preferred stock or any other
class or series of its stock, or, directly or indirectly (except for repurchases
of common stock by Maker in accordance with the terms of employee benefit plans
or written agreement between Maker and any of its employees approved by the
Board of Directors of Maker prior to February 1, 2004), redeem, purchase, or
otherwise acquire for any consideration any shares of its common stock or any
other class of its stock.

          (f) Hiring. Maker shall not hire, engage, retain, or agree to hire,
engage or retain, any Personnel, except with Holder's express prior written
approval, on a case by case basis.

          (g) Severance. Maker shall not enter into, increase, expand, extend,
renew or reinstate any severance, separation, retention, change of control or
similar agreement with any Personnel, or agree, promise, commit or undertake to
do so, except with Holder's prior written approval, on a case by case basis.

          (h) Facilities. Maker shall not purchase, lease, hire, rent or
otherwise acquire directly or indirectly any rights in or to any asset or
facility outside of the ordinary course of business in an amount in excess of
$10,000, in aggregate, or agree, promise or commit to do so,


                                       9



except in accordance with the Maker's budget that has been approved by the
Maker's board of directors and the Holder.

               (i) Expenses. Maker shall make no expenditures in excess of
$10,000 in aggregate other than in accordance with a budget pre-approved by
Holder. Maker shall not deviate, during the period covered by such budget, more
than $10,000 in aggregate from the budget included in the Disclosure Schedule,
nor take any action or make any promise, undertaking or commitment that would
result in Maker incurring or accumulating payables and/or other financial
obligations of any kind, whether current or deferred, direct or indirect, for
purposes other than as set forth in budgets expressly agreed to by Holder,
and/or in any amounts in excess of the amounts set forth in such agreed budgets,
which equal or exceed $10,000 in aggregate, and which have not been approved in
writing in advance by Holder.

          (j) Other Limitations.

               (i) Maker shall not change the nature of its business activity in
a manner that would cause a violation of 13 C.F.R. Section 107.720 and/or
Section 107.760(b) (including, without limitation, by undertaking real estate,
film production or oil and gas exploration activities). In the event that Maker
changes the nature of its business activity such that such change would render
Maker ineligible for financing pursuant to applicable SBA rules and regulations,
Maker agrees to use its best efforts to facilitate a transfer or redemption of
any securities then held by Holder.

               (ii) Maker will at all times comply with the non-discrimination
requirements of 13 C.F.R. Parts 112, 113 and 117.

               (iii) For a period of at least one year after the date of this
Note, Maker will locate no more than 49 percent of the employees or tangible
assets of Maker outside the United States.

     10.3 Additional Covenant. Until the later of the expiration of the
Standstill Period (as defined in Section 13 below) or the date on which this
Note has been discharged in full, Maker shall not sell, license, loan or
otherwise in any way transfer or distribute Maker's Tangential Flow Filtration
("TFF") devices or any similar device, or any specifications, diagrams,
description or other information about the TFF devices, to any third party, or
commit or promise or enter into any understanding of any kind, direct or
indirect, contingent or otherwise, to do any of the foregoing in regard to
Maker's TFF devices or any similar device, without the prior written consent of
Holder in each case.

SECTION 11. SECURITY INTEREST.

     11.1 First Priority in All Collateral. To secure its obligations under this
Note whether at stated maturity, by acceleration or otherwise, Maker hereby
grants and pledges to Holder a first priority senior security interest in all of
Maker's right, title and interest in, to and under all of Maker's tangible and
intangible property, whether now owned, licensed or held or hereafter


                                       10



acquired, licensed, developed, held or arising, as described in Exhibit A hereto
(the "COLLATERAL"), and all proceeds of any kind from any disposition of any
such Collateral. Such security interest shall be senior to any security interest
in the Collateral granted the holders of the Management Notes pursuant to any
subordination agreement between Holder, the holders of the Management Notes,
Toucan Capital Fund II, L.P. or Maker, and shall be senior to any other security
interest of any kind, direct or indirect, contingent or otherwise, in the
Collateral except for the security interests and liens described in items 2, 3,
4 and 5 of Schedule 14.11 of the Disclosure Schedule (only to the amounts set
forth on such schedule) and any other indebtedness or obligations of Maker to
Holder. If certificates of title are now, or hereafter become, issued or
outstanding with respect to any of the Collateral, Maker promptly shall cause
the senior security interest of Holder to be properly noted thereon. Maker
agrees that the security interest herein granted has attached and shall continue
until Maker's obligations under this Note have been paid, performed and
indefeasibly discharged in full.

     11.2 Rights Cumulative. The rights and remedies of Holder with respect to
the senior security interest granted hereby are in addition to those which are
now or may hereafter be available to Holder as a matter of law or equity. Each
right, power and remedy of Holder provided for herein, or now or hereafter
existing at law or in equity, shall be cumulative and concurrent and shall be in
addition to every right, power and remedy provided for herein, and the exercise
by Holder of any one or more of the rights, powers and/or remedies provided for
in this Note, or now or hereafter existing at law or in equity, shall not
preclude the simultaneous or later exercise by any person, including a grantee,
of any or all other rights, powers and/or remedies.

     11.3 Documentation of Security Interest. Maker shall execute, deliver,
file, amend, and re-file any financing statements, instruments (including
without limitation stock certificates), continuation statements, assignments, or
other security agreements that Holder may require from time to time to confirm
the liens arising out of this Note with respect to the Collateral. Maker agrees
to pay all reasonable costs associated with filing and/or re-filing of any
financing statements, continuation statements or other security agreements
required to perfect and to continue perfection of Holder's security interest in
the Collateral and all reasonable costs required to evidence the first priority
of the security interest, including, without limitation, reasonable attorneys'
fees. Maker authorizes Holder to file financing statements under the UCC with
respect to the security interest granted hereby and agrees, upon request of
Holder, to promptly and duly execute and deliver any and all such further
instruments and documents, and to take such further action, as Holder may
reasonably deem necessary or desirable to obtain the full benefits of this grant
of security interest.

     11.4 No Conflicting Agreements. Maker shall not enter into any agreement on
or after the effective date of this Note that would materially impair or
conflict with Maker's obligations hereunder without Holder's prior written
consent. Without Holder's prior written consent, Maker shall not permit the
inclusion in any material contract to which it becomes a party on or after the
effective date of this Note, of any provisions that could or might in any way
prevent the creation, perfection and maintenance of a first priority security
interest in Maker's rights and interest in any property included within the
definition of the Collateral acquired under such contracts. Maker represents and
warrants that, as of the effective date of this Note, there are no existing
agreements or undertakings that would materially impair or conflict with Maker's
obligations


                                       11



hereunder or that could or might in any way prevent the creation, perfection and
maintenance of a first priority security interest in Maker's rights and interest
in any property included within the definition of the Collateral acquired under
such contracts; except for existing equipment leases described in item 2 of
Schedule 14.11 and the statutory liens described in items 3 and 4 of the
Disclosure Schedule.

     11.5 Notification Requirements. Within two (2) business days of any
officer, director or employee of Maker obtaining knowledge thereof, Maker will
promptly notify Holder in writing of any event that materially adversely affects
the value of any material Collateral, the ability of Maker to dispose of any
material Collateral, or the rights and remedies of Holder in relation thereto,
including the levy of any legal process against any of the Collateral.

     11.6 Foreclosure Remedy. Notwithstanding anything to the contrary herein or
in the Recapitalization Agreement or any other agreement or document, in the
event that Maker is unable to pay and discharge this Note in full on the
Maturity Date, subject to the compliance with the requirements of the Delaware
Uniform Commercial Code, nothing herein or in the Recapitalization Agreement or
any other agreement or document shall be deemed to preclude, limit or restrict
Holder from requiring the delivery of some or all of the Collateral in full or
partial satisfaction of Maker's obligation under the Note. Alternatively, Holder
may, in its sole discretion, elect to cause some or all of the Collateral to be
sold, and the sale proceeds to be used to pay and discharge the Note in full.

SECTION 12. CONVERSION.

     12.1 Holder's Election. Notwithstanding any other provision of this Note or
any applicable agreement or document, until, and/or in the absence of, purchases
for cash of a minimum of $15 million of Convertible Preferred Stock, by Other
Investors (as defined in the Recapitalization Agreement), on the terms and
conditions set forth in the Recapitalization Agreement and the Convertible
Preferred Stock Term Sheet, Holder may, in its sole discretion, elect to convert
any or all of the principal and/or interest due under the Note into any Equity
Security and/or Debt Security (each as defined below) and/or any combination
thereof, in each case that Holder shall designate in Holder's sole discretion
(the securities so elected being the "HOLDER DESIGNATED SECURITIES"). Holder may
make such determinations from time to time and at any time before this Note has
been discharged in full, and, as applicable, at any time on or before the
expiration of the thirty (30) day notice period required under this Note in the
event the Maker wishes to prepay this Note. For purposes hereof, (i) the term
"Equity Security" means any class or series of equity security, or any
combination of classes and/or series of equity securities, of the Maker that
have been authorized under the Maker's certificate of incorporation, as amended
and/or restated, including by any certificate of designation (the "Charter"), or
any new class or series of equity security, or any combination of new and/or
existing classes and/or series of equity securities, of the Maker for which the
Maker has undertaken any agreement, obligation, promise, commitment or letter of
intent to obtain such authorization and (ii) the term "Debt Security" means any
evidence of indebtedness of the Maker that the Maker has authorized, created or
incurred, or that the Maker has undertaken any agreement, obligation, promise,
commitment or letter of intent to authorize, create or incur.


                                       12


     12.2 Automatic Conversion. The principal amount of, and accrued and unpaid
interest on, this Note shall automatically convert into Convertible Preferred
Stock, upon the terms and conditions set forth herein and in the
Recapitalization Agreement, only in the event, and upon the closing of, the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments), on the
terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by
Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a
minimum of $15 million of Convertible Preferred Stock.

     12.3 Information for Holder's Election. Maker shall provide to Holder,
within two (2) business days after notice of each request by Holder, all
information reasonably requested by Holder in connection with any Equity
Securities and/or Debt Securities, to enable Holder to make decisions regarding
one or more conversions. In the event that Maker seeks to prepay this Note,
Maker shall deliver to Holder, simultaneously and together with the notice
required under Section 2 of this Note of Maker's interest in prepaying the Note,
a summary of all material information, terms and conditions relating to all
Equity Securities and Debt Securities (including any "side" letters or
agreements or separate agreements).

     12.4 Conversion Price. The conversion price for any conversion pursuant to
Section 12.2 shall be the lowest nominal or effective price per share paid by
the Other Investors who acquire such Convertible Preferred Stock (with the
exception of shares issuable upon exercise of the Initial Bridge Warrants). The
conversion price for any conversion into any equity or debt security pursuant to
Section 12.1 shall be the lowest of (i) the lowest nominal or effective price
per share paid by any investor at any time on or after the date one year prior
to the Effective Date (with the exception of (x) purchases of up to 35,000
shares of Common Stock pursuant to certain options to purchase, at a purchase
price of $0.0001, that were outstanding on the Effective Date and held by
members of the Board of Directors, as set forth in Schedule 2.7(d) to the
Recapitalization Agreement, and (y) shares issuable upon the exercise of the
Initial Bridge Warrants, each of which shall be excluded from consideration
under this section), (ii) the lowest nominal or effective price at which any
investor is entitled to acquire shares (including, without limitation, through
purchase, exchange, conversion or exercise) pursuant to any other security,
instrument, or promise, undertaking, commitment, agreement or letter of intent
of the Maker outstanding on or after the Effective Date or granted, issued,
extended or otherwise made available by the Maker at any time on or after the
date one year prior to the Effective Date (regardless of whether currently
exercisable or convertible) (with the exception of (x) certain options to
purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that
were outstanding on the Effective Date and held by members of the Board of
Directors as set forth in Schedule 2.7(d) to the Recapitalization Agreement, and
(y) the Initial Bridge Warrants, each of which shall be excluded from
consideration under this section); and (iii) the lesser of $0.10 per share or
35% discount to the average closing price per share of the Common Stock during
any twenty consecutive trading days (beginning with the twenty consecutive
trading days prior to the Effective Date); provided, however, that in no event
shall the price per share calculated pursuant to this clause (iii) be less than
$.04 per share. The calculation required by clause (ii) hereof shall initially
be based upon Schedule 2.7(d) to the Recapitalization Agreement. All other
rights, preferences, privileges, terms and conditions received by Holder in
connection with any conversion and/or any securities issued by the Maker to
Holder upon


                                       13



conversion, shall be no less favorable to Holder than the rights, preferences,
privileges, terms and conditions any other investor in the Maker has received or
is entitled to receive with respect to the security into which Holder is
converting pursuant to any other security, instrument, promise, undertaking,
commitment, agreement or letter of intent of the Maker, whether or not such
rights, preferences, privileges, terms and conditions for any other investor are
incorporated into the agreements or documents relating to any conversion or any
issuance of the security or other instrument to that investor or are provided
separately, at any time on or after one year prior to the Effective Date. In
regard to each conversion hereunder, the Maker hereby agrees to take and/or
arrange for all necessary corporate and related action to enable the execution
of each such conversion elected by Holder.

     12.5 No Impairment. Maker shall not, by amendment of its Charter or through
a reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities, or any other voluntary action, omission or agreement,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by Maker under and/or in connection with this Note, but
shall at all times in good faith use best efforts to assist in carrying out of
all the provisions of and/or relating to this Note and in taking all such action
as may be necessary or appropriate to protect Holder's rights, preferences and
privileges under and/or in connection with the Note against impairment. Holder's
rights, preferences and privileges granted under and/or in connection with any
Holder Designated Securities may not be amended, modified or waived without the
Holder's prior written consent, and the documentation providing for such rights,
preferences and privileges will specifically provide as such.

SECTION 13. STANDSTILL, EXCLUSIVITY AND CONFIDENTIALITY.

During the Bridge Period and the Equity Financing Period, as defined in the
Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet,
but excluding the periods from February 18, 2004 through February 29, 2004 and
from March 16, 2004 through the Effective Date (collectively, the "STANDSTILL
PERIOD") the parties shall have worked together, and shall continue to work
together, in good faith with best efforts to implement the terms of the
Recapitalization Agreement, upon which the parties shall have reached binding
agreement and which the parties shall have executed as a condition precedent to
the execution and funding of this Note. Except as provided in the fiduciary
exception set forth in Section 3.2 of the Recapitalization Agreement, during the
Standstill Period, the Maker and its officers, directors, employees, agents,
advisers, consultants, partners and collaborators shall work only with Investor
and its agents, advisers and consultants, and shall have had, and shall continue
to have, no discussions, negotiations and/or communications of any kind with any
other parties, regardless of which party initiates or attempts to initiate any
such contact or communication, in regard to any potential equity or debt
financing of the Maker by parties other than Holder, and/or any joint venture,
license, co-development or other business arrangement by or with parties other
than Holder. Notwithstanding the fiduciary exception set forth in Section 3.2 of
the Recapitalization Agreement, during the Standstill Period, the Maker and its
officers, directors, employees, agents, advisers, consultants, partners and
collaborators shall maintain confidentiality, and shall not have, and shall
continue not to provide copies, excerpts, summaries, descriptions, or
communicate in any way with any third parties, either directly or indirectly, as
to any aspects of the recapitalization of Maker and/or any financing by Holder,
including, without


                                       14



limitation, the identity of the parties involved, any terms of the
Recapitalization Agreement, this Note, the Related Recapitalization Documents,
the Convertible Preferred Stock or any other matter relating to the
recapitalization of Maker, or the progress or status of any activities or
processes relating to the recapitalization of Maker; provided, however, nothing
herein shall prohibit the Maker from filing this Note, the Recapitalization
Agreement and any Related Recapitalization Document with the Securities and
Exchange Commission (the "SEC"), if required by the regulations of the SEC
(subject to the covenant in Section 2.5(a) of the Recapitalization Agreement).
During the Standstill Period, the Maker shall not make any sales of equipment or
other assets of any kind, including, without limitation, any non-essential
laboratory equipment, and the Maker shall comply with Section 10.3 in regard to
the TFF devices.

SECTION 14. REPRESENTATIONS AND WARRANTIES.

Except as expressly set forth (with reference to a section in this Note) in the
Disclosure Schedules attached hereto as Exhibit B (as updated as of each closing
contemplated by the Recapitalization Agreement and the Related Recapitalization
Documents), and only to the extent such exceptions are acceptable to Holder in
its sole discretion as of the date of this Note, and independently as of the
date upon which each additional Note is issued to Holder, and as of the date of
each closing, if any, of the Anticipated Equity Financing, Maker represents and
warrants to the following:

     14.1 Organization, Good Standing and Qualification. Maker is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business. Maker is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business, properties, operations, prospects or
condition (financial or otherwise).

     14.2 Authorization of Note, Etc. The execution, delivery and performance by
Maker of this Note has been duly authorized by all requisite corporate action by
Maker in accordance with Delaware law. This Note is a valid and binding
obligation of Maker, enforceable against Maker in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application effecting enforcements of
creditors' rights or general principles of equity.

     14.3 No Conflicts. The execution, delivery, performance, issuance, sale and
delivery of this Note and the Related Recapitalization Documents, and compliance
with the provisions hereof by Maker, will not (a) to the knowledge of Maker,
violate any provision of any law, statute, rule or regulation applicable to
Maker or any ruling, writ, injunction, order, judgment or decree of any court,
arbitrator, administrative agency or other governmental body applicable to Maker
or any of its properties or assets or (b) conflict with or result in any
material breach of any of the terms, conditions or provisions of, or constitute
(with notice or lapse of time or both) a material default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of, any encumbrance upon any of the material assets of Maker under, the


                                       15



Charter or Bylaws of Maker (as they may be amended to date) or any agreement or
instrument to which Maker is a party. As used herein, "encumbrance" shall mean
any liens, charges, encumbrances, equities, claims, options, proxies, pledges,
security interests, licenses or other similar rights of any nature.

     14.4 Compliance with Other Instruments. Maker is not in violation of any
term of Maker's Charter, as amended, including any certificate of designation
filed therewith, and/or Maker's Bylaws. Maker is not, in any material respect,
in violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which Maker
or any of such Collateral is subject. To the best of Maker's knowledge, no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach or violation, in any material respect, under any
applicable judgments, orders, writs, decrees, federal, state and/or local laws,
rules or regulations which would have a material adverse affect on the
condition, financial or otherwise, or operations of Maker (as it is currently
conducted and as it is proposed to be conducted) or on any material assets or
any Intellectual Property or other Collateral owned, controlled, licensed,
possessed, and/or used by Maker. To the best of its knowledge, Maker has avoided
every condition, and has not performed any act, the occurrence of which would
result in Maker's loss of any right granted under any license, distribution
agreement or other agreement or Maker's loss of any rights in or to any
Collateral.

     14.5 Approvals. Maker has obtained all necessary permits, authorizations,
waivers, consents and approvals of or by, and made all necessary notifications
of and/or filings with, all applicable persons (governmental and private), in
connection with the execution, delivery, performance, issuance, sale and/or
delivery of this Note, the Recapitalization Agreement and the Related
Recapitalization Documents, and consummation by Maker of the transactions
contemplated hereby and thereby, except as listed in Schedule 14.5

     14.6 Capitalization. The authorized capital stock of Maker consists of
300,000,000 shares of Common Stock, par value $0.001 per share and 100,000,000
shares of Preferred Stock, par value of $0.001 per share. As of the date hereof,
63,553,806 shares of Common Stock are issued and outstanding and 32,500,000
shares of Series A convertible preferred stock are issued and outstanding. No
other shares of any class or series of Maker's capital stock are authorized
and/or issued and outstanding. All issued and outstanding shares of capital
stock of Maker have been duly authorized and validly issued, and are fully paid
and non-assessable, and have been offered, sold and delivered by Maker in
compliance with all applicable federal and state securities laws. Except as set
forth in Schedule 14.6, no subscription, warrant, option, convertible security,
or other right (direct or indirect, contingent or otherwise) to purchase or
otherwise acquire any equity securities of Maker is authorized or outstanding,
and there is no agreement, promise, commitment, undertaking or letter of intent
of any kind (direct or indirect, contingent or otherwise) by Maker to issue any
shares, subscriptions, warrants, options, convertible securities, or other such
rights, or to distribute to holders of any of its equity securities any evidence
of indebtedness or asset. Except as set forth in Schedule 14.6, Maker has no
obligation of any kind (direct or indirect, contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Schedule 14.6 includes a true, accurate and complete statement
describing the total number of shares of Maker outstanding as of the date of


                                       16



this Note (on a fully diluted basis, including, without limitation, all warrants
and options outstanding (whether or not currently exercisable), all convertible
instruments of any kind (whether or not currently convertible), shares of all
classes of stock, and any agreements, promises, commitments, undertakings or
letters of intent to issue any of the foregoing.

     14.7 Authorization of the Shares. Maker has authorized the issuance and
sale of a sufficient number of shares of Convertible Preferred Stock, par value
$0.001 per share, and Common Stock of the Maker to fully implement the
Recapitalization Plan, while maintaining such additional authorized but unissued
shares as reasonably determined by Holder to be appropriate. Of such authorized
shares, a sufficient number of shares shall be reserved for issuance upon any
exercise of the Bridge Warrants and/or Preferred Stock Warrants. If at any time
the number of authorized but unissued shares of Convertible Preferred Stock
and/or of Common Stock is not sufficient to effect the conversion of all then
outstanding convertible Notes and other instruments, and the exercise of all
then outstanding warrants, options and similar instruments, then, in addition to
such other remedies as may be available to Holder, including, without
limitation, the exercise of Holder's right of first refusal set forth in Section
2.7(f) of the Recapitalization Agreement, Maker shall take such corporate action
as may be necessary to increase its authorized but unissued shares of
Convertible Preferred Stock and/or Common Stock to such number of shares as will
be sufficient for such purposes. Such corporate action shall include, without
limitation, obtaining all requisite regulatory approvals and any requisite
shareholder approval of any necessary amendment to Maker's Charter.

     14.8 Litigation. Except as set forth in Schedule 14.8 of the Disclosure
Schedule, there is no action, suit, proceeding or investigation pending or, to
the knowledge of Maker, currently threatened against Maker, and/or its
directors, officers, advisers, agents, properties, assets or business, in each
case relating to Maker and/or its business, assets, operations or properties.
Maker is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by Maker
currently pending or which Maker intends to initiate.

     14.9 No Liens. Except for liens for the benefit of Holder, created by this
Note, and for the benefit of Toucan Partners, LLC created by the
Recapitalization Agreement and/or any of the Related Recapitalization Documents,
and except as set forth in Schedule 14.9 of the Disclosure Schedule, none of the
material assets of Maker, including the Collateral, are subject to any existing
lien, pledge, security interest or other encumbrance of any kind, direct or
indirect, contingent or otherwise.

     14.10 Full Disclosure. Notwithstanding any other provision of this Note,
neither this Note, nor any exhibit hereto, nor any written report, certificate,
instrument or other information furnished to Holder in connection with the
transactions contemplated under and/or in connection with Note contain any
material misstatement (including, without limitation, any material omission), or
is misleading in any material respect.

     14.11 No Other Security Interests or Other Encumbrances. Except as set
forth in Schedule 14.11 (and only to the amounts set forth on such schedule),
there are no existing security interests, pledges, liens or other encumbrances
of any kind, direct or indirect, contingent


                                       17



or otherwise (including without limitation any licensing or partnering
arrangements or agreements), in or relating to any assets of Maker, including,
without limitation, any Intellectual Property (as defined herein) or other
Collateral. All existing security interests, pledges, liens or other
encumbrances of any kind, other than those set forth in Schedule 14.11 hereto
(and only to the amounts set forth on such schedule), are subordinate to the
security interest established pursuant to Section 11 hereof, all necessary
consents, subordination agreements and waivers, if any, have been obtained, and
all amended filings and/or re-filings shall be made immediately upon execution
of this Note.

     14.12 "Small Business".

          (a) Small Business Status. Maker together with its "affiliates" (as
that term is defined in Section 121.103 of Title 13 of Code of Federal
Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within
the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL
BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including
Section 121.301(c) of Title 13, Code of Federal Regulations.

          (b) Information for SBA Reports. Maker has delivered and/or will
deliver to Holder certain information, set forth by and regarding the Maker and
its affiliates in connection with this Note, on SBA Forms 480, 652 and Part A
and B of Form 1031. This information delivered was true, accurate, complete and
correct, and any information yet to be delivered will be true, accurate,
complete and correct, and in form and substance acceptable to Holder.

          (c) Eligibility. Maker is eligible for financing by any Holder
pursuant to Section 107.720 of Title 13 of the Federal Regulations and any other
SBA regulations.

     14.13 Intellectual Property.

          (d) Definitions. "Intellectual Property" means all foreign and
domestic intangible property and rights, owned, licensed, sub-licensed or
otherwise obtained by Maker, including, without limitation, (i) inventions,
discoveries and ideas, whether patentable or not, and all patents, registrations
and applications therefor, including divisions, continuations,
continuations-in-part, requests for continued examination, and renewal
applications, and including renewals, extensions and reissues (collectively,
"PATENTS"); (ii) confidential and proprietary information, trade secrets and
know-how, including without limitation processes, schematics, formulae,
drawings, prototypes, models, designs and customer lists (collectively, "TRADE
SECRETS"); (iii) all data, slides, observations, and laboratory results,
produced by, for or on behalf of Maker, or which Maker has rights to obtain
(collectively, "DATA"); (iv) all FDA applications, registrations, filings and
other rights (collectively, "FDA RIGHTS") and all data and documentation
supporting or relating thereto; (iv) published and unpublished works of
authorship, whether copyrightable or not (including, without limitation,
databases and other compilations of information), copyrights therein and
thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "COPYRIGHTS");
(v) trademarks, service marks, brand names, certification marks, collective
marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress,
assumed names,


                                       18



fictitious names, trade names, and other indicia of origin, all applications and
registrations for the foregoing, and all goodwill associated therewith and
symbolized thereby, including all extensions, modifications and renewals of same
(collectively, "TRADEMARKS"); (vi) all other intellectual property or
proprietary rights, including, without limitation, all claims or causes of
action arising out of or related to any infringement, misappropriation or other
violation of any of the foregoing, including rights to recover for past, present
and future violations thereof (collectively, "OTHER PROPRIETARY RIGHTS").

     "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating
to or affecting the Intellectual Property, including, without limitation,
agreements granting rights to use the Licensed or Sub-Licensed Intellectual
Property, agreements granting rights to use Owned Intellectual Property,
confidentiality agreements, Trademark coexistence agreements, Trademark consent
agreements and non-assertion agreements.

     "LICENSED or SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual
Property that Maker is licensed, sub-licensed or otherwise permitted by other
persons or entities to use.

     "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by
Maker.

     "REGISTERED" means issued, registered, renewed or the subject of a pending
application.

          (e) Schedule 14.13 ("INTELLECTUAL PROPERTY") sets forth a true and
complete list and summary description of (A) all Registered or material Owned
Intellectual Property (each identified as a Patent, Trademark, Trade Secret,
Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or
Sub Licensed Intellectual Property and (C) all Intellectual Property Contracts.

          (f) All Intellectual Property is valid, subsisting and enforceable. No
Owned Intellectual Property has been canceled, suspended, adjudicated invalid,
not maintained, expired or lapsed, or is subject to any outstanding order,
judgment or decree restricting its use or adversely affecting or reflecting
Maker's rights thereto. No Licensed or Sub-Licensed Intellectual Property has
been canceled, suspended, not renewed or extended, adjudicated invalid, not
maintained, expired or lapsed, or is subject to any outstanding order, judgment
or decree restricting its use or adversely affecting or reflecting Maker's
rights thereto.

          (g) The Owned Intellectual Property is owned exclusively by Maker and
has been used with all patent, trademark, copyright, confidential, proprietary
and other Intellectual Property notices and legends prescribed by law or
otherwise permitted.

          (h) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"Suit") is pending or threatened concerning any claim or position:

               (i) that Maker, or another person or entity, has violated any
Intellectual Property rights. To Maker's best knowledge, Maker is not violating
and has not violated any intellectual property rights of any other party.


                                       19



               (ii) that Maker, or another person or entity, has breached any
Intellectual Property Contract. There exists no event, condition or occurrence
which, with the giving of notice or lapse of time, or both, would constitute a
breach or default by Maker, or a breach or default by another person or entity,
under any Intellectual Property Contract. No party to any Intellectual Property
Contract has given Maker notice of its intention to cancel, terminate or fail to
renew any Intellectual Property Contract.

               (iii) that the Intellectual Property has been violated or is
invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or
not owned exclusively by Maker. No such claim has been threatened or asserted.
To Maker's best knowledge, no valid basis for any such Suits or claims exists.

          (i) To Maker's best knowledge, no other person or entity is violating,
infringing upon or claiming rights incompatible with Maker's rights to any
Intellectual Property. Maker has provided to Holder copies of all information
reasonably available to it relevant to intellectual property rights claimed by
third parties and possible infringement thereof including, without limitation,
any freedom to practice or freedom to operate opinions.

          (j) Except as set forth on Schedule 14.13(j), Maker owns or otherwise
holds valid rights to use all Intellectual Property used in its business.

          (k) Maker has timely made all filings and payments with the
appropriate foreign and domestic agencies and other parties required to maintain
in full force and effect all Intellectual Property. Except as set forth on
Schedule 14.13, no due dates for filings or payments concerning the Intellectual
Property (including, without limitation, office action responses, affidavits of
use, affidavits of continuing use, renewals, requests for extension of time,
maintenance fees, application fees and foreign convention priority filings) fall
due within ninety (90) days prior to or after the closing, whether or not such
due dates are extendable. Maker is in compliance with all applicable rules and
regulations of such agencies and other parties with respect to the Intellectual
Property. All documentation necessary to confirm and effect the Intellectual
Property, if acquired from other persons or entities, has been recorded in the
United States Patent and Trademark Office, the United States Copyright Office
and other official offices.

          (l) Maker has undertaken and consistently implemented best efforts to
protect the secrecy, confidentiality and value of all non-public Intellectual
Property used in its business (including, without limitation, entering into
appropriate confidentiality agreements with all officers, directors, employees
and other persons or entities with access to such non-public Intellectual
Property). Maker management has not disclosed any such non-public Intellectual
Property to any persons or entities other than (i) Maker employees or Maker
contractors who had a need to know and use such non-public Intellectual Property
in the ordinary course of employment or contract performance, or (ii)
prospective customers, and in each case who executed appropriate confidentiality
agreements.


                                       20



          (m) Maker has taken all reasonable measures to confirm that no current
or former Maker employee is or was a party to any confidentiality agreement or
agreement not to compete that restricts or forbids, or restricted or forbade at
any time during such employee's employment by Maker, such employee's performance
of Maker's business, or any other activity that such employee was hired to
perform or otherwise performed on behalf of or in connection with such
employee's employment by Maker.

     14.14 SEC Filings; Financial Statements.

     (a) Maker has delivered or made available to Holder accurate and complete
copies of all registration statements, proxy statements and other statements,
reports, schedules, forms and other documents filed by the Maker with the SEC
since January 1, 2003, and all amendments thereto (the "MAKER SEC DOCUMENTS").
Except as set forth on Schedule 14.14(a), all statements, reports, schedules,
forms and other documents required to have been filed by Maker with the SEC have
been so filed on a timely basis. As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Note, then on the
date of such filing): (i) each of the Maker SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the Maker SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

     (b) The financial statements (including any related notes) contained in the
Maker SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end adjustments that will not, individually or in the aggregate, be
material in amount), and (iii) fairly present the consolidated financial
position of Maker and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows of Maker and
its consolidated subsidiaries for the periods covered thereby.

     14.15 Liabilities. As of the date hereof, Maker has the following accrued
liabilities: (i) tax liabilities to the State of Washington in the approximate
amount of $345,000, (ii) amounts payable to Cognate Therapeutics and Investor,
(iii) future sublease payments to MediQuest Corporation and a contingent lease
liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest
Corporation default on its lease with Benaroya Capital Co. LLC and which is not
yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities
of any nature, either mature or immature, as of the date hereof, not in excess
of $275,000 (excluding amounts payable to Cognate and Investor), of which (x)
approximately $105,000 are currently due payables (including $85,000 for
attorney fees), (y) $9,500 are the aggregate balances of capital leases payable
in monthly installments in the amounts set forth in the budget included in the
Disclosure Schedule through the first calendar quarter of 2006, decreasing


                                       21


thereafter, the last of which is fully amortized in May 2007, and (z) $90,000
are accrued vacation and sick pay.

     14.16 Compliance with All Standstill Provisions. Maker has complied in all
respects with all standstill, exclusivity and confidentiality provisions of (a)
this Note, the Recapitalization Agreement and the Related Recapitalization
Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between Maker and Toucan Capital Fund II, L.P. dated as of February
2, 2004 and (c) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between Maker and Toucan Capital Fund II, L.P. dated as of March 1,
2004.

     14.17 Recall of TFF Devices. Maker has recalled all units of Maker's TFF
devices, and all specifications, diagrams, description or other information
relating to such TFF devices or any similar devices, from all third parties who
may previously have possessed any of the foregoing, and, as of the Effective
Date of this note, no third party possesses any of the foregoing.

SECTION 15. INDEMNIFICATION

     15.1 Indemnification Agreement.

          (a) In addition to all rights and remedies available to Holder at law
or in equity, Maker shall indemnify Holder and each subsequent holder of this
Note, and their respective affiliates, stockholders, limited partners, general
partners, officers, directors, managers, employees, agents, representatives,
successors and assigns (collectively, the "INDEMNIFIED PERSONS") and save and
hold each of them harmless against and pay on behalf of or reimburse such party
as and when incurred for any loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense (other than any
demand, claim, action or cause of action instituted by Maker), including
interest, penalties, reasonable attorneys' fees and expenses, and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "LOSSES") which any such party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of:

               (i) any material misrepresentation in, or material omission from,
     or breach of any of the representations, warranties, statements, schedules
     and/or exhibits hereto, certificates or other instruments or documents
     furnished to Holder by Maker in connection with this Note; or

               (ii) any material nonfulfillment or material breach of any
     covenant or agreement on the part of Maker under this Note.

          (b) Notwithstanding the foregoing, Maker shall not be liable for any
portion of Losses resulting from the gross negligence or willful misconduct of
Holder or a subsequent holder of this Note.

          (c) Within twenty (20) days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, Holder shall give
Maker written notice


                                       22



thereof together with a copy of such claim, process or other legal pleading of
such claim. Maker shall have the right to assist in the defense thereof by
representation of its own choosing.

     15.2 Survival. All indemnification rights hereunder shall survive the
execution and delivery of this Note and the consummation of the transactions
contemplated hereby (i) for a period of two years with respect to
representations and warranties made by Maker, and (ii) until fully performed
with respect to covenants and agreements made by Maker, regardless of any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of Holder and/or any of the Indemnified Persons, or the acceptance by Holder of
any certificate or opinion.

     15.3 Payment. Any indemnification of Holder or any other Indemnified Person
by Maker pursuant to this Section 15 shall be effected by wire transfer of
immediately available funds from Maker to an account designated by Holder or
such other Indemnified Person within fifteen (15) days after the determination
thereof.

SECTION 16. INTEGRATION WITH RECAPITALIZATION PLAN

Maker acknowledges and agrees that the funding provided by Holder pursuant to
this Note is only being provided as part of an integrated Recapitalization Plan,
as set forth in the Recapitalization Agreement. Maker further acknowledges and
agrees that this Note is subject to all terms and conditions set forth in the
Recapitalization Agreement.

SECTION 17. MISCELLANEOUS.

     17.1 Notices. All notices, demands and requests of any kind to be delivered
to any party in connection with this Note shall be in writing and shall be
deemed to be effective upon delivery if (i) personally delivered, (ii) sent by
confirmed facsimile with a copy sent by nationally recognized overnight courier,
(iii) sent by nationally recognized overnight courier, or (iv) sent by
registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:

     if to Maker:    Northwest Biotherapeutics, Inc.
                     18701 120th Avenue, NE, Suite 101
                     Bothell, WA  98011
                     Fax: (425) 608 3146
                     Attn: Alton Boynton

     if to Holder:   Toucan Partners, LLC
                     7600 Wisconsin Avenue
                     Suite 700
                     Bethesda, MD 20814
                     Fax: (240) 497-4060
                     Attention: Linda F. Powers

or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section.


                                       23



     17.2 Parties In Interest. This Note shall bind and inure to the benefit of
Holder, Maker and their respective successors and permitted assigns. Maker shall
not transfer or assign this Note without the prior written consent of Holder.
Holder may transfer and assign this note without the prior consent of Maker.

     17.3 Entire Agreement. This Note together with the Disclosure Schedules,
Exhibits attached hereto and the Recapitalization Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto.

     17.4 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware (without giving effect to
principles of conflicts of laws of the State of Delaware or any other state).

     17.5 Headings. The section and paragraph headings contained in this Note
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Note.

     17.6 Amendments. No provision of this Note may be amended or waived without
the express written consent of both Maker and Holder, provided, however, that
Holder may waive any provision hereof that inures to the benefit of Holder
without the prior written consent of Maker. Also notwithstanding anything to the
contrary, this Note shall be amended as and to the extent necessary to comply
with the Small Business Investment Act and all regulations, advice, direction
and guidance applicable to SBIC's.

     17.7 Nature of Obligation. This Note is being made for business and
investment purposes, and not for household or other purposes.

     17.8 Expenses. Maker shall pay, reimburse or otherwise satisfy, upon demand
of Holder, all fees, costs and expenses incurred and/or undertaken, and to be
incurred and/or undertaken, by Holder relating to the preparation for,
development of and implementation of the Recapitalization Plan set forth in the
Recapitalization Agreement, including, without limitation, all due diligence
expenses and all expenses relating to the Bridge Funding, the Anticipated Equity
Financing and the transactions contemplated thereby and the documentation of the
foregoing (including, without limitation all legal fees and expenses and costs
incurred and to be incurred in connection with any SBA filings), which shall be
satisfied by Maker upon Holder's demand, including but without limitation upon
each closing of the Bridge Funding or Anticipated Equity Financing. This
obligation shall apply regardless of whether or not all of the transactions
contemplated in the Recapitalization Agreement close. At each closing of Bridge
Funding and/or Anticipated Equity Financing, at Holder's sole discretion, and
with respect to any or all of such fees, costs and expenses accrued through such
closing, Maker shall (a) pay Holder in cash concurrently with such closing (or
at Holder's sole discretion, Holder may withhold such amount from the wire of
investment proceeds), (b) issue a Note in the form hereof in principal amount
equal to such fees, costs and expenses (which at Holder's option may instead be
evidenced as an increase in the principal amount of any Note issued in
connection with such closing); or (c) treat


                                       24



such fees, costs and expenses as an unsecured payable. At any time following
such closing, Holder may require any amounts that it elected to have Maker treat
as unsecured amounts payable to be paid in cash or satisfied by issuance of a
Note in the principal amount of some or all of such unsecured obligation.


                                       25



     IN WITNESS WHEREOF, Maker has caused this Note to be duly executed by its
duly authorized person(s) as of the date first written above.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton Boynton
                                        Title: President

                              CONSENT AND AGREEMENT

     Toucan Partners, LLC consents to the loan and security interest granted by
Maker in the foregoing Note.

                                        TOUCAN PARTNERS, LLC


                                        By:
                                            ------------------------------------
                                        Name: Linda Powers
                                        Title: Managing Member


                                       26



                                    EXHIBIT A

                            DESCRIPTION OF COLLATERAL

     The "Collateral" consists of all of Maker's right, title and interest (in
each case, whether now owned or hereafter acquired) in and to the following:

     (a) All intellectual property of any kind, whether owned, licensed or
otherwise permitted to be used, and whether now held or hereafter acquired or
developed (the "Intellectual Property"). Such Intellectual Property shall
include, without limitation, all foreign and domestic intangible property and
rights, owned, licensed or otherwise obtained by Maker, including, without
limitation, (i) trademarks, service marks, brand names, certification marks,
collective marks, d/b/a's, Internet domain names, logos, symbols, trade dress,
assumed names, fictitious names, trade names, and other indicia of origin, all
applications and registration for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all extensions, modifications and
renewals of same, including without limitation those items reference on Appendix
1 hereto (collectively, "Trademarks"); (ii) inventions, discoveries and ideas,
whether patentable or not, and all patents, registrations and applications
therefor, including divisions, continuations, continuations-in-part, requests
for continued examination, and renewal applications, and including renewals,
extensions and reissues, including without limitation those items reference on
Appendix 2 hereto (collectively, "Patents"); (iii) confidential and proprietary
information, trade secrets and know-how, including, without limitation,
processes, schematics, formulae, drawings, prototypes, models, designs and
customer lists (collectively, "Trade Secrets"); (iv) published and unpublished
works of authorship, whether copyrightable or not (including, without
limitation, databases and other compilations of information), copyrights therein
and thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "Copyrights");
(v) all FDA applications, registrations, filings and other rights (collectively,
"FDA Rights and Materials"); (vi) all results, information and data arising
from, or obtained in connection with, research, development, pre-clinical work
and/or clinical trials (collectively, "Data"); and (vii) all other intellectual
property or proprietary rights and claims or causes of action arising out of or
related to any infringement, misappropriation or other violation of any of the
foregoing, including rights to recover for past, present and future violations
thereof (collectively, "Other Proprietary Rights").

     (b) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located.

     (c) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Maker's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing an any documents of title representing any of the above.


                                       27



     (d) All contract rights, general intangibles and intellectual property, now
owned or hereafter acquired, including, without limitation, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent
applications, leases, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, computer code, copyrights,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind.

     (e) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Maker
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Maker, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefore, as well as
all merchandise returned to or reclaimed by Maker.

     (f) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Maker's books relating to the foregoing.

     (g) Each item of equipment, or personal property whether now owned or
hereafter acquired, together with all substitutions, renewals or replacements of
and additions, improvements, and accessions to any and all of the foregoing, and
all proceeds from sales, renewals, releases or other dispositions thereof.

     (h) All Maker's books relating to the foregoing and any and all claims,
rights and interests in any of the above, whether now owned or hereafter
acquired, and all substitutions for, additions and accessions to and proceeds
thereof.

Notwithstanding the foregoing, to the extent any of Maker's licensed
Intellectual Property prohibits the transfer or encumbrance of such licensed
Intellectual Property (the "Restricted Intellectual Property") without prior
consent of the owner or licensor thereof, such Restricted Intellectual Property
is hereby conditionally included within the definition of Collateral, subject to
receipt, by or on behalf of Maker, of any required consents. If requested by
Holder, Maker shall use its best efforts to obtain the required consents under
any Restricted Intellectual Property within thirty (30) days of such request.


                                       28



                                   APPENDIX 1
                                   TRADEMARKS


                                       29



                                   APPENDIX 2
                                     PATENTS


                                       30


                                                                       EXHIBIT B


                               DISCLOSURE SCHEDULE
             TO AMENDED AND RESTATED NORTHWEST BIOTHERAPEUTICS, INC.
                     LOAN AGREEMENT, SECURITY AGREEMENT AND
                    10% CONVERTIBLE, SECURED PROMISSORY NOTE
                              DATED APRIL 17, 2006


      This Disclosure Schedule is made and given pursuant to Section 14 of the
above referenced agreement and updates the representations and warranties of
Maker made in notes issued to Toucan Capital Fund II, L.P. ("TOUCAN") on April
26, 2004, June 11, 2004, July 30, 2004, October 22, 2004, November 10, 2004,
December 27, 2004, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005
and September 7, 2005, respectively, and made in a notes issued to Toucan
Partners, LLC ("TOUCAN PARTNERS") on November 14, 2005, December 30, 2005 and
March 9, 2006, and also updates all Disclosure Schedules delivered by Maker to
Toucan and Toucan Partners in connection with such notes. Nothing in this
Disclosure Schedule constitutes an admission of any liability or obligation of
Maker to any third party, nor an admission to any third party against Maker's
interests.


                                       31



                                  SCHEDULE 14.5
                                    CONSENTS


None




                                  SCHEDULE 14.6
                        CAPITALIZATION, FULLY DILUTED(1)


                                                               
Common Stock as of 3/14/06 (per Mellon Investors Services)        58,545,939
Stock Options Outstanding as of 04/17/06                             743,111
Management Converted Bridge Loan                                   2,687,719
Management Bridge Warrants                                         3,553,480
All other warrants                                                22,089,168
                                                                  ----------
 Total fully diluted shares                                       87,619,417




(1)   Table excludes securities issued or issuable to Toucan.






                                  SCHEDULE 14.8
                                   LITIGATION

On February 3, 2006, Soma Partners, LLC filed another notice of appeal with the
Supreme Court of the State of New York. As of the date of this agreement, the
Supreme Court of New York has yet to act on this matter. On December 30, 2005,
the Notice of Petition to Vacate Arbitration Award with the Supreme Court of the
State of New York, requested that the May 24, 2005 and December 30, 2005
findings of the arbitrator be vacated.






                                  SCHEDULE 14.9
                                    NO LIENS

      1. The Equipment Lessors listed below have security interests in equipment
subject to their respective leases (amounts due are as of February 14, 2006).




CAPITAL LEASES:        AMOUNT           CAPITAL LEASES:                        AMOUNT
                                                                      

CitiCapital            $34,229          VWR Centrifuge 6R, Refrigerated        $2,354
IOS Capital            $21,789          Canon IR5000N                           8,720
                                                                               -------
                                                             Total             $11,074

      2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company,
LLC, under its premises lease has a statutory landlord lien. This is a statutory
lien of general application for all landlords and covers up to two months' rent.
This lien would be triggered upon a default in payment of rent. Maker is not
delinquent as to any rent due under its premises lease.

      3. The State of Washington has a statutory tax lien for real property and
personal property excise taxes that are unpaid in the approximate amount of
$345,000. This is a statutory lien of general application to all taxpayers.
These tax liens would be triggered upon a default in payment of these taxes.
Maker is not delinquent in the payment of any real property or personal property
excise tax.


      4. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes, dated April
26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Note dated July 30,
2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated October 22, 2004 and November 10, 2004,
respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12,
2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005,
July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005,
a $250,000 Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Notes dated December 30, 2005, as amended and a $300,000 Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Notes
dated March 9, 2006, as amended, respectively; plus accrued interest thereon,
and secured by a security interest in Maker's assets issued to Toucan.

      5. A License Agreement dated July 1, 2003 with Dako Cytomation for
worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma
Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen
(PSMA), Clone IG3.

                              SCHEDULE 14.11
                   NO OTHER SECURITY INTERESTS OR ENCUMBRANCES


      1. (a) The Equipment Lessors listed below have security interests in
equipment subject to their respective leases (amounts due are as of February 14,
2006).



CAPITAL LEASES:      AMOUNT             CAPITAL LEASES:                       AMOUNT
                                                                     
CitiCapital          $34,229            VWR Centrifuge 6R, Refrigerated       $2,354
IOS Capital          $21,789            Canon IR5000N                          8,720
                                                                             -------
                                                             Total           $11,074

             (b) A License Agreement dated July 1, 2003 with Dako Cytomation for
worldwide research and diagnostic immunohistochemical (IHC) market. Hybridoma
Cell Line, Monoclonal Antibody (MAb) to Prostate Specific Membrane Antigen
(PSMA), Clone IG3.

      2. Pursuant to RCW 60.72.010, Maker's landlord, Benaroya Capital Company,
LLC, under its premises lease has a statutory landlord lien. This is a statutory
lien of general application for all landlords and covers up to two months' rent.
This lien would be triggered upon a default in payment of rent. Maker is not
delinquent as to any rent due under its premises lease.

      4. The State of Washington has a statutory tax lien for real property and
personal property excise taxes that are unpaid in the approximate amount of
$345,000. This is a statutory lien of general application to all taxpayers.
These tax liens would be triggered upon a default in payment of these taxes.
Maker is not delinquent in the payment of any real property or personal property
excise tax.

      5. Two $50,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated April 26, 2004; two $500,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes, dated April
26, 2004 and June 11, 2004, respectively; a $2.0 million Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Note dated July 30,
2004; two $500,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Notes dated October 22, 2004 and November 10, 2004,
respectively; a $250,000 Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated December 27, 2004; two $450,000 Loan Agreement,
Security Agreement and 10% Convertible, Secured Promissory Notes dated April 12,
2005 and May 13, 2005, respectively; three $500,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated June 16, 2005,
July 26, 2005 and September 7, 2005, a $400,000 Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Notes dated November 14, 2005,
a $250,000 Loan Agreement, Security Agreement and 10% Secured Promissory Notes
dated December 30, 2005, as amended and a $300,000 Loan Agreement, Security
Agreement and 10% Secured Promissory Notes dated March 9, 2006, as restated and
amended, respectively; plus accrued interest thereon, and secured by a security
interest in Maker's assets issued to Toucan.


*     All the holders of the 10% Convertible Secured Notes are parties to a
      Subordination Agreement with Toucan executed concurrent with the
      Recapitalization Agreement.






                                SCHEDULE 14.14(A)
                                   SEC FILINGS


1. Maker did not file on a timely basis its annual report on Form 10-K with the
SEC for its fiscal year ended December 31, 2003 and 2005.




                                 SCHEDULE 14.15
                                  LIABILITIES


      As of the date hereof, Maker has the following accrued liabilities: (i)
tax liabilities to the State of Washington in the approximate amount of
$345,000, (ii) amounts payable to Cognate Therapeutics and Investor, (iii)
future sublease payments to MediQuest Corporation and a contingent lease
liability to Benaroya Capital Co. LLC for Maker's premises should Mediquest
Corporation default on its lease with Benaroya Capital Co. LLC and which is not
yet due, and (iv) Maker's aggregate accrued, contingent and/or other liabilities
of any nature, either mature or immature, as of the date hereof , not in excess
of $275,000 (excluding amounts payable to Cognate and Investor), of which (x)
approximately $105,000 are currently due payables (including approximately
$85,000 for attorney fees), (y) $9,500 are the aggregate balances of capital
leases payable in monthly installments in the amounts set forth in the budget
included in the Disclosure Schedule through the first calendar quarter of 2006,
decreasing thereafter, the last of which is fully amortized in May 2007, and (z)
$90,000 are accrued vacation and sick pay.

EX-10.4

                                                                    Exhibit 10.4

                         NORTHWEST BIOTHERAPEUTICS, INC.
                              AMENDED AND RESTATED
                            INVESTOR RIGHTS AGREEMENT



                         NORTHWEST BIOTHERAPEUTICS, INC.

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

     THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 17th day of April, 2006, by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "Company") and TOUCAN CAPITAL
FUND II, L.P. (the "Investor").

                                    RECITALS

     WHEREAS, the Investor purchased shares of the Company's Series A Preferred
Stock (the "Series A Stock") pursuant to that certain Securities Purchase
Agreement (the "Purchase Agreement") dated as of January 26, 2005 and the
Investor is acquiring shares of the Company's Series A-1 Preferred Stock (the
"Series A-1 Stock" and together with Series A Stock, the "Preferred Stock")
pursuant to that certain Note Conversion Agreement (the "Conversion Agreement")
dated of even date herewith;

     WHEREAS, pursuant to the Purchase Agreement the Company and the Investor
entered into that certain Investor Rights Agreement (the "ORIGINAL AGREEMENT");

     WHEREAS, the Conversion Agreement is conditioned upon the execution and
delivery of this Agreement; and

     WHEREAS, in connection with the consummation of the Conversion Agreement,
the parties desire to enter into this Agreement in order to amend and restate
the Original Agreement and to provide Investor with the registration and other
rights as set forth below.

     NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

SECTION 1. GENERAL.

     1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:

          (A) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

          (B) "FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor or similar registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

          (C) "HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.11 hereof.



          (D) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

          (E) "REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issuable or issued upon conversion of the Shares and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities (i) sold by a person to the public either pursuant to a
registration statement or Rule 144, (ii) sold in a private transaction in which
the transferor's rights under Section 2 of this Agreement are not assigned or
(iii) held by a Holder (together with its affiliates) if, as reflected on the
Company's list of stockholders, such Holder (together with its affiliates) holds
less than 1% of the Company's outstanding Common Stock (treating all shares of
Preferred Stock on an as converted basis), the Company has completed its Initial
Offering and all shares of Common Stock of the Company issuable or issued upon
conversion of the Shares held by and issuable to such Holder (and its
affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period.

          (F) "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares of the Company's Common Stock that are Registrable Securities and either
(a) are then issued and outstanding or (b) are issuable pursuant to then
exercisable or convertible securities.

          (G) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.4 and 2.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed one hundred thousand dollars ($100,000) of a single special counsel
for the Holders, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).

          (H) "SEC" or "COMMISSION" means the Securities and Exchange
Commission.

          (I) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

          (J) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.

          (K) "SHARES" shall mean the Company's Series A Stock issued pursuant
to the Purchase Agreement and Series A-1 Stock issued pursuant to the Conversion
Agreement held from time to time by the Investor and its permitted assigns and
the Capital Stock issuable upon exercise of the Warrants.

          (L) "SPECIAL REGISTRATION STATEMENT" shall mean (i) a registration
statement relating to any employee benefit plan or (ii) with respect to any
corporate reorganization or transaction under Rule 145 of the Securities Act,
any registration statements related to the


                                                                    EXHIBIT 10.4


issuance or resale of securities issued in such a transaction or (iii) a
registration related to stock issued upon conversion of debt securities.

          (M) "WARRANTS" shall mean those certain warrants to purchase capital
stock held by the Investor dated April 26, 2004, June 11, 2004, July 30, 2004,
October 22, 2004, November 10, 2004, December 27, 2004, January 26, 2005, April
12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September 7, 2005.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.

     2.1 RESTRICTIONS ON TRANSFER.

          (A) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:

               (I) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

               (II) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. The Company will not require any transferee pursuant to Rule 144
to be bound by the terms of this Agreement if the shares so transferred do not
remain Registrable Securities hereunder following such transfer.

          (B) Notwithstanding the provisions of subsection (a) above, no such
restriction shall apply to a transfer by a Holder that is (A) a partnership
transferring to its partners or former partners in accordance with partnership
interests, (B) a corporation transferring to an affiliate, (C) a limited
liability company transferring to its members or former members in accordance
with their interest in the limited liability company, (D) an individual
transferring to the Holder's family member or trust for the benefit of an
individual Holder; (E) any other party permitted under applicable federal and
state securities laws, provided that in each case the transferee will agree in
writing to be subject to the terms of this Agreement to the same extent as if he
were an original Holder hereunder.

          (C) Each certificate representing Shares or Registrable Securities
shall be stamped or otherwise imprinted with legends substantially similar to
the following (in addition to any legend required under applicable state
securities laws):

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
          SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
          OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
          UNTIL REGISTERED



          UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
          SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
          NOT REQUIRED.

          THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
          REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
          OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER
          AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
          REQUEST TO THE SECRETARY OF THE COMPANY.

          (D) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any Holder thereof if the Company has completed
its Initial Offering and the Holder shall have obtained an opinion of counsel
(which counsel may be counsel to the Company) reasonably acceptable to the
Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification and legend,
provided that the second legend listed above shall be removed only at such time
as the Holder of such certificate is no longer subject to any restrictions
hereunder.

          (E) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

     2.2 DEMAND REGISTRATION.

          (A) If, at any time after the initial purchase of the Preferred Stock,
holders of at least 20% of the Registrable Securities issued or issuable upon
conversion of the Preferred Stock (the "INITIATING HOLDERS") request that the
Company file a registration statement on Form SB-2 or Form S-1 (the
"REGISTRATION STATEMENT") covering at least 10% of the Registrable Securities
issued or issuable upon conversion of the Preferred Stock (or any lesser
percentage if the anticipated aggregate offering price would exceed $2,000,000),
the Company shall cause the Registrable Securities attributable to the Preferred
Stock to be registered.

          (B) If the Investor intends to distribute the Registrable Securities
covered by their request by means of an underwriting, it shall so advise the
Company as a part of its request made pursuant to this Section 2.2 or any
request pursuant to Section 2.4 and the Company shall include such information
in the written notice referred to in Section 2.2(a) or Section 2.4(a), as
applicable. In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Holders of a majority of the
Registrable Securities held by all



Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities that would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.

          (C) The Company shall not be required to effect a registration
pursuant to this Section 2.2:

               (I) if the Company has effected two (2) registrations pursuant to
this Section 2.2 in the preceding twelve (12) months, and such registrations
have been declared or ordered effective;

               (IV) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below and the Company undertakes
promptly to file such Form S-3; or

     2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such



Holder an opportunity to include in such registration statement all or part of
such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

          (A) UNDERWRITING. If the registration statement of which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise the Holders of Registrable Securities. In such event, the right
of any such Holder to include Registrable Securities in a registration pursuant
to this Section 2.3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Agreement, if the underwriter reasonably determines, in
good faith, that marketing factors require a limitation of the number of shares
to be underwritten, the number of shares that may be included in the
underwriting shall be allocated, first, to the Company; second, to the Holders
on a pro rata basis based on the total number of Registrable Securities held by
the Holders; and third, to any stockholder of the Company (other than a Holder)
on a pro rata basis; provided, however, that no such reduction shall reduce the
amount of securities of the selling Holders included in the registration below
thirty percent (30%) of the total amount of securities included in such
registration in accordance with the immediately preceding clause. In no event
will shares of any other selling stockholder be included in such registration
that would reduce the number of shares which may be included by Holders without
the written consent of Holders of not less than a majority of the Registrable
Securities proposed to be sold in the offering. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter, delivered at least ten (10)
days prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership, limited
liability company or corporation, the partners, retired partners, members,
retired members and stockholders of such Holder, or the estates and family
members of any such partners, retired partners, members and retired members and
any trusts for the benefit of any of the foregoing person shall be deemed to be
a single "Holder," and any pro rata reduction with respect to such "Holder"
shall be based upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such "Holder," as defined in
this sentence.



     2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:

          (A) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and

          (B) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:

               (I) if Form S-3 is not available for such offering by the
Holders, or

               (II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000), or

          (C) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as



soon as practicable after receipt of the requests of the Holders. Registrations
effected pursuant to this Section 2.4 shall not be counted as demands for
registration or registrations effected pursuant to Section 2.2.

     2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, 2.3 or 2.4 herein shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.3, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to deem such registration to have
been effected as of the date of such withdrawal for purposes of determining
whether the Company shall be obligated pursuant to Section 2.2(c) to undertake
any subsequent registration, in which event such right shall be forfeited by all
Holders). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
such registration shall not be deemed to have been effected for purposes of
determining whether the Company shall be obligated pursuant to Section 2.2 to
undertake any subsequent registration.

     2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

          (A) prepare and file within sixty (60) days of the receipt of a
request for registration of Registrable Securities with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective within one
hundred twenty (120) days of such request, and keep such registration statement
effective until the Holder or Holders have completed the distribution related
thereto;



          (B) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in subsection (a) above.

          (C) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

          (D) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.

          (E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

          (F) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will amend or supplement such prospectus in order to cause
such prospectus not to include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

          (G) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter, dated as



of such date, from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.

     2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.

          (A) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.

          (B) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.

          (C) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section 2.2
or Section 2.4, whichever is applicable.

     2.8 LIQUIDATED DAMAGES. In the event that the Company shall fail to cause
the Registration Statement to be timely filed, timely declared effective, as
provided herein) as provided herein, the Company shall pay as liquidated damages
the amount of 1% per month of the aggregate purchase price for the securities
to be sold pursuant to the Registration Statement (or such lesser
amount that is the maximum permitted under applicable rules and regulations of
the U.S. Small Business Administration ("SBA")) provided, however, that in no
event shall the aggregate liquidated damages exceed ten percent (10%) of the
aggregate purchase price of the Registrable Securities proposed to be included
in the Registration Statement.

     2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:

          (A) To the fullest extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, members, officers and directors of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained



in such registration statement or incorporated reference therein, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will reimburse each such Holder,
partner, member, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, member,
officer, director, underwriter or controlling person of such Holder.

          (B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) other than consequential losses of any kind, to
which the Company or any such director, officer, controlling person, underwriter
or other such Holder, or partner, director, officer or controlling person of
such other Holder may become subject under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
of the following statements: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement or
incorporated reference therein, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act
(collectively, a "HOLDER VIOLATION"), in each case to the extent (and only to
the extent) that such Holder Violation occurs in reliance upon and in conformity
with written information furnished by such Holder under an instrument duly
executed by such Holder and stated to be specifically for use in connection with
such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Holder Violation; provided, however, that the
indemnity agreement contained in this Section 2.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event



shall any indemnity under this Section 2.9 exceed the net proceeds from the
offering received by such Holder.

          (C) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses thereof to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.9 to the extent, and
only to the extent, prejudicial to its ability to defend such action, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 2.9.

          (D) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) or Holder Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.

          (E) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and, with respect to liability arising from an offering
to which this Section 2.9 would apply that is covered by a registration filed
before termination of this Agreement, such termination. No indemnifying party,
in the defense of any such claim or litigation, shall, except with the consent
of each indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.



          (F) Notwithstanding any of the foregoing provisions of this Section
2.9, no party shall be entitled to indemnification against any consequential
damages.

     2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities (for so long as
such shares remain Registrable Securities) that (a) is a subsidiary, parent,
general partner, limited partner, retired partner, member or retired member, or
stockholder of a Holder that is a corporation, partnership or limited liability
company, (b) is a Holder's family member or trust for the benefit of an
individual Holder, (c) acquires at least one million (1,000,000) shares of
Registrable Securities (as adjusted for stock splits and combinations); (d) is
an entity affiliated by common control (or other related entity) with such
Holder or (e) is any other permitted assignee or transferee under applicable
federal and state securities laws, provided, however, (i) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.

     2.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Other than as provided
in Section 5.10, after the date of this Agreement, the Company shall not enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder rights to demand the registration of
shares of the Company's capital stock, or to include such shares in a
registration statement that would reduce the number of shares includable by the
Holders.

     2.12 AGREEMENT TO FURNISH INFORMATION. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall provide, within ten (10) days of such request, such
information as may be required by the Company or such representative in
connection with the completion of any public offering of the Company's
securities pursuant to a registration statement filed under the Securities Act.
The obligations described in this Section 2.12 shall not apply to a Special
Registration Statement. The Company may impose stop-transfer instructions with
respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said day period. Each Holder agrees that
any transferee of any shares of Registrable Securities shall be bound by this
Section 2.12. The underwriters of the Company's stock are intended third party
beneficiaries of this Section 2.12 and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto.

     2.13 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:

          (A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

          (B) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and



          (C) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company filed with the Commission; and such other reports and documents as a
Holder may reasonably request in connection with availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.

SECTION 3. COVENANTS OF THE COMPANY.

     3.1 RESERVATION OF COMMON STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.

     3.2 DIRECTOR AND OFFICER INSURANCE. The Company will use its best efforts
to obtain and maintain in full force and effect director and officer liability
insurance in the amount of Ten Million Dollars ($10,000,000).

     3.3 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement substantially in a form approved by the
Company's counsel or Board of Directors.

     3.4 APPROVAL. The Company shall not without the approval of a majority of
the Board of Directors, with all non-interested Directors voting and the
approval at least one of the Directors designated by holders of the Preferred
Stock (if any are in office), authorize or enter into any transactions with any
director or officer, or any member of such director's or officer's immediate
family.

     3.5 QUALIFIED SMALL BUSINESS. The Company will use best efforts to comply
with the reporting and recordkeeping requirements of Section 1202 of the
Internal Revenue Code of 1986, as amended (the "Code"), any regulations
promulgated thereunder and any similar state laws and regulations and agrees not
to repurchase any stock of the Company if such repurchase would cause the Shares
not to so qualify as "Qualified Small Business Stock," so long as the Company's
Board of Directors determines that it is in the best interests of and not unduly
burden some to the Company to comply with the provisions of Section 1202 of the
Code.

     3.6 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement other than the provision of Section 3.2 shall expire
and terminate as to each Investor upon an "ACQUISITION" as defined in the
Company's Certificate of Incorporation as in effect as of the date hereof.

     3.7 CERTAIN COVENANTS RELATING TO SBA MATTERS.

          (A) USE OF PROCEEDS. The Company has used, and shall continue to use,
the proceeds from the sale of the Preferred Stock (the "Proceeds") for its
growth, modernization or expansion. The Company shall provide each Investor
which is a licensed Small Business



Investment Company (an "SBIC INVESTOR") and the SBA reasonable access to the
Company's books and records for the purpose of confirming the use of Proceeds.

          (B) BUSINESS ACTIVITY. For so long as any SBIC Inventor holds any
securities of the Company, the Company shall not change the nature of its
business activity if such change would render the Company ineligible as provided
in 13 C.F.R. Section 107.720.

          (C) COMPLIANCE. So long as any SBIC Investor holds any securities of
the Company, the Company will at all times comply with the non-discrimination
requirements of 13 C.F.R. Parts 112, 113 and 117.

          (D) INFORMATION FOR SBIC INVESTOR. Within forty five (45) days after
the end of each fiscal year and at such other times as an SBIC Investor may
reasonably request, the Company shall deliver to such SBIC Investor a written
assessment, in form and substance reasonably satisfactory to such SBIC Investor,
of the economic impact of such SBIC Investor's financing specifying the
full-time equivalent jobs created or retained in connection with such
investment, and the impact of the financing on the Company's business in terms
of profits and on taxes paid by the Company and its employees. Upon request, the
Company agrees to promptly provide each SBIC Investor with sufficient
information to permit such Investor to comply with their obligations under the
Small Business Investment Act of 1958, as amended, and the regulations
promulgated thereunder and related thereto; provided, however, each SBIC
Investor agrees that it will protect any information which the Company labels as
confidential to the extent permitted by law. Any submission of any financial
information under this Section shall include a certificate of the Company's
president, chief executive officer, treasurer or chief financial officer.

          (E) NUMBER OF HOLDERS OF VOTING SECURITIES. So long as any SBIC
Investor holds any securities purchased pursuant to the Purchase Agreement or
issued by the Company with respect thereto, the Company shall notify each SBIC
Investor (i) at least fifteen (15) days prior to taking any action after which
the number of record holders of the Company's voting securities would be
increased from fewer than fifty (50) to fifty (50) or more, and (ii) of any
other action or occurrence after which the number of record holders of the
Company's voting securities was increased (or would increase) from fewer than
fifty (50) to fifty (50) or more, as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is proposed
to occur.

SECTION 4. RIGHTS OF FIRST REFUSAL.

     4.1 SUBSEQUENT OFFERINGS. Subject to applicable securities laws, the
Investor shall have a right of first refusal to purchase its pro rata share of
all Equity Securities, as defined below, that the Company may, from time to
time, propose to sell and issue after the date of this Agreement, other than the
Equity Securities excluded by Section 4.7 hereof. The Investor's pro rata share
is equal to the ratio of (a) the number of shares of the Company's Common Stock
(including all shares of Common Stock issuable or issued upon conversion of the
Shares or upon the exercise of outstanding warrants or options) of which such
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or


issuable upon conversion of the Shares or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "EQUITY SECURITIES" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security directly or indirectly
convertible into or exercisable or exchangeable for, with or without
consideration, any Common Stock, Preferred Stock or other security (including
any option to purchase such a convertible security), (iii) any security carrying
any warrant or right directly or indirectly to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.

     4.2 PRE-EMPTIVE RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give the Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. The Investor shall have 45 days
from the giving of such notice to agree to purchase its pro rata share of the
Equity Securities for the price and upon the terms and conditions specified in
the notice by giving written notice to the Company and stating therein the
quantity of Equity Securities to be purchased. Notwithstanding the foregoing,
the Company shall not be required to offer or sell such Equity Securities to the
Investor if the Investor would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale and there is
no other way to avoid such violation.

     4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the Investor does
not elect to purchase its pro rata share of the Equity Securities, then the
Company shall have ninety (90) days thereafter to sell the Equity Securities in
respect of which the Investor's rights were not exercised, at a price not lower
and upon general terms and conditions not materially more favorable to the
purchasers thereof than specified in the Company's notice to the Investor
pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Investor in the manner provided
above.

     4.4 TERMINATION AND WAIVER OF PRE-EMPTIVE RIGHTS AND RIGHTS OF FIRST
REFUSAL. The pre-emptive rights and rights of first refusal established by this
Section 4 shall not apply to, and shall terminate upon an Acquisition.
Notwithstanding Section 5.5 hereof, the rights of first refusal established by
this Section 4 may be amended, or any provision waived with and only with the
written consent of the Company and the Investor.

     4.5 ASSIGNMENT OF PRE-EMPTIVE RIGHTS AND RIGHTS OF FIRST REFUSAL. The
pre-emptive rights and rights of first refusal of each Investor under this
Section 4 may be assigned in whole or in part, at any time or times, to any
party permitted under applicable federal and state securities laws.

     4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:

          (A) Shares of Common Stock and/or options, warrants or other Common
Stock purchase rights and the Common Stock issued pursuant to such options,
warrants or other rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like after the date hereof) issued or to be
issued after the date hereof to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to customary
employee incentive stock



purchase or stock option plans or other arrangements that are approved by the
Board of Directors;

          (B) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;

          (C) any Equity Securities issued in connection with any stock split,
stock dividend or recapitalization by the Company;

          (D) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including, without
limitation (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that the issuance of shares therein has been approved by the Company's Board of
Directors and provided further that such transaction is not substantially for
financing purposes.

SECTION 5. MISCELLANEOUS.

     5.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of DELAWARE in all respects as such laws are applied to
agreements among Delaware residents entered into and to be performed entirely
within Delaware, without reference to conflicts of laws or principles thereof.
The parties agree that any action brought by either party under or in relation
to this Agreement, including without limitation to interpret or enforce any
provision of this Agreement, shall be brought in, and each party agrees to and
does hereby submit to the jurisdiction and venue of, any state or federal court
located in the County of Wilmington, Delaware.

     5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors, assigns, heirs, executors, and
administrators and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the



transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.

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

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

     5.5 AMENDMENT AND WAIVER.

          (A) Except as otherwise expressly provided, this Agreement may be
amended or modified, and the obligations of the Company and the rights of the
Holders under this Agreement may be waived, only upon the written consent of the
Company and the holders of at least a majority of the then-outstanding
Registrable Securities.

          (B) For the purposes of determining the number of Holders entitled to
vote or exercise any rights hereunder, the Company shall be entitled to rely
solely on the list of record holders of its stock as maintained by or on behalf
of the Company.

     5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any party's
part of any breach, default or noncompliance under the Agreement or any waiver
on such party's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.

     5.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed electronic mail or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on



the signature pages hereof or at such other address or electronic mail address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.

     5.8 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

     5.9 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement or the Conversion Agreement, any
purchaser of such shares of Preferred Stock shall become a party to this
Agreement by executing and delivering an additional counterpart signature page
to this Agreement and shall be deemed an "INVESTOR," a "Holder" and a party
hereunder. Notwithstanding anything to the contrary contained herein, if the
Company shall issue Equity Securities in accordance with Section 4.7 (c) or (e)
of this Agreement, any purchaser of such Equity Securities may become a party to
this Agreement by executing and delivering an additional counterpart signature
page to this Agreement and shall be deemed an "INVESTOR," a "HOLDER" and a party
hereunder.

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

     5.11 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons or persons or entities under common
management or control shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

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

     5.13 TERMINATION. This Agreement shall terminate and be of no further force
or effect upon an Acquisition.

                            [Signature Page Follows]



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

COMPANY:                                INVESTOR:

NORTHWEST BIOTHERAPEUTICS, INC.         TOUCAN CAPITAL FUND II, L.P.

18701 120th Avenue, NE                  7600 Wisconsin Avenue
Suite 101                               Suite 700
Bothell, WA 98011                       Bethesda, MD 20814


By:                                     By:
    ---------------------------------       ------------------------------------
                                        Title:
                                               ---------------------------------

                  [SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]

EX-10.21

                                                                   Exhibit 10.21

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.

                         NORTHWEST BIOTHERAPEUTICS, INC.

                                     WARRANT

NO. BW-14                                                          APRIL 17,2006

     THIS CERTIFIES THAT, for value received, TOUCAN PARTNERS, LLC, with its
principal office at 7600 Wisconsin Avenue, Suite 700, Bethesda, MD 20814, and/or
its assigns (collectively, the "HOLDER"), is entitled to subscribe for and
purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation, with its
principal office at 18701 120th Avenue, NE, Suite 101, Bothell, Washington 98011
(the "COMPANY"), such number of Exercise Shares as provided herein at the
Exercise Price (each subject to adjustment as provided herein). This Warrant is
being issued pursuant to the terms of the Amended and Restated Recapitalization
Agreement, dated July 30, 2004, as amended on October 22, 2004, November 10,
2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June
16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005, by and among
the Company and Toucan Capital Fund II, L.P. (the "RECAPITALIZATION AGREEMENT")
and in partial consideration for the Holder's agreement to consent to the
Company's issuance of shares of Common Stock and warrants to purchase Common
Stock to certain accredited investors in a private placement pursuant to that
certain Note and Warrant Purchase Agreement dated as of March 30, 2006.

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

          (A) "CAPITAL STOCK" shall mean the securities for which this Warrant
is exercisable as provided in Section 2.2 hereof.

          (B) "DENOMINATOR SHARE PRICE" shall mean $0.10.

          (C) "EXERCISE PERIOD" shall mean the period commencing on the date of
issuance of this Warrant and ending on seven (7) years after the date of
issuance of this Warrant.

          (D) "EXERCISE PRICE" shall mean $0.04 (subject to adjustment pursuant
to Section 5).

          (E) "EXERCISE SHARES" shall mean a number of shares of Capital Stock
equal to the quotient of (i) 100% (i.e., 1.0) multiplied by the Note Amount,
divided by (ii) the


                                       1.



Denominator Share Price, which in this case equals 2,500,000 shares of Capital
Stock, subject to adjustment pursuant to the terms herein.

          (F) "NOTE AMOUNT" shall mean $250,000.

     2. EXERCISE OF WARRANT. 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;

          (B) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by cancellation of indebtedness; and

          (C) This Warrant.

     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 persons affiliated with the Holder, if the Holder so designates,
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.

     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.

     2.1 NET 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:

                   Y (A-B)
               X = -------
                      A

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


                                       2.



           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 2.1 in connection with the Company's initial public
offering of its Common Stock after the deregistration of the Company's Common
Stock under the Securities Exchange Act of 1934, the fair market value per share
shall be the product of (i) the per share offering price to the public of the
Company's initial public offering, and (ii) the number of shares of Common Stock
into which each Exercise Share is convertible at the time of such exercise.

     2.2 SECURITIES FOR WHICH WARRANT IS EXERCISABLE. In the event the
Convertible Preferred Stock is approved and authorized, and the terms and
conditions are the same as set forth in the Recapitalization Agreement and in
the Convertible Preferred Stock Term Sheet, and Other Investors have purchased
in cash (and not by conversion of debt, exercise of warrants or options, or
conversion or exercise of other securities or instruments) a minimum of $15
million of such Convertible Preferred Stock, on the terms and conditions set
forth in the Recapitalization Agreement and in the Convertible Preferred Stock
Term Sheet, then, subject to Section 5 hereof, this Warrant shall be exercisable
solely for such Convertible Preferred Stock. However, if, for any reason, such
Convertible Preferred Stock is not approved or authorized, and/or is approved or
authorized on any terms different than any terms set forth in the
Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet,
and/or if Other Investors have not purchased in cash (and not by conversion of
debt, exercise of warrants or options, or conversion or exercise of other
securities or instruments) a minimum of $15 million of such Convertible
Preferred Stock, on the terms and conditions set forth in the Recapitalization
Agreement and in the Convertible Preferred Stock Term Sheet, this Warrant shall
be exercisable for any Equity Security and/or Debt Security and/or any
combination thereof, in each case that Holder shall designate in Holder's sole
discretion.

     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 nonassessable, 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 the series of equity securities comprising the Exercise Shares and the
Company's Common Stock to provide for the exercise of the rights represented by
this Warrant and the subsequent conversion of the Exercise Shares. If at any
time during the Exercise Period the number of authorized but


                                       3.



unissued shares of such series of the Company's equity securities or the
Company's Common Stock shall not be sufficient to permit exercise of this
Warrant or the subsequent conversion of the Exercise Shares, then, in addition
to such other remedies as may be available to Holder, including, without
limitation, the exercise of Holder's right of first refusal set forth in Section
2.7(f) of the Recapitalization Agreement, the Company will take such corporate
action as shall be necessary to increase its authorized but unissued shares of
such series of the Company's equity securities or the Company's Common Stock, as
appropriate, 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 date specified herein, 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 Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with this Warrant, but shall at all times in good faith use best
efforts to assist in carrying out of all the provisions of and/or relating to
this Warrant and in taking all such action as may be necessary or appropriate to
protect Holder's rights, preferences and privileges under and/or in connection
with this Warrant against 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, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.

          3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying Shares
(as defined below) shall be "registrable securities" (or terms of similar
impact) under the Investor Rights Agreement dated as of April __, 2006 by and
between the Company and Toucan Capital Fund II, L.P. and any agreement executed
by the Company as part of the Anticipated Equity Financing, or any other
agreement executed by the Company in lieu of, and/or in addition to, the
Anticipated Equity Financing, in each case, for purposes of providing
registration rights under the Act to holders of shares of Capital Stock, and the
Company shall ensure that any such agreement conforms with the requirements of
this Section 3.4. Such registration rights may not be amended, modified or
waived without the prior written consent of the Holder.

     4. REPRESENTATIONS OF HOLDER.

          4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents
and warrants that it is acquiring the Warrant, the Exercise Shares and the
shares of Common Stock issuable upon conversion of the Exercise Shares (the
"UNDERLYING SHARES") solely for its account for investment and not with a view
to or for sale or distribution of said Warrant, Exercise Shares or Underlying
Shares, or any part thereof except in compliance with applicable federal and
state securities laws. The Holder also represents that the entire legal and
beneficial interests of the Warrant, the Exercise Shares and the Underlying
Shares the Holder is acquiring is being acquired for, and will be held for, its
account only.


                                       4.



          4.2 SECURITIES ARE NOT REGISTERED.

               (A) The Holder understands that the Warrant, the Exercise Shares
and the Underlying Shares have not been registered under the Securities Act of
1933, as amended (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 has no such present intention.

               (B) The Holder recognizes that the Warrant, the Exercise Shares
and the Underlying Shares must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available;
provided, however, the parties acknowledge and agree that the Company has an
obligation to register the Underlying Shares as provided in the Recapitalization
Agreement and the Convertible Preferred Stock Term Sheet.

               (C) The Holder is aware that neither the Warrant, the Exercise
Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under
the Act unless certain conditions are met, including, among other things, the
existence of a public market for the shares, 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, EXERCISE SHARES AND UNDERLYING SHARES.

               (A) The Holder further agrees not to make any disposition of all
or any part of the Warrant, the Exercise Shares or the Underlying Shares in any
event unless and until:

                    (I) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition;

                    (II) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or

                    (III) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and such
disposition shall not be contrary to any applicable federal and/or state
securities laws.

               (B) The Holder understands and agrees that 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


                                       5.



     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.

          5.1 CHANGES IN SECURITIES. In the event of changes in the series of
equity securities of the Company comprising the Exercise Shares by reason of
stock dividends, splits, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of Exercise Shares available under the Warrant in the
aggregate and the Exercise Price shall be correspondingly adjusted to give the
Holder of the Warrant, on exercise for the same aggregate Exercise Price, the
total number, class, and kind of 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. For purposes of this
Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the aggregate Exercise
Price payable in connection with the exercise in full 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.

          5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all
outstanding shares of the series of equity securities comprising the Exercise
Shares into Common Stock, if applicable, this Warrant shall become exercisable
for that number of shares of Common Stock of the Company into which the Exercise
Shares would then be convertible, so long as such shares, if this Warrant had
been exercised prior to such offering, would have been converted into shares of
the Company's Common Stock pursuant to the Company's Certificate of
Incorporation. In such case, all references to "EXERCISE SHARES" shall mean
shares of the Company's Common Stock issuable upon exercise of this Warrant, as
appropriate.

          5.3 DILUTIVE ISSUANCES. If at any time prior to exercise of this
Warrant, the Company issues or sells, or is deemed to have issued or sold,
additional shares of Capital Stock for a nominal or effective price less than
the then effective Exercise Price (a "DILUTIVE ISSUANCE"), then and in each such
case, the then existing Exercise Price shall be reduced, as of the opening of
business on the date of such issue or sale, to the price at which such shares
are issued or sold, or deemed to be issued or sold. For purposes of this Section
5.3, the Company will be deemed to have issued or sold additional shares of
Capital Stock if it issues any security or instrument convertible, exercisable
or exchangeable for Capital Stock, or if it promises, undertakes, commits,
agrees or enters into any letter of intent to do so. Notwithstanding the
foregoing, (i) no further adjustment of the Exercise Price shall be made as a
result of the actual issuance of shares of Capital Stock upon the conversion,
exercise or exchange of any such instrument or in satisfaction of any such
undertaking, commitment, agreement or letter of intent, and (ii) no adjustment
of the Exercise Price shall be made as a result of the actual issuance of any
shares of Common Stock pursuant to either (X) the exercise of those certain
options to purchase up to 35,000 shares of Common Stock at a purchase price of
$0.0001 per share that were


                                       6.



outstanding on April 26, 2004 and held by members of the Board of Directors of
the Company; or (Y) the exercise of the Initial Bridge Warrants.

          5.4 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the Exercise
Price and/or Exercise Shares, the Company shall promptly notify the Holder in
writing and furnish the Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.

     6. 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,
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.

     7. 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. The transferee shall sign a
customary investment letter in form and substance reasonably satisfactory to the
Company.

     8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.

     9. AMENDMENT. Any term of this Warrant may be amended or waived only with
the written consent of the Company and the Holder.

     10. NOTICES, ETC. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon actual 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 ten (10) days advance written notice to
the other parties hereto.

     11. 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 as applied to agreements among Delaware residents, made and to be
performed entirely within the State of Delaware without giving effect to
conflicts of laws principles.

                            [SIGNATURE PAGE FOLLOWS]


                                       7.



     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: Alton Boynton
                                        Title: President
                                        Address: 18701 120th Avenue, NE
                                                 Suite 101
                                                 Bothell, WA 98011
                                                 Fax: (425) 608-3146


ACKNOWLEDGED AND AGREED:

TOUCAN PARTNERS, LLC


By:
    ---------------------------------
Name: Linda Powers
Title: Managing Member
Address: 7600 Wisconsin Avenue
         Suite 700
         Bethesda, MD 20814
         Fax: (240) 497-4060

                      [SIGNATURE PAGE TO WARRANT NO. BW-14]



                               NOTICE OF EXERCISE

TO: NORTHWEST BIOTHERAPEUTICS, INC.

     (1) [ ] The undersigned hereby elects to purchase ________ shares of
___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.

          [ ] The undersigned hereby elects to purchase ________ shares of
__________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.

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

                                       ________________________
                                                (Name)

                                       ________________________

                                       ________________________
                                               (Address)

     (3) The undersigned represents that (i) the aforesaid Exercise Shares are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in accordance with applicable federal and state securities laws; (ii) the
undersigned is aware of the Company's business affairs and financial condition
and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision regarding its investment in the Company; (iii) the
undersigned is experienced in making investments of this type and has such
knowledge and background in financial and business matters that the undersigned
is capable of evaluating the merits and risks of this investment and protecting
the undersigned's own interests; (iv) the undersigned understands that Exercise
Shares issuable upon exercise of this Warrant have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), by reason of a
specific exemption from the registration provisions of the Securities Act, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
Exercise Shares may not be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions are met and until the undersigned has
held the shares for the number of years prescribed by Rule 144, that among the
conditions for use of the Rule is the availability of current information to the
public about the Company; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Exercise Shares unless
and until there is then in effect a registration statement under the Securities
Act covering such proposed disposition or unless such transaction is in
compliance with applicable federal and state securities laws.


- -------------------------------------   ----------------------------------------
(Date)                                  (Signature)

                                        ----------------------------------------
                                        (Print name)


                                       1.



                                 ASSIGNMENT FORM

                    (To assign the foregoing Warrant, execute this form and
                    supply required information. Do not use this form to
                    purchase shares.)

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

Name:___________________________________________________________________________
                                  (Please Print)

Address: _______________________________________________________________________
                                  (Please Print)

Dated: __________, 20__


Holder's
Signature:
           --------------------------

Holder's
Address:
         ----------------------------

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


                                       2.

EX-10.22

                                                                   Exhibit 10.22

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.

                         NORTHWEST BIOTHERAPEUTICS, INC.

                                     WARRANT

NO. BW-15                                                         APRIL 17, 2006

     THIS CERTIFIES THAT, for value received, TOUCAN PARTNERS, LLC, with its
principal office at 7600 Wisconsin Avenue, Suite 700, Bethesda, MD 20814, and/or
its assigns (collectively, the "HOLDER"), is entitled to subscribe for and
purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation, with its
principal office at 18701 120th Avenue, NE, Suite 101, Bothell, Washington 98011
(the "COMPANY"), such number of Exercise Shares as provided herein at the
Exercise Price (each subject to adjustment as provided herein). This Warrant is
being issued pursuant to the terms of the Amended and Restated Recapitalization
Agreement, dated July 30, 2004, as amended on October 22, 2004, November 10,
2004, December 27, 2004, January 26, 2005, April 12, 2005, May 13, 2005, June
16, 2005, July 26, 2005, September 7, 2005 and November 14, 2005, by and among
the Company and Toucan Capital Fund II, L.P. (the "RECAPITALIZATION AGREEMENT")
and in partial consideration for the Holder's agreement to consent to the
Company's issuance of shares of Common Stock and warrants to purchase Common
Stock to certain accredited investors in a private placement pursuant to that
certain Note and Warrant Purchase Agreement dated as of March 30, 2006.

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

          (A) "CAPITAL STOCK" shall mean the securities for which this Warrant
is exercisable as provided in Section 2.2 hereof.

          (B) "DENOMINATOR SHARE PRICE" shall mean $0.10.

          (C) "EXERCISE PERIOD" shall mean the period commencing on the date of
issuance of this Warrant and ending on seven (7) years after the date of
issuance of this Warrant.

          (D) "EXERCISE PRICE" shall mean $0.04 (subject to adjustment pursuant
to Section 5).

          (E) "EXERCISE SHARES" shall mean a number of shares of Capital Stock
equal to the quotient of (i) 100% (i.e., 1.0) multiplied by the Note Amount,
divided by (ii) the


                                       1.



Denominator Share Price, which in this case equals 3,000,000 shares of Capital
Stock, subject to adjustment pursuant to the terms herein.

          (F) "NOTE AMOUNT" shall mean $300,000.

     2. EXERCISE OF WARRANT. 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;

          (B) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by cancellation of indebtedness; and

          (C) This Warrant.

     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 persons affiliated with the Holder, if the Holder so designates,
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.

     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.

     2.1 NET 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:

                                       Y (A-B)
                                   X = -------
                                          A

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


                                       2.



           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 2.1 in connection with the Company's initial public
offering of its Common Stock after the deregistration of the Company's Common
Stock under the Securities Exchange Act of 1934, the fair market value per share
shall be the product of (i) the per share offering price to the public of the
Company's initial public offering, and (ii) the number of shares of Common Stock
into which each Exercise Share is convertible at the time of such exercise.

     2.2 SECURITIES FOR WHICH WARRANT IS EXERCISABLE. In the event the
Convertible Preferred Stock is approved and authorized, and the terms and
conditions are the same as set forth in the Recapitalization Agreement and in
the Convertible Preferred Stock Term Sheet, and Other Investors have purchased
in cash (and not by conversion of debt, exercise of warrants or options, or
conversion or exercise of other securities or instruments) a minimum of $15
million of such Convertible Preferred Stock, on the terms and conditions set
forth in the Recapitalization Agreement and in the Convertible Preferred Stock
Term Sheet, then, subject to Section 5 hereof, this Warrant shall be exercisable
solely for such Convertible Preferred Stock. However, if, for any reason, such
Convertible Preferred Stock is not approved or authorized, and/or is approved or
authorized on any terms different than any terms set forth in the
Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet,
and/or if Other Investors have not purchased in cash (and not by conversion of
debt, exercise of warrants or options, or conversion or exercise of other
securities or instruments) a minimum of $15 million of such Convertible
Preferred Stock, on the terms and conditions set forth in the Recapitalization
Agreement and in the Convertible Preferred Stock Term Sheet, this Warrant shall
be exercisable for any Equity Security and/or Debt Security and/or any
combination thereof, in each case that Holder shall designate in Holder's sole
discretion.

     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 nonassessable, 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 the series of equity securities comprising the Exercise Shares and the
Company's Common Stock to provide for the exercise of the rights represented by
this Warrant and the subsequent conversion of the Exercise Shares. If at any
time during the Exercise Period the number of authorized but


                                       3.



unissued shares of such series of the Company's equity securities or the
Company's Common Stock shall not be sufficient to permit exercise of this
Warrant or the subsequent conversion of the Exercise Shares, then, in addition
to such other remedies as may be available to Holder, including, without
limitation, the exercise of Holder's right of first refusal set forth in Section
2.7(f) of the Recapitalization Agreement, the Company will take such corporate
action as shall be necessary to increase its authorized but unissued shares of
such series of the Company's equity securities or the Company's Common Stock, as
appropriate, 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 date specified herein, 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 Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with this Warrant, but shall at all times in good faith use best
efforts to assist in carrying out of all the provisions of and/or relating to
this Warrant and in taking all such action as may be necessary or appropriate to
protect Holder's rights, preferences and privileges under and/or in connection
with this Warrant against 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, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.

          3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying Shares
(as defined below) shall be "registrable securities" (or terms of similar
impact) under the Investor Rights Agreement dated as of April __, 2006 by and
between the Company and Toucan Capital Fund II, L.P. and any agreement executed
by the Company as part of the Anticipated Equity Financing, or any other
agreement executed by the Company in lieu of, and/or in addition to, the
Anticipated Equity Financing, in each case, for purposes of providing
registration rights under the Act to holders of shares of Capital Stock, and the
Company shall ensure that any such agreement conforms with the requirements of
this Section 3.4. Such registration rights may not be amended, modified or
waived without the prior written consent of the Holder.

     4. REPRESENTATIONS OF HOLDER.

          4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents
and warrants that it is acquiring the Warrant, the Exercise Shares and the
shares of Common Stock issuable upon conversion of the Exercise Shares (the
"UNDERLYING SHARES") solely for its account for investment and not with a view
to or for sale or distribution of said Warrant, Exercise Shares or Underlying
Shares, or any part thereof except in compliance with applicable federal and
state securities laws. The Holder also represents that the entire legal and
beneficial interests of the Warrant, the Exercise Shares and the Underlying
Shares the Holder is acquiring is being acquired for, and will be held for, its
account only.


                                       4.



          4.2 SECURITIES ARE NOT REGISTERED.

               (A) The Holder understands that the Warrant, the Exercise Shares
and the Underlying Shares have not been registered under the Securities Act of
1933, as amended (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 has no such present intention.

               (B) The Holder recognizes that the Warrant, the Exercise Shares
and the Underlying Shares must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available;
provided, however, the parties acknowledge and agree that the Company has an
obligation to register the Underlying Shares as provided in the Recapitalization
Agreement and the Convertible Preferred Stock Term Sheet.

               (C) The Holder is aware that neither the Warrant, the Exercise
Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under
the Act unless certain conditions are met, including, among other things, the
existence of a public market for the shares, 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, EXERCISE SHARES AND UNDERLYING SHARES.

               (A) The Holder further agrees not to make any disposition of all
or any part of the Warrant, the Exercise Shares or the Underlying Shares in any
event unless and until:

                    (I) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition;

                    (II) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or

                    (III) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and such
disposition shall not be contrary to any applicable federal and/or state
securities laws.

               (B) The Holder understands and agrees that 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


                                       5.



     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.

          5.1 CHANGES IN SECURITIES. In the event of changes in the series of
equity securities of the Company comprising the Exercise Shares by reason of
stock dividends, splits, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of Exercise Shares available under the Warrant in the
aggregate and the Exercise Price shall be correspondingly adjusted to give the
Holder of the Warrant, on exercise for the same aggregate Exercise Price, the
total number, class, and kind of 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. For purposes of this
Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the aggregate Exercise
Price payable in connection with the exercise in full 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.

          5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all
outstanding shares of the series of equity securities comprising the Exercise
Shares into Common Stock, if applicable, this Warrant shall become exercisable
for that number of shares of Common Stock of the Company into which the Exercise
Shares would then be convertible, so long as such shares, if this Warrant had
been exercised prior to such offering, would have been converted into shares of
the Company's Common Stock pursuant to the Company's Certificate of
Incorporation. In such case, all references to "EXERCISE SHARES" shall mean
shares of the Company's Common Stock issuable upon exercise of this Warrant, as
appropriate.

          5.3 DILUTIVE ISSUANCES. If at any time prior to exercise of this
Warrant, the Company issues or sells, or is deemed to have issued or sold,
additional shares of Capital Stock for a nominal or effective price less than
the then effective Exercise Price (a "DILUTIVE ISSUANCE"), then and in each such
case, the then existing Exercise Price shall be reduced, as of the opening of
business on the date of such issue or sale, to the price at which such shares
are issued or sold, or deemed to be issued or sold. For purposes of this Section
5.3, the Company will be deemed to have issued or sold additional shares of
Capital Stock if it issues any security or instrument convertible, exercisable
or exchangeable for Capital Stock, or if it promises, undertakes, commits,
agrees or enters into any letter of intent to do so. Notwithstanding the
foregoing, (i) no further adjustment of the Exercise Price shall be made as a
result of the actual issuance of shares of Capital Stock upon the conversion,
exercise or exchange of any such instrument or in satisfaction of any such
undertaking, commitment, agreement or letter of intent, and (ii) no adjustment
of the Exercise Price shall be made as a result of the actual issuance of any
shares of Common Stock pursuant to either (X) the exercise of those certain
options to purchase up to 35,000 shares of Common Stock at a purchase price of
$0.0001 per share that were


                                       6.



outstanding on April 26, 2004 and held by members of the Board of Directors of
the Company; or (Y) the exercise of the Initial Bridge Warrants.

          5.4 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the Exercise
Price and/or Exercise Shares, the Company shall promptly notify the Holder in
writing and furnish the Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.

     6. 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,
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.

     7. 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. The transferee shall sign a
customary investment letter in form and substance reasonably satisfactory to the
Company.

     8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.

     9. AMENDMENT. Any term of this Warrant may be amended or waived only with
the written consent of the Company and the Holder.

     10. NOTICES, ETC. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon actual 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 ten (10) days advance written notice to
the other parties hereto.

     11. 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 as applied to agreements among Delaware residents, made and to be
performed entirely within the State of Delaware without giving effect to
conflicts of laws principles.

                            [SIGNATURE PAGE FOLLOWS]


                                       7.



     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: Alton Boynton
                                        Title: President

                                        Address: 18701 120th Avenue, NE
                                                 Suite 101
                                                 Bothell, WA 98011
                                                 Fax: (425) 608-3146


ACKNOWLEDGED AND AGREED:

TOUCAN PARTNERS, LLC


By:
    ------------------------------------
Name: Linda Powers
Title: Managing Member

Address: 7600 Wisconsin Avenue
         Suite 700
         Bethesda, MD 20814
         Fax: (240) 497-4060

                      [SIGNATURE PAGE TO WARRANT NO. BW-15]



                               NOTICE OF EXERCISE

TO: NORTHWEST BIOTHERAPEUTICS, INC.

     (1)  [ ] The undersigned hereby elects to purchase ________ shares of
___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.

          [ ] The undersigned hereby elects to purchase ________ shares of
__________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.

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

                                        ________________________________________
                                                         (Name)

                                        ________________________________________

                                        ________________________________________
                                                        (Address)

     (3) The undersigned represents that (i) the aforesaid Exercise Shares are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in accordance with applicable federal and state securities laws; (ii) the
undersigned is aware of the Company's business affairs and financial condition
and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision regarding its investment in the Company; (iii) the
undersigned is experienced in making investments of this type and has such
knowledge and background in financial and business matters that the undersigned
is capable of evaluating the merits and risks of this investment and protecting
the undersigned's own interests; (iv) the undersigned understands that Exercise
Shares issuable upon exercise of this Warrant have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), by reason of a
specific exemption from the registration provisions of the Securities Act, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
Exercise Shares may not be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions are met and until the undersigned has
held the shares for the number of years prescribed by Rule 144, that among the
conditions for use of the Rule is the availability of current information to the
public about the Company; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Exercise Shares unless
and until there is then in effect a registration statement under the Securities
Act covering such proposed disposition or unless such transaction is in
compliance with applicable federal and state securities laws.


- -------------------------------------   ----------------------------------------
(Date)                                  (Signature)

                                        ----------------------------------------
                                        (Print name)


                                       1.



                                 ASSIGNMENT FORM

    (To assign the foregoing Warrant, execute this form and supply required
             information. Do not use this form to purchase shares.)

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

Name: __________________________________________________________________________
                                    (Please Print)

Address: _______________________________________________________________________
                                      (Please Print)

Dated: __________, 20__


Holder's
Signature:
           --------------------------

Holder's
Address:
         ----------------------------

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


                                       2.

EX-10.23

                                                                   Exhibit 10.23

                            NORTHWEST BIOTHERAPEUTICS

                 AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     This AMENDED AND RESTATED RECAPITALIZATION AGREEMENT (this "AGREEMENT") is
made by and between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any
(collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th
Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P.,
and its designees (collectively, the "INVESTOR"), a Delaware limited partnership
with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814, effective as of July
30, 2004 (the "RESTATEMENT DATE").

     WHEREAS, the Company is in the business of developing cancer therapeutics,
the Company's products are still in clinical and pre-clinical development, the
Company does not yet have any revenue-generating products, and the Company needs
substantial amounts of additional funding to resume development of its potential
products;

     WHEREAS, the Company has sought to raise equity financing for nearly two
years, with assistance from two investment banks, but to date has not succeeded
in obtaining any binding commitment for, or closing on, any such funding;

     WHEREAS, the Company has taken all reasonable steps to reduce its
expenditures during this period, including terminating clinical trials, reducing
staff, ceasing GMP manufacturing, exiting from its GMP facility, moving the
Company to smaller and less expensive offices and lab space, and other such
steps;

     WHEREAS, the Company has also taken all reasonable actions during this
period to try to raise funds through any means other than equity financing,
including selling off certain future royalty rights, selling certain
non-essential equipment, obtaining bridge funding from management, and other
such steps;

     WHEREAS, the Company also needs substantial funds in order to fulfill
regulatory requirements for FDA approval to re-start its prostate cancer
clinical trial, to persuade trial sites and other necessary parties to
participate in a re-start of the prostate trial, and to resume any clinical
and/or pre-clinical development of other products beyond the prostate cancer
vaccine;

     WHEREAS, in January 2004, the Company was within one week of having to
cease operations and commence liquidation, the Company had no investors ready to
close on any funding, and no investors who had made material progress into due
diligence. Although the Company was still vigorously pursuing all other funding
possibilities, there were no alternative sources of funding available to the
Company, either, at that time or soon enough for the Company to avoid ceasing
operations and commencing liquidation;

     WHEREAS, Investor was interested in commencing due diligence on the
Company, to determine whether an investment in the Company would be viable.
However, as of that time, the necessary due diligence materials had not been
pulled together into organized, comprehensive binders or investor packages that
could be readily reviewed by prospective investors. It was


                                       1.



necessary for Investor to work jointly with the Company to assemble these
necessary materials, and develop the necessary analyses, to enable a due
diligence assessment to be made;

     WHEREAS, since the Company did not have any operating funds to enable it to
continue operating during a due diligence process, such a process was only
feasible if Investor provided operating funds for the Company for this period;

     WHEREAS, Investor provided such operating funds to the Company in two
bridge notes of $50,000 each, covering the period from late January through the
date of this Agreement. Such bridge (debt) financing was extremely high risk;

     WHEREAS, the Company's situation and prospects were highly complex, and a
large volume of information was required to be gathered and analyzed to make a
due diligence assessment. For Investor, it took a team of two partners, four
associates, and numerous outside advisors (e.g., legal, regulatory, IP) a period
of two months to pull together and evaluate most of the necessary information;

     WHEREAS, the due diligence to date has made clear that, in order for
recapitalization and restart of the Company to be viable, a number of critical
steps must occur first, for both of the Company's two lead programs and overall;

     WHEREAS, a further (third) bridge period is necessary in order to try to
accomplish as many as possible of the key steps that must occur before a
recapitalization and restart may be viable, and this bridge period may take up
to one hundred eighty (180) days and the Company believes that an additional
bridge and recapitalization will create more value for its stockholders and
creditors than could be achieved through a liquidation of the Company at this
time;

     WHEREAS, at this time there can be no assurance as to whether the key steps
required to make recapitalization and restart of the Company viable can be
achieved, nor what amount of time and expense will be required to achieve them
if they are achievable, nor whether prospective co-investors will then be
willing to close on sufficient funding to enable the Company to continue in
business;

     WHEREAS, the Company does not have adequate funds for operations, nor for
additional expenses related to corporate governance, regulatory filings, or
preparations for recapitalization and restart of the Company, during this
further bridge period, and the Company has requested that Investor provide such
bridge funding;

     WHEREAS, the amount of funds the Company will need in order to continue
operations during the additional bridge period of up to one hundred eighty (180)
days will be much larger than the Company has needed for the two bridge periods
to date, and will be as much as $500,000 for the first thirty (30) days alone;

     WHEREAS, Investor has already undertaken extensive risk and work during the
first two bridge periods, Investor will undertake substantially greater risk
with substantially more capital and perform further work during the further
(third) bridge period contemplated under this Agreement, and Investor is willing
to provide the necessary funds for operations and certain other expenses of the
Company during a further bridge period, but only as part of a


                                       2.



comprehensive recapitalization agreement, with binding agreement between the
parties, prior to such further bridge funding, as to all material terms of the
comprehensive recapitalization, as set forth herein, all parts of which
constitute essential terms and conditions;

     WHEREAS, Investor, the Company and its Board of Directors have undertaken
extensive discussions and negotiations over a number of weeks about the terms,
conditions and structure of an overall recapitalization of the Company, and have
explored numerous approaches to fit the circumstances and meet the needs of both
the Company and Investor;

     WHEREAS, on April 26, 2004 the parties hereto entered into that certain
Recapitalization Agreement (the "PRIOR AGREEMENT"), effective as of April 26,
2004 (the "EFFECTIVE DATE"), by and between the Company and Investor, whereby
among other things Investor loaned $500,000 to the Company (in addition to the
issuance of additional convertible promissory notes to Investor in the aggregate
principal amount of $100,000 in return for the cancellation of notes held by
Investor having the same principal amounts);

     WHEREAS, on June 11, 2004 Investor loaned an additional $500,000 to the
Company pursuant to the terms of the Prior Agreement;

     WHEREAS, Investor desires to make a further loan to the Company in the
amount of $2,000,000, and the Company desires to receive such further loan from
Investor pursuant to this Agreement, and to amend the Prior Agreement in such
other respects as set forth herein;

     WHEREAS, Section 4.13(f) of the Prior Agreement provides that the Prior
Agreement may be amended pursuant to a written agreement signed by Investor and
the Company; and

     WHEREAS, the parties hereto wish to amend and restate in its entirety the
Prior Agreement as set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

SECTION 1: RECAPITALIZATION PLAN

     1.1 Recapitalization Plan: The Company is being recapitalized in two stages
(the "RECAPITALIZATION PLAN"), consisting of (i) a bridge period (the "BRIDGE
PERIOD") which began on February 1, 2004 and shall end one hundred eighty (180)
days after the Effective Date, unless earlier terminated or further extended as
provided in Section 2.6 of this Agreement, and (ii) an anticipated equity
financing of the Company, through the issuance of Convertible Preferred Stock
(as defined in the Convertible Preferred Stock Term Sheet attached hereto as
Exhibit B) in accordance with this Agreement (the "ANTICIPATED EQUITY
FINANCING"). Investor shall serve as the lead in the Bridge Funding and Bridge
Period Activities, as defined herein. Investor has also elected to serve as the
lead investor in the Anticipated Equity Financing as provided herein.

     1.2 Recapitalization Documents and Agreements: The terms and conditions of
the Recapitalization Plan are set forth in this Agreement, and shall be further
set forth in the following other documents and agreements (collectively, the
"RELATED RECAPITALIZATION DOCUMENTS"): (a) (i) the three Loan Agreement,
Security Agreement and 10% Convertible,


                                       3.



Secured Promissory Notes dated April 26, 2004 attached hereto as Exhibits A-1,
A-2 and A-3, (ii) the Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated June 11, 2004 attached hereto as Exhibit A-4 and
(iii) the Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Note dated July 30, 2004 attached hereto as Exhibit A-5 (each a
"NOTE," and collectively, the "Notes"), (b) the binding Convertible Preferred
Stock Term Sheet, attached hereto as Exhibit B, (c) warrants in the form
attached hereto as Exhibit C and Exhibit C-1 (each an "INITIAL BRIDGE WARRANT"
and collectively, the "INITIAL BRIDGE WARRANTS"); (d) a Preferred Stock Warrant
in the form attached hereto as Exhibit D, (e) a Convertible Stock Purchase
Agreement, Investor Rights Agreement, Certificate of Designation (or Amended and
Restated Certificate of Incorporation, as appropriate), and Voting Agreement,
all of which shall be drafted, executed and filed, as necessary, in accordance
with this Agreement and the binding Convertible Stock Term Sheet attached hereto
as Exhibit B, as promptly as practicable after the Effective Date, (f) a
Subsequent Bridge Warrant (as defined below) in the form attached hereto as
Exhibit J (and collectively with the Initial Bridge Warrants, the "BRIDGE
WARRANTS"), and (g) such other documents and agreements as may be necessary or
desirable, in Investor's sole discretion, to effectuate the transactions
contemplated in this Agreement and designated by Investor as a "Related
Recapitalization Document." All such Related Recapitalization Documents are and
shall be incorporated into this Agreement by reference.

     1.3 Integrated Plan; All Terms and Conditions Essential: The
Recapitalization Plan comprises a single integrated plan. All terms and
conditions set forth in this Agreement and the Related Recapitalization
Documents are an essential part of the transaction. The Company acknowledges and
agrees that Investor is only willing to undertake the Recapitalization Plan and
this Agreement, and the consideration to Investor for undertaking the
Recapitalization Plan and this Agreement is only adequate, if the entire
Recapitalization Plan and this Agreement are implemented on an integrated basis,
including all terms and conditions thereof. The Company also acknowledges and
agrees that, in view of the resources needed to restart its business and to
maintain and build that business on a sustainable basis, it is in the best
interests of the Company for the entire Recapitalization Plan to be implemented
on an integrated basis. Notwithstanding anything in this Section 1.3 or anything
in the remainder of this Agreement or any Related Recapitalization Document to
the contrary, any Note, Bridge Warrant, Preferred Stock Warrant or other equity
or debt security issued hereunder or under the terms of any Related
Recapitalization Document shall continue to be outstanding regardless of whether
the Recapitalization Plan is ever fully implemented, and the failure of the
Company to fully implement the Recapitalization Plan shall not in any way limit
any rights of the Investor under the terms of this Agreement, any Related
Capitalization Document or any such security.

     1.4 Notwithstanding anything in Section 1.3 or the remainder of this
Agreement or any Related Recapitalization Document to the contrary, and for the
purposes of clarity, other than the Initial Bridge Funding and the Subsequent
Bridge Funding (each as defined below), Investor shall not be obligated to
provide any financing to the Company on the terms described herein or therein,
or on any other terms, and each decision, if any, by Investor to provide any
such additional financing shall be at Investor's sole discretion and shall not
be deemed to create any obligation on the part of Investor to provide any future
financing to the Company.

SECTION 2: BRIDGE PERIOD AND FUNDING


                                       4.



     2.1 Activities During Bridge Period: During the Bridge Period, the parties
shall cooperate and use best efforts to complete certain material actions
(collectively, the "BRIDGE PERIOD ACTIVITIES") necessary or desirable for the
recapitalization of the Company, restart of the Company's development programs,
and the Anticipated Equity Financing. Investor shall lead these Bridge Period
Activities, after consultation with the Company. Such Bridge Period Activities
shall include, without limitation:

          (a) Negotiation and execution of contract manufacturing arrangements
for GMP sourcing and handling of dendritic cells.

          (b) Analysis of the intellectual property of the Company.

          (c) Identification and pursuit of additional antigens to establish a
product pipeline for the Company, through negotiation and execution of binding
letter(s) of intent or agreement(s) for one or more licensing and/or M&A
transactions.

          (d) Evaluation of the antigen for the Company's prostate cancer
clinical trial and related production and regulatory issues.

          (e) Clarification and analysis of licensing terms and costs for
license of IL-4, in case it is not feasible or not desirable (e.g., because
regulatory requirements are too lengthy and/or costly) to change the dendritic
cell production method to use the Tangential Flow Filtration ("TFF") devices in
the prostate cancer clinical trial re-start.

          (f) Preparation of an updated business plan, budgets, regulatory plan
(including plans for pre-IND animal and in vitro studies for FDA re-approval of
the prostate cancer clinical trial), Gantt charts, manufacturing plans,
intellectual property analyses, and the like.

          (g) Preparation of an investor package and due diligence binders, to
facilitate review and due diligence by prospective equity investors.

          (h) Evaluation of potential structures for the Anticipated Equity
Financing and preparations for implementation of the transaction selected,
including, without limitation, Investor consent and regulatory filings.

          (i) Analysis and determination, satisfactory to Investor, of what
reverse stock split should be undertaken by the Company (including terms,
conditions and timing), and preparations for implementation of the transaction
decided upon, including, without limitation, Investor consent and regulatory
filings.

          (j) Planning for syndication of the Anticipated Equity Financing, and
determination of the amounts and timing of such financing.

     2.2 Form, Seniority and Security of Bridge Funding:

          (a) Funding provided by Investor for the Bridge Period shall be
provided in the form of senior secured convertible debt (the "BRIDGE FUNDING")
in one or more tranches, in


                                       5.



Investor's sole discretion. The Bridge Funding shall be evidenced by execution
of the Notes in the forms attached hereto as Exhibits A-1 through A-5.

          (b) As more fully provided in the forms of Note evidencing each
tranche of Bridge Funding, and except as otherwise expressly provided in the
Notes or herein, the Bridge Funding: (i) shall be senior in all respects to all
other indebtedness or obligations of the Company of any kind, direct or
indirect, contingent or otherwise, other than obligations of the Company owed
directly to the state or federal government, obligations to those creditors
listed on Schedule 2.2 hereto (and only to the amounts set forth on such
schedule), and other than any other obligations of the Company to Investor; and
(ii) shall not be made subordinate or subject in right of payment to the prior
payment of any other indebtedness or obligation of any kind, direct or indirect,
contingent or otherwise, other than obligations of the Company owed directly to
the state or federal government, obligations to those creditors listed on
Schedule 2.2 hereto (and only to the amounts set forth on such schedule), and
other than any other obligations of the Company to Investor.

          (c) As more fully provided in the forms of Note evidencing the Bridge
Funding and except as otherwise expressly set forth in the Notes or herein, the
Company's obligations under each such Note shall be secured by a first priority
senior security interest in all of the Company's right, title and interest in,
to and under all of the Company's tangible and intangible property, whether now
owned, licensed or held or hereafter acquired, licensed, developed, held or
arising, (the "COLLATERAL"). The rights and remedies of Investor with respect to
the senior security interest are in addition to all other rights, powers and
remedies that may be available to as a matter of law or equity, and shall be
cumulative and concurrent. The exercise by Investor of any one or more of the
rights, powers and/or remedies provided for in the Notes, or now or hereafter
existing at law or in equity, shall not preclude the simultaneous or later
exercise by any person, including a grantee, of any or all rights, powers and/or
remedies.

          (d) Notwithstanding anything to the contrary in this Agreement or any
other agreement or document, in the event that the Company is unable to pay and
discharge any Note in full on the applicable Maturity Date, subject to
compliance with any applicable requirements of the Delaware Uniform Commercial
Code, nothing herein or in any Related Recapitalization Document shall be deemed
to preclude, limit or restrict Investor from requiring the delivery of some or
all of the Collateral in full or partial satisfaction of the Company's
obligations under the Notes. Alternatively, Investor may, in its sole
discretion, elect to cause some or all of the Collateral to be sold, and the
sale proceeds to be used to pay and discharge the Note in full.

     2.3 Amount and Timing of Bridge Funding:

          (a) The initial amounts of Bridge Funding provided by Investor include
(i) $100,000 already provided by Investor prior to the Effective Date, for which
the applicable notes have been cancelled and re-issued in the forms as attached
hereto as Exhibits A-1 and A-2, (ii) $500,000 provided by Investor on the
Effective Date, for which a Note in the form of Exhibit A-3 was issued to
Investor, (iii) $500,000 provided by Investor on June 11, 2004, for which a Note
in the form of Exhibit A-4 was issued to Investor (collectively, the "INITIAL
BRIDGE FUNDING"). The Initial Bridge Funding was to cover general operating
expenses and certain other expenses


                                       6.



of the Company from the commencement of the Bridge Period through the Amendment
Date, as more fully provided herein and in the Notes evidencing the Initial
Bridge Funding.

          (b) On the Restatement Date, Investor is providing an additional
$2,000,000 of Bridge Funding (the "SUBSEQUENT BRIDGE FUNDING") to cover general
operating expenses and certain other expenses of the Company agreed in advance
by Investor during the remaining Bridge Period following the period covered by
the Initial Bridge Funding. The Subsequent Bridge Funding shall be evidenced by
a Note in the form attached hereto as Exhibit A-5 and shall be provided on the
terms and conditions set forth herein. The Subsequent Bridge Funding shall be
used only for the purposes and in the amounts set forth in the budget included
in the Schedule of Exceptions. As provided under Section 2.5 hereof in regard to
all Notes, any expenditures of Subsequent Bridge Note funds, and/or any action,
promise, undertaking or commitment which would result in the Company incurring
or accumulating payables and/or other financial obligations of any kind, whether
current or deferred, direct or indirect, for purposes other than as set forth in
budgets expressly agreed to by Investor, and/or in any amounts in excess of the
amounts set forth in such agreed budgets, which equal or exceed $10,000 in
aggregate, and which have not been approved in writing in advance by Investor,
shall constitute an Event of Default under the Notes.

          (c) The amounts and timing of any further Bridge Funding after the
Subsequent Bridge Funding, if any, shall be determined by mutual agreement
between the Company and Investor. Investor's agreement to any such further
Bridge Funding shall be in its sole discretion.

     2.4 Conditions to Bridge Funding and Recapitalization Plan: Notwithstanding
anything to the contrary, and, in each case, unless expressly waived in writing
in advance by Investor (any such waiver by Investor shall be applicable only as
to such closing and shall not be deemed a waiver of such condition as to future
closings, if any), and only to the extent expressly waived, at the first closing
of Bridge Funding following the Effective Date and, independently, at any
subsequent closing of Bridge Funding, Investor's provision of Bridge Funding
and/or any other element of the Recapitalization Plan shall be conditional upon
and subject to the satisfaction or waiver of each of the following conditions
precedent, with each such satisfaction or waiver to be determined by Investor in
its sole discretion (including, without limitation, the acceptability to
Investor of any exception set forth in a disclosure schedule), on or before the
applicable closing date. Investor shall make all such determinations in its sole
discretion. The conditions precedent to all closings of Bridge Funding and/or
any other element of the Recapitalization Plan shall include the following,
unless waived by Investor in its sole discretion:

          (a) the Company to execute this Agreement and all Related
Recapitalization Documents, and all such documents and agreements to be in form
and in substance satisfactory to Investor;

          (b) the Company to be in compliance with all terms and conditions of
this Agreement and all Related Recapitalization Documents that are being or have
been executed as of such closing (whether originally executed in connection with
such closing or a prior closing), including, without limitation, the
confidentiality and exclusivity requirements set forth in Sections 4.1 and 4.12
hereof;


                                       7.



          (c) the Company to re-issue the two prior bridge notes evidencing the
$100,000 provided by Investor to date, to conform to the forms of Note attached
hereto as Exhibits A-1 and A-2;

          (d) all conditions set forth in the Notes to continue, including
without limitation, the covenants;

          (e) the Company to have permitted, and to continue to permit, Investor
to serve as the lead in regard to the Bridge Funding and Bridge Period
Activities, and in regard to the Anticipated Equity Financing;

          (f) the Company's board of directors to have resolved that a reverse
split of its outstanding stock is needed, and that the terms, conditions and
timing shall be determined during the Bridge Period as part of the Bridge Period
Activities, and shall be reasonably satisfactory to Investor;

          (g) the Company to obtain all necessary creditor and stockholder
consents, and any additional consents requested by Investor, and the Company to
make all necessary regulatory filings related to this Agreement and the Related
Recapitalization Documents and the transactions contemplated thereby, in each
case as rapidly as reasonably possible during the Bridge Period;

          (h) all secured creditors of the Company to have executed a
subordination agreement, in the form attached hereto as Exhibit E, except for
the equipment lessors and holders of statutory liens or landlord liens set forth
on Schedule 2.2 hereto;

          (i) each holder of secured convertible promissory notes issued on
November 13, 2003 (each a "MANAGEMENT Note" and, collectively the "MANAGEMENT
NOTES") shall have executed the notice, consent and waiver in the form attached
hereto as Exhibit F;

          (j) each holder of a Management Note shall have executed and delivered
the First Amendment to Convertible Secured Promissory Note in the form attached
hereto as Exhibit G;

          (k) each holder of a warrant to purchase common shares issued in
connection with the Management Notes shall have executed the First Amendment to
Warrants to Purchase Common Shares in the form attached hereto as Exhibit H;

          (l) all fees, costs and expenses incurred and/or undertaken by
Investor to be satisfied by the Company as provided in Section 4.11 hereof;

          (m) progress toward and/or in the Bridge Period Activities to be
satisfactory to Investor;

          (n) the Company to have satisfied all applicable general conditions to
closing, as set forth in Section 4.9;


                                       8.



          (o) the Company to deliver to Investor at each closing of Bridge
Funding and each closing of any other element of the Recapitalization Plan an
officer's certificate, executed by an authorized and responsible officer of the
Company, and certifying that the foregoing conditions have been fulfilled;

          (p) the Company to be in compliance with all conditions, covenants and
other provisions contained in the Notes;

          (q) with respect to the Subsequent Bridge Funding only, the Company to
have agreed with Investor to extend the Bridge period through the date that is
ninety (90) days from and after July 25, 2004 (such ninety (90) days, the
"EXTENDED BRIDGE PERIOD"), in contemplation of the Subsequent Bridge Funding;

          (r) with respect to the Subsequent Bridge Funding only, the Company
having completed the negotiation of, and executed, one or more contract services
agreements, acceptable to Investor, providing for all services necessary for
rapid restart of the Company's Phase III prostate cancer trial and Phase II
brain cancer trial, including, without limitation, regulatory advisory services
and good manufacturing practice (GMP) manufacturing; and

          (s) the Company to have implemented new measures, acceptable to
Investor, to ensure that all pre-and post-closing conditions and covenants
provided for herein and in the Related Recapitalization Documents are fully
satisfied, including, without limitation, to ensure that during the Extended
Bridge Period the covenants required by Sections 2.5(c), (d), (e), (g), (h) and
(i) are satisfied.

     2.5 Covenants Related to Bridge Funding and Equity Financing Period: As
more fully set forth in the forms of the Notes evidencing the Bridge Funding,
during the Bridge Period and for so long as any Bridge Funding remains
outstanding, the Company shall comply with certain affirmative and negative
covenants including, without limitation, covenants relating to financial
matters, handling of intellectual property, issuance of any equity or debt
securities, handling of TFF devices, confidentiality and exclusivity, and other
material matters. Without limiting the foregoing, during the Bridge Period and
the Equity Financing Period, the Company shall:

          (a) coordinate with Investor on the preparation and filing with the
SEC of any Exchange Act filings and confidential treatment requests covering any
commercially sensitive terms (as determined jointly by the Company and Investor)
of this Agreement and any Related Recapitalization Document required to be filed
with the SEC under applicable SEC regulations, and the Company shall use its
best efforts to obtain confidential treatment of such information from the SEC;

          (b) take all steps reasonably necessary to implement the structure
provided in Section 3.3 hereof;

          (c) not hire, engage, retain, or agree to hire, engage or retain, any
full or part-time, permanent or temporary employee, consultant, adviser,
independent contractor, collaborator, intern or other personnel of any kind
(collectively, "PERSONNEL"), except with Investor's express prior written
approval, on a case by case basis;


                                       9.



          (d) not enter into, increase, expand, extend, renew or reinstate any
severance, separation, retention, change of control or similar agreement with
any Personnel (or agree, promise, commit or undertake to do so), except with
Investor's prior written approval, on a case by case basis;

          (e) not purchase, lease, hire, rent or otherwise acquire directly or
indirectly any rights in or to any asset or facility outside of the ordinary
course of business in an amount in excess of $10,000, in aggregate, or agree,
promise or commit to do so, except in accordance with the Company's budget that
has been approved by the Company's board of directors and the Investor;

          (f) take all steps reasonably necessary to procure the execution and
delivery by Dan Wilds of the First Amendment to Warrants to Purchase Common
Shares during the thirty (30) day Funded Bridge Period of the Initial Bridge
Note;

          (g) make no expenditures in excess of $10,000 in aggregate other than
in accordance with a budget pre-approved by Investor;

          (h) report the Company's cash position and all expenditures and
agreements, commitments or undertakings for expenditures to Investor on a
bi-weekly basis; and

          (i) not deviate, during the period covered by such budget, more than
$10,000 in aggregate from the budget included in the Schedule of Exceptions in
connection with the Subsequent Bridge Note, nor take any action or make any
promise, undertaking or commitment that would result in the Company incurring or
accumulating payables and/or other financial obligations of any kind, whether
current or deferred, direct or indirect, for purposes other than as set forth in
budgets expressly agreed to by Investor, and/or in any amounts in excess of the
amounts set forth in such agreed budgets, which equal or exceed $10,000 in
aggregate, and which have not been approved in writing in advance by Investor.

     2.6 Modification of Bridge Period:

          (a) Early Termination of Bridge Period: The Bridge Period shall
continue until one hundred eighty (180) days after the Effective Date. The
Bridge Period may only terminate prior to one hundred eighty (180) days after
the Effective Date upon the mutual agreement of the parties.

          (b) Extension of Bridge Period: The Bridge Period may be extended
beyond the period of one hundred eighty (180) days after the Effective Date upon
the occurrence of one of the following events:

               (i) mutual agreement of the parties; or

               (ii) Investor reasonably determines, in its discretion, that
further time is needed to complete the Bridge Period Activities, and Investor is
willing to provide reasonable additional Bridge Funding for the period of such
extension.

     2.7 Conversion of Bridge Funding:


                                       10.



          (a) Automatic Conversion: The Bridge Funding shall automatically
convert into Convertible Preferred Stock, upon the terms and conditions set
forth herein, in the Notes and in the Convertible Preferred Stock Term Sheet,
only in the event, and upon the closing of, the purchase in cash (and not by
conversion of debt, exercise of warrants or options, or conversion or exercise
of other securities or instruments), on the terms and conditions set forth in
the Convertible Preferred Stock Term Sheet, by Other Investors, as defined in
the Convertible Preferred Stock Term Sheet, of a minimum of $15 million of
Convertible Preferred Stock.

          (b) Discretionary Conversion: Until, and/or in the absence of, the
closing of purchases for cash of a minimum of $15 million of Convertible
Preferred Stock, by Other Investors, on the terms and conditions set forth
herein and in the Convertible Preferred Stock Term Sheet, the determination as
to whether to convert any or all of the Bridge Funding into equity shall be made
by Investor in its sole discretion. Investor may make such determinations from
time to time with regard to any Note and at any time before such Note has been
discharged in full, and, as applicable, at any time on or before the expiration
of the thirty (30) day notice period required under each Note in the event the
Company wishes to prepay such Note. Investor may, in its sole discretion, elect
to convert any or all of the principal and/or interest due under each Note into
any Equity Security and/or Debt Security (each as defined below) and/or any
combination thereof, in each case that Investor shall designate in Investor's
sole discretion (the securities so elected being the "INVESTOR DESIGNATED
SECURITIES"). For purposes hereof, (i) the term "EQUITY SECURITY" means any
class or series of equity security, or any combination of classes and/or series
of equity securities, of the Company that have been authorized under the
Company's certificate of incorporation, as amended and/or restated, including by
any certificate of designation (the "CHARTER"), or any new class or series of
equity security, or any combination of new and/or existing classes and/or series
of equity securities, of the Company for which the Company has undertaken any
agreement, obligation, promise, commitment or letter of intent to obtain such
authorization and (ii) the term "DEBT SECURITY" means any evidence of
indebtedness of the Company that the Company has authorized, created or
incurred, or that the Company has undertaken any agreement, obligation, promise,
commitment or letter of intent to authorize, create or incur.

          (c) Information for Investor's Election. The Company shall provide to
Investor, within two (2) business days after notice of each request by Investor,
all information reasonably requested by Investor in connection with any Equity
Securities and/or Debt Securities, to enable Investor to make decisions
regarding one or more conversions. In the event that the Company seeks to prepay
a Note evidencing Bridge Funding, the Company shall deliver to Investor,
simultaneously and together with the notice required under such Note of the
Company's interest in prepaying the Note, a summary of all material information,
terms and conditions relating to all Equity Securities and Debt Securities
(including any "side" letters or agreements or separate agreements).

          (d) Conversion. The conversion price for any conversion pursuant to
Section 2.7(a) shall be the lowest nominal or effective price per share paid by
the Other Investors who acquire such Convertible Preferred Stock (with the
exception of shares issuable upon exercise of the Initial Bridge Warrants). The
conversion price for any conversion into any Equity Security or Debt Security
pursuant to Section 2.7(b) shall be the lowest of (i) the lowest nominal or
effective price per share paid by any investor at any time on or after the date
one year prior to the


                                       11.



Effective Date (with the exception of (x) purchases of up to 35,000 shares of
the Company's Common Stock, $0.001 par value ("COMMON STOCK") pursuant to
certain options to purchase, at a purchase price of $0.0001, that were
outstanding on the Effective Date and held by members of the Board of Directors,
as set forth in Schedule 2.7(d), and (y) shares issuable upon the exercise of
the Initial Bridge Warrants, each of which shall be excluded from consideration
under this section), (ii) the lowest nominal or effective price at which any
investor is entitled to acquire shares (including, without limitation, through
purchase, exchange, conversion or exercise) pursuant to any other security,
instrument, or promise, undertaking, commitment, agreement or letter of intent
of the Company outstanding on or after the Effective Date or granted, issued,
extended or otherwise made available by the Company at any time on or after the
date one year prior to the Effective Date (regardless of whether currently
exercisable or convertible) (with the exception of (x) certain options to
purchase up to 35,000 shares of Common Stock at a purchase price of $0.0001 that
were outstanding on the Effective Date and held by members of the Board of
Directors as set forth in Schedule 2.7(d), and (y) the Initial Bridge Warrants,
each of which shall be excluded from consideration under this section); and
(iii) the lesser of $0.10 per share or 35% discount to the average closing price
per share of the Common Stock during any twenty consecutive trading days
(beginning with the twenty consecutive trading days prior to the Effective
Date); provided, however, that in no event shall the price per share calculated
pursuant to this clause (iii) be less than $0.04 per share. The calculation
required by clause (ii) hereof shall initially be based upon Schedule 2.7(d)
hereto. All other rights, preferences, privileges, terms and conditions received
by Investor in connection with any conversion and/or any securities issued by
the Company to Investor upon conversion, shall be no less favorable to Investor
than the rights, preferences, privileges, terms and conditions any other
investor in the Company has received or is entitled to receive with respect to
the security into which Investor is converting pursuant to any other security,
instrument, promise, undertaking, commitment, agreement or letter of intent of
the Company, whether or not such rights, preferences, privileges, terms and
conditions for any other investor are incorporated into the agreements or
documents relating to any conversion or any issuance of the security or other
instrument to that investor or are provided separately, at any time on or after
one year prior to the Effective Date. In regard to each conversion hereunder,
the Company hereby agrees to take and/or arrange for all necessary corporate and
related action to enable the execution of each such conversion elected by
Investor. Except as set forth on Schedule 2.7(d) hereto, no subscription,
warrant, option, convertible security, or other right (direct or indirect,
contingent or otherwise) to purchase or otherwise acquire any equity securities
of the Company are outstanding or authorized. At each closing of the Bridge
Funding and the Anticipated Equity Financing, if any, the Company shall provide
Investor with an updated Schedule 2.7(d).

          (e) No Impairment. The Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission, or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with any Note evidencing Bridge Funding, but shall at all times in
good faith use best efforts to assist in carrying out of all the provisions of
and/or relating to such Note and in taking all such action as may be necessary
or appropriate to protect Investor's rights, preferences and privileges under
and/or in connection with the Note against impairment. The Investor's rights,
preferences and privileges granted under and/or in connection with any Note
and/or Investor Designated Securities may not be amended, modified or waived
without the


                                       12.



Investor's prior written consent, and the documentation providing for such
rights, preferences and privileges will specifically provide as such.

          (f) Right of First Refusal: In the event that the Company proposes to
authorize or issue any Equity Security and/or Debt Security, Investor shall have
a right of first refusal to purchase any or all of such Equity Security and/or
Debt Security, through the conversion of any or all of the Notes and the
exercise of any or all of the Bridge Warrants for such securities; provided,
however, that in the event of automatic conversion of Bridge Funding pursuant to
Section 2.7(a) hereof, Investor's right of first refusal shall relate solely to
the purchase of Convertible Preferred Stock. Any such conversion of Notes by
Investor would be at the conversion price provided in Section 2.7(d) and any
such exercise of the Bridge Warrants would be at the exercise price provided in
the applicable Bridge Warrant, in each case irrespective of the purchase price
proposed to be paid by any other investor for such securities. This right of
first refusal shall apply at each closing of the issuance of any such Equity
Security and/or Debt Security, so long as any Notes or Bridge Warrants are
outstanding. Such right of first refusal shall apply regardless of whether or
not Investor leads or otherwise participates in any such financing. Prior to
issuing any Equity Security or Debt Security, the Company shall provide Investor
with at least sixty days advance written notice of its intention to issue such
securities, which notice shall describe in sufficient detail (to the extent then
known) the securities proposed to be issued, the parties to whom the Company
proposes to issue such securities and the price at which the securities are
proposed to be issued (collectively the "FINANCING TERMS"). The Company shall
update Investor with respect to the Financing Terms to the extent that the
Financing Terms change or become known to the Company. Once the Financing Terms
are fixed, the Company shall provide Investor with a final notice ("FINAL
NOTICE") containing all Financing Terms and Investor shall have a period of
thirty days to exercise its right of first refusal following delivery of such
Final Notice to Investor by the Company. All rights of first refusal provided by
this Section 2.7(f) are in addition to, and shall in no way be deemed to limit,
offset or supersede, Investor's right of first refusal contained in Section
3.4(d) of this Agreement.

     2.8 Initial Bridge Warrants:

          (a) Issuance of Initial Bridge Warrants. At each closing of Initial
Bridge Funding, Investor received a warrant with coverage equal to three hundred
percent (300%) of the principal amount due under each Note evidencing the Bridge
Funding provided in connection with such closing (collectively, the "INITIAL
BRIDGE WARRANTS"). The Company therefore issued $3,300,000 in warrant coverage
on the $1,100,000 of Initial Bridge Funding provided prior to the Restatement
Date. The number of shares subject to such Initial Bridge Warrants so issued was
determined on the basis of $0.05 per share (subject to adjustment for stock
splits, stock dividends and the like). The number of shares for which Investor
shall initially be able to exercise the Initial Bridge Warrants Investor
received for the Initial Bridge Funding shall therefore be 66,000,000 shares.

          (b) Exercise of Initial Bridge Warrants: The Initial Bridge Warrants
shall become exercisable on the Restatement Date and continue to be exercisable,
in whole or in part, until the dates seven years after issuance, respectively,
of such Initial Bridge Warrants. The exercise price of the Initial Bridge
Warrants shall be $0.01 per share (subject to adjustment for stock dividends,
stock splits, certain dilutive issuances and similar transactions, as provided
more


                                       13.



fully in the Initial Bridge Warrants). In the event the Convertible Preferred
Stock is approved and authorized, and the terms and conditions are the same as
set forth herein and in the Convertible Preferred Stock Term Sheet, and Other
Investors have purchased in cash (and not by conversion of debt, exercise of
warrants or options, or conversion or exercise of other securities or
instruments) a minimum of $15 million of such Convertible Preferred Stock, on
the terms and conditions set forth herein and in the Convertible Preferred Stock
Term Sheet, then the Initial Bridge Warrants shall be exercisable solely for
such Convertible Preferred Stock (subject to Section 5 thereof). However, if,
for any reason, such Convertible Preferred Stock is not approved or authorized,
and/or is approved or authorized on any terms different than any terms set forth
herein and in the Convertible Preferred Stock Term Sheet, and/or if Other
Investors have not purchased in cash (and not by conversion of debt, exercise of
warrants or options, or conversion or exercise of other securities or
instruments) a minimum of $15 million of such Convertible Preferred Stock, on
the terms and conditions set forth herein and in the Convertible Preferred Stock
Term Sheet, the Initial Bridge Warrants shall be exercisable for any Equity
Security and/or Debt Security (each as defined in Section 2.7 hereof) and/or any
combination thereof, in each case that Investor shall designate in Investor's
sole discretion (the securities so elected being the "INVESTOR DESIGNATED
SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission, or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with the Initial Bridge Warrants, but shall at all times in good
faith use best efforts to assist in carrying out of all the provisions of and/or
relating to such Initial Bridge Warrants and in taking all such action as may be
necessary or appropriate to protect Investor's rights, preferences and
privileges under and/or in connection with the Initial Bridge Warrants against
impairment. The Investor's rights, preferences and privileges granted under
and/or in connection with the Initial Bridge Warrants may not be amended,
modified or waived without the Investor's prior written consent, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.

          (d) Tax Treatment of Initial Bridge Warrants and Notes. The Company
and Investor, as a result of arm's length bargaining, agree that the aggregate
fair market value of the Notes issued in connection with the Initial Bridge
Funding, if issued apart from the Initial Bridge Warrants, is $1,045,000 for
such Notes, and the aggregate fair market value of the Initial Bridge Warrants,
if issued apart from such Notes, is $55,000. The Company and Investor further
agree that all tax filings and records relating to or including this Agreement,
the Notes and/or the Initial Bridge Warrants shall be prepared on the basis of,
and consistently reflect, the agreed fair market values set forth in this
Section 2.8(d), and the Company shall instruct its accountants and other
tax-preparation professionals to prepare all tax filings and returns on the
basis of the foregoing.

     2.9 Subsequent Bridge Warrant:

          (a) Issuance of Subsequent Bridge Warrant. On the Restatement Date,
Investor shall receive a warrant with coverage equal to one hundred percent
(100%) of the principal amount due under the Note evidencing the Subsequent
Bridge Funding (the "SUBSEQUENT BRIDGE WARRANT" and, collectively with the
Initial Bridge Warrants and the


                                       14.



Preferred Stock Warrants (as defined herein), the "WARRANTS"). The Company
shall, therefore, issue $2,000,000 in warrant coverage on the $2,000,000 of
Subsequent Bridge Funding provided on the Restatement Date. The number of shares
subject to such Subsequent Bridge Warrant to be so issued shall be determined on
the basis of $0.10 per share (subject to adjustment for stock splits, stock
dividends and the like). The total number of shares for which Investor shall
initially be able to exercise the Subsequent Bridge Warrant shall therefore be
20,000,000 shares as of the Restatement Date.

          (b) Exercise of Subsequent Bridge Warrant: The Subsequent Bridge
Warrant shall be immediately exercisable upon issuance and continue to be
exercisable for a period of seven (7) years after its issuance date. The
exercise price of the Subsequent Bridge Warrant shall be the lesser of $0.10 per
share (subject to adjustment for stock splits, stock dividends and the like, as
provided more fully in the Subsequent Bridge Warrant) and a 35% discount to the
average closing price during the twenty trading days prior to the first closing
of the sale of Convertible Preferred Stock; provided, however that in no event
will the exercise price be less than $0.04 per share (subject to adjustment for
stock splits, stock dividends and the like, as provided more fully in the
Subsequent Bridge Warrant). In the event the Convertible Preferred Stock is
approved and authorized, and the terms and conditions are the same as set forth
herein and in the Convertible Preferred Stock Term Sheet, and Other Investors
have purchased in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments) a minimum
of $15 million of such Convertible Preferred Stock, on the terms and conditions
set forth herein and in the Convertible Preferred Stock Term Sheet, then the
Subsequent Bridge Warrant shall be exercisable solely for such Convertible
Preferred Stock (subject to Section 5 thereof). However, if, for any reason,
such Convertible Preferred Stock is not approved or authorized, and/or is
approved or authorized on any terms different than any terms set forth herein
and in the Convertible Preferred Stock Term Sheet, and/or if Other Investors
have not purchased in cash (and not by conversion of debt, exercise of warrants
or options, or conversion or exercise of other securities or instruments) a
minimum of $15 million of such Convertible Preferred Stock, on the terms and
conditions set forth herein and in the Convertible Preferred Stock Term Sheet,
the Subsequent Bridge Warrant shall be exercisable for any Equity Security
and/or Debt Security (each as defined in Section 2.7 hereof) and/or any
combination thereof, in each case that Investor shall designate in Investor's
sole discretion (the securities so elected being the "INVESTOR DESIGNATED
SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission, or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with the Subsequent Bridge Warrant, but shall at all times in good
faith use best efforts to assist in carrying out of all the provisions of and/or
relating to such Subsequent Bridge Warrant and in taking all such action as may
be necessary or appropriate to protect Investor's rights, preferences and
privileges under and/or in connection with the Subsequent Bridge Warrant against
impairment. The Investor's rights, preferences and privileges granted under
and/or in connection with the Subsequent Bridge Warrant may not be amended,
modified or waived without the Investor's prior written consent, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.


                                       15.



          (d) Tax Treatment of Subsequent Bridge Warrant and Note. The Company
and Investor, as a result of arm's length bargaining, agree that the fair market
value of the Note to be issued in connection with the Subsequent Bridge Funding,
if issued apart from the Subsequent Bridge Warrant, is $1,980,000, and the fair
market value of the Subsequent Bridge Warrant, if issued apart from such Note,
is $20,000. The Company and Investor further agree that all tax filings and
records relating to or including this Agreement, the Note to be issued in
connection with the Subsequent Bridge Funding and/or the Subsequent Bridge
Warrant shall be prepared on the basis of, and consistently reflect, the agreed
fair market values set forth in this Section 2.9(d), and the Company shall
instruct its accountants and other tax-preparation professionals to prepare all
tax filings and returns on the basis of the foregoing.

     2.10 Post-Closing Matters: Following the closing of the Subsequent Bridge
Funding, the parties agree to take all steps necessary to amend any Related
Recapitalization Document to (i) replace all Notes representing the Initial
Bridge Funding with a Note in the form of Exhibit A-5; and (ii) conform any
language therein to the language provided herein within ten (10) business days
of the Restatement Date. To the extent that any provisions of this Agreement are
inconsistent with or in addition to the provisions contained in any Related
Recapitalization Document, the provisions hereof shall be controlling.

SECTION 3: ANTICIPATED EQUITY FINANCING

     3.1 Essential Part of Recapitalization Plan: As provided in Section 1.1,
hereof, the Company is being recapitalized in two stages under the
Recapitalization Plan: first, through Bridge Funding, and thereafter through an
Anticipated Equity Financing. The Recapitalization Plan comprises a single
integrated plan, and all terms and conditions set forth in this Agreement and
the Related Recapitalization Documents - including, without limitation, the
Anticipated Equity Financing - are an essential part of the transaction. This
integrated structure, with binding agreement between the parties in regard to
the Anticipated Equity Financing as well as the Bridge Funding, is necessary to
provide adequate consideration to Investor, and is also both necessary and
desirable for the Company, in order to provide the resources needed to restart
the Company's business, and enable the Company to maintain and build that
business on a sustainable basis. The Company shall fully disclose and present
the Recapitalization Plan as a single integrated plan in all regulatory filings
and all documents relating to shareholder notice and consent in connection with
the Recapitalization Plan.

     3.2 Fiduciary Exception: Notwithstanding the binding agreement set forth
herein in regard to the Anticipated Equity Financing, that agreement, and the
Company's obligations thereunder, shall be subject to a limited fiduciary
exception, pursuant to which the Company may respond to or accept a proposal for
equity financing or merger, consolidation, business combination or sale of all
or substantially all of the Company's assets from another party or parties (each
of the foregoing constituting an "ALTERNATIVE EQUITY FINANCING Proposal"), but
(a) only as and to the extent required by applicable law; (b) only in regard to
an Alternative Equity Financing Proposal that has not been directly or
indirectly solicited by the Company or any of its officers, directors or
employees, Soma Partners LLC ("SOMA"), or any advisors, agents or consultants of
the Company during the Standstill Period provided in Section 4.1 hereof or
during the standstill period provisions described in the Notes and Section 13 of
each of the 10% Convertible, Secured Promissory Notes issued by the Company to
the Investor, dated as of


                                       16.



February 2, 2004 and March 1, 2004, respectively (an "UNSOLICITED PROPOSAL"),
and (c) only if the Board of Directors of the Company provides written
certification to Investor that the Alternative Equity Financing Proposal is an
Unsolicited Proposal. The Company shall notify Investor of its receipt of any
Unsolicited Proposal immediately upon receipt thereof, and shall provide to
Investor a copy of such Unsolicited Proposal or a description of all material
terms thereof, including the party or parties involved. If the Company's board
of directors determines that acceptance of any Unsolicited Proposal is required
in order to fulfill its fiduciary obligations, prior to accepting such
Unsolicited Proposal, the Company shall notify Investor of its intent to accept
such Unsolicited Proposal. Investor shall have twenty-one (21) days from the
date it receives such notice from the Company to present a revised proposal of
its own to the Company (although Investor shall under no circumstances be
obligated to do so), which the Company's board of directors shall fully consider
in good faith. In the event that, following the consideration of any revised
proposal from Investor or, in the absence of any such revised proposal,
following the expiration of twenty-one (21) days, the Company's board of
directors determines that acceptance of the Unsolicited Proposal is required in
order to fulfill its fiduciary obligations pursuant to this Section 3.2 and the
Company has complied with all aspects of this Section 3.2, then the Company
shall be under no obligation to proceed with the Anticipated Equity Financing;
provided, however, that all other terms and conditions of this Agreement and the
Related Recapitalization Documents, including, without limitation, the terms and
conditions of any Notes and Warrants issued pursuant to this Agreement, shall
remain in full force and effect (with the exception of Sections 2.1, 2.5(b),
2.5(c), 4.6(b), 4.6(d), 4.6(e) and 4.6(h) of this Agreement which shall
terminate and be of no further effect). Upon the later of (i) the termination,
if applicable, of the Company's obligation to proceed with the Anticipated
Equity Financing as described in this Section 3.2, and (ii) the date that no
Notes are outstanding, the covenants contained in Section 4.6(f) of this
Agreement shall terminate and be of no further effect.

     3.3 Structure: It is the preference of the Company to raise the Anticipated
Equity Financing in the form of a private investment in public entity ("PIPE")
transaction, with the Company remaining a publicly traded entity. However, the
Company acknowledges and agrees that there can be no assurance that it will be
reasonably feasible to do so. The Company, with assistance from two investment
banks, has tried for two years without success to raise financing through a
secondary equity offering or PIPE while remaining a publicly traded entity. In
order to raise the necessary follow-on financing to the Bridge Funding, it may
be necessary for the Company to do so in connection with, or following, the
deregistration of the Common Stock under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"). In order to accommodate the Company's preference
for a PIPE transaction, while also providing for the possibility of effecting
the follow-on financing in connection with or following deregistration of the
Common Stock under the Exchange Act if the latter transaction is either
necessary or desirable, the parties agree to the plan set forth below. The
parties further agree that the securities to be sold for the Anticipated Equity
Financing will be the same Convertible Preferred Stock, on the same terms and
conditions as set forth herein, regardless of whether the structure of the
Anticipated Equity Financing is (i) a PIPE transaction, (ii) in connection with,
or following, the deregistration of the Common Stock under the Exchange Act, or
(iii) a combination thereof.

          (a) Initial PIPE: The Company will first seek to sell at least $8
million of the Convertible Preferred Stock through a PIPE transaction. The
Company's Board of Directors is


                                       17.



requested not to change until the earlier of: (x) approval by the Company's
stockholders of the transactions contemplated by this Agreement and/or the
Related Recapitalization Documents; or (y) the expiration of the Bridge Period.
In the event such sale through a PIPE transaction is not achieved, and if it
reasonably appears that such sale can be achieved in connection with or
following the deregistration of the Company's Common Stock under the Exchange
Act, the Company will then review the Anticipated Equity Financing with a view
to proceeding with such financing in connection with or following the
deregistration of the Company's Common Stock under the Exchange Act.

          (b) Regulatory Approval and Shareholder Consent: The Company will
fully disclose, in all applicable regulatory filings and all documents relating
to shareholder notice and consent, the full Recapitalization Plan.

     3.4 Terms and Conditions: The terms and conditions of the Anticipated
Equity Financing shall be as set forth herein and in the Convertible Preferred
Stock Term Sheet, which is attached hereto as Exhibit B and incorporated herein
by reference. Such terms and conditions include, without limitation, the
following:

          (a) Securities To Be Issued: The Anticipated Equity Financing shall
consist of the issuance and sale of up to $40 million of Convertible Preferred
Stock (including any shares issuable upon conversion of Bridge Funding, but not
including any shares issuable upon exercise of warrants, options, and similar
instruments or obligations, which shares shall be issued in addition to the
issuance and sale of up to $40 million) (the "MAXIMUM ISSUANCE"), in one or more
closings over a period of 12 months commencing at the first closing of
Convertible Preferred Stock (the "EQUITY FINANCING PERIOD"), so long as the
aggregate amount issued and sold (excluding the amounts to be issued upon
exercise of warrants, options and similar instruments or obligations) does not
exceed the Maximum Issuance. The price per share for such issuance and sale
shall be the lesser of $0.10 per share (as adjusted for stock splits, stock
dividends and the like) or a 35% discount to the average closing price during
the twenty trading days prior to closing; provided, however, that in no event
shall the price per share be less than $0.04 per share (as adjusted for stock
splits, stock dividends and the like).

          (b) Preferred Warrants: The Company shall issue $8 million in warrant
coverage on the first $8 million of Convertible Preferred Stock purchased for
cash (the "PREFERRED STOCK WARRANTS"). Preferred Stock Warrants shall not be
issued upon conversion of notes, exercise of warrants, or other conversion or
exercise. The number of shares issuable upon exercise of warrants to be so
issued shall be determined on the basis of $0.10 per share (subject to
adjustment for stock splits, stock dividends and the like), and the aggregate
number of shares for which the holders of Preferred Stock Warrants shall be able
to exercise such Warrants shall therefore be 80,000,000 shares. The exercise
price of such Preferred Stock Warrants shall be the lesser of $0.10 per share
(subject to adjustment for stock splits, stock dividends and the like) and a 35%
discount to the average closing price during the twenty trading days prior to
the first closing of the sale of Convertible Preferred Stock; provided, however
that in no event will the exercise price be less than $0.04 per share (subject
to adjustment for stock splits, stock dividends and the like). The exercise
period shall commence upon issuance of the Preferred Stock Warrants, and shall
continue for a period of seven (7) years after their respective issuance dates.


                                       18.



          (c) Investor Election to Lead: Investor has elected to serve as the
lead to identify and organize Other Investors during the Bridge Period and the
Equity Financing Period, and prepare for one or more closings of the Anticipated
Equity Financing during the Equity Financing Period.

          (d) Right of First Refusal: Investor shall have a right of first
refusal to purchase up to $15 million of the Convertible Preferred Stock. This
right of first refusal shall apply at each closing during the Equity Financing
Period, until the $15 million amount is reached. Such purchases shall be
determined in addition to, and shall not be deemed to include, any purchases of
Convertible Preferred Stock by Investor (including its designees) through
conversion of Bridge Funding, or exercise of any warrants or similar
instruments. Such right of first refusal shall apply regardless of whether or
not Investor leads the financing during any part of the Equity Financing Period.

SECTION 4: GENERAL PROVISIONS

     4.1 Standstill and Exclusivity: During the Bridge Period and the Equity
Financing Period, as defined herein and in the Convertible Preferred Stock Term
Sheet, but excluding the periods from February 18, 2004 through February 29,
2004 and March 16, 2004 through the Effective Date (collectively the "STANDSTILL
PERIOD"), the parties shall have worked together, and shall continue to work
together, in good faith with best efforts to implement the terms of this
Agreement. Except as provided in the fiduciary exception set forth in Section
3.2 hereof, during the Standstill Period the Company and its officers,
directors, employees, agents, advisers, consultants, partners and collaborators
shall work only with Investor and its agents, advisers and consultants, and
shall have had, and shall continue to have, no discussions, negotiations and/or
communications of any kind with any other parties, regardless of which party
initiates or attempts to initiate any such contact or communication, in regard
to any potential equity or debt financing of the Company, and/or any joint
venture, license, co-development or other business arrangement, or merger,
consolidation, business combination or sale of all or substantially all of the
Company's assets, by or with parties other than Investor.

     4.2 Cross-Default: The Company acknowledges that the financing contemplated
by this Agreement is part of an integrated Recapitalization Plan, as set forth
in this Agreement and the Related Recapitalization Documents. The Company
further acknowledges and agrees that this Agreement is subject to all terms and
conditions set forth in the Related Recapitalization Documents, and that the
Related Recapitalization Documents are subject to all of the terms and
conditions of this Agreement. The Company agrees that any default by the Company
under any provision of this Agreement or any of the Related Recapitalization
Documents will constitute a default under each other Related Recapitalization
Document and this Agreement.

     4.3 Termination of Soma Partners: Prior to any closing hereunder, including
without limitation the closing of the Initial Bridge Funding hereunder, the
Company shall terminate all existing agreements, understandings, commitments and
obligations with Soma (other than an existing obligation of $3,000 and
obligations under the tail period following termination of the letter agreement
between the Company and Soma dated October 15, 2003). Following such
termination, the Company shall be permitted (but not required) to negotiate and
enter into a new agreement with Soma, provided that the terms and conditions of
any such agreement are in


                                       19.



accordance with prevailing market terms, and provided further that the Company
obtains the prior written approval of Investor for any such new agreement.

     4.4 Indemnification: The Company will indemnify, defend and hold Investor
and each person controlling Investor harmless, to the fullest extent allowed
under applicable law, from and against all liabilities, losses, and damages,
together with all reasonable costs and expenses related thereto (including,
without limitation, reasonable legal and accounting fees and expenses), other
than consequential losses or damages, which would not have been incurred if (a)
all of the representations and warranties of the Company herein had been true,
correct and complete as of each closing, and (b) all of the covenants and
agreements of the Company herein had been fully and timely complied with and
performed. The Company will pay as incurred to Investor and to each person
controlling Investor, all legal and other expenses reasonably incurred in
connection with investigating, defending against, and/or settling any such
liability, loss or damage.

     4.5 Injunctive Relief: The Company agrees that its breach of this Agreement
will cause irreparable harm to the Investor and that monetary damages would not
be a sufficient remedy in the event of a breach of the Agreement by the Company.
The Company agrees that Investor shall be entitled to seek and obtain injunctive
relief and/or specific performance under this Agreement in the event of any such
breach. Such remedies shall not be deemed to be exclusive remedies for a breach
of this Agreement but shall be in addition to all other remedies available to
Investor at law or in equity.

     4.6 Additional Covenants:

          (a) The Company will make, in a timely manner, all filings required by
applicable regulatory agencies (whether state or federal), exchanges, markets or
other bodies, at the Company's expense, in connection with the transactions
contemplated by this Agreement and the Related Recapitalization Documents.

          (b) As soon as practicable after the Effective Date, the Company will
use its best efforts to obtain all necessary consents and, if applicable,
shareholder votes from its shareholders to implement the transactions
contemplated by this Agreement and the Related Recapitalization Documents.

          (c) The Company shall not hire, engage, retain or agree to hire,
engage or retain any Personnel, except with Investor's express prior written
approval, on a case by case basis;

          (d) The Company shall not enter into, increase, expand, extend, renew
or reinstate any severance, retention, separation, change of control or similar
agreement with any Personnel, or agree, promise, commit or undertake to do so,
without the prior written approval of Investor;

          (e) The Company shall make no expenditures in excess of $10,000 in
aggregate other than in accordance with a budget pre-approved by Investor;


                                       20.


          (f) The Company shall report the Company's cash position and all
expenditures and commitments for expenditures to Investor on a bi-weekly basis;

          (g) The Company shall not deviate, during the period covered by such
budget, more than $10,000 in aggregate from the budget included in the Schedule
of Exceptions in connection with the Subsequent Bridge Note, nor take any action
or make any promise, undertaking or commitment that would result in the Company
incurring or accumulating payables and/or other financial obligations of any
kind, whether current or deferred, direct or indirect, for purposes other than
as set forth in budgets expressly agreed to by Investor, and/or in any amounts
in excess of the amounts set forth in such agreed budgets, which equal or exceed
$10,000 in aggregate, and which have not been approved in writing in advance by
Investor;

          (h) The Company shall not purchase, lease, hire, rent or otherwise
acquire directly or indirectly any rights in or to any asset or facility outside
of the ordinary course of business in an amount in excess of $10,000, in
aggregate, or agree, promise or commit to do so, except in accordance with the
Company's budget that has been approved by the Company's board of directors and
the Investor;

          (i) The Company shall comply in all respects with all covenants listed
in Section 10 of the Notes. The covenants listed in Section 10 of the Notes are
hereby incorporated by reference into this Section 4.6 of this Agreement;

          (j) The Company shall comply in all respects with all covenants listed
in Section 3 of the Initial Bridge Warrants. The covenants listed in Section 3
of the Initial Bridge Warrants are incorporated by reference into this Section
4.6 of this Agreement;

          (k) The Company shall use its best efforts to obtain, within 30 days
of the Effective Date, the written agreement, in a form acceptable to Investor,
of each of those stockholders of the Company listed on Schedule 4.6 hereto (the
"KEY STOCKHOLDERS") to vote in favor of the approval of this Agreement, the
Related Recapitalization Documents and all transactions contemplated hereunder
and thereunder, including, without limitation, the approval of an amendment to
the Company's Charter in order to authorize sufficient capital stock to permit
the Anticipated Equity Financing. Such written agreement of the Key Stockholders
shall, without limitation, include a provision whereby each Key Stockholder
agrees that it will not take any action in opposition to the transactions
contemplated hereby or attempt to frustrate the purposes hereof; and

          (l) The Company shall comply in all respects with all covenants listed
in Section 3 of the Subsequent Bridge Warrant. The covenants listed in Section 3
of the Subsequent Bridge Warrant are incorporated by reference into this Section
4.6 of this Agreement.

     4.7 Representations and Warranties: Except as expressly set forth (with
reference to a section in this Agreement) in the Schedule of Exceptions (as
updated as of each closing contemplated by this Agreement and the Related
Recapitalization Documents) attached hereto as Exhibit I (the "SCHEDULE OF
EXCEPTIONS"), and only to the extent such exceptions are acceptable to Investor,
in its sole discretion, as of the Effective Date, and independently as of the
date upon


                                      21.



which each Note is issued to Investor, and as of the date of each closing, if
any, of the Anticipated Equity Financing, the Company represents and warrants to
the following:

          4.7.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on its business, properties, operations,
prospects or condition (financial or otherwise).

          4.7.2 Authorization of Agreement, Etc. The execution, delivery and
performance by the Company of this Agreement, including the Related
Recapitalization Documents, has been duly authorized by all requisite corporate
action by the Company in accordance with Delaware law. This Agreement and the
Related Recapitalization Documents that are being or have been executed as of
such closing are valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application effecting enforcements of creditors' rights or general
principles of equity.

          4.7.3 No Conflicts. The execution, delivery, performance, issuance,
sale and delivery of this Agreement and the Related Recapitalization Documents,
and compliance with the provisions hereof by the Company, will not (a) to the
knowledge of the Company, violate any provision of any law, statute, rule or
regulation applicable to the Company or any ruling, writ, injunction, order,
judgment or decree of any court, arbitrator, administrative agency or other
governmental body applicable to the Company or any of its properties or assets
or (b) conflict with or result in any material breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a material default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of, any encumbrance upon any
of the material assets of the Company under, the Charter or Bylaws of the
Company (as they may be amended to date) or any agreement or instrument to which
the Company is a party. As used herein, "encumbrance" shall mean any liens,
charges, encumbrances, equities, claims, options, proxies, pledges, security
interests, licenses or other similar rights of any nature.

          4.7.4 Compliance with Other Instruments. The Company is not in
violation of any term of the Company's Charter, as amended, including any
certificate of designation filed therewith, and/or the Company's Bylaws. The
Company is not, in any material respect, in violation of any term of any
mortgage, indenture, contract, agreement, instrument, judgment, decree, order,
statute, rule or regulation to which the Company or any of such Collateral is
subject. To the best of the Company's knowledge, no event has occurred which,
with the passage of time or the giving of notice, or both, would constitute a
breach or violation, in any material respect, under any applicable judgments,
orders, writs, decrees, federal, state and/or local laws, rules or regulations
which would have a material adverse affect on the condition, financial or
otherwise, or operations of the Company (as it is currently conducted and as it
is proposed to be conducted) or on any material assets or any Intellectual
Property owned, controlled, licensed, possessed, and/or used by the Company. To
the best of its knowledge, the Company has avoided every condition, and has not
performed any act, the occurrence of which


                                      22.



would result in the Company's loss of any right granted under any license,
distribution agreement or other agreement or Intellectual Property.

          4.7.5 Approvals. The Company has obtained all necessary permits,
authorizations, waivers, consents and approvals of or by, and made all necessary
notifications of and/or filings with, all applicable persons (governmental and
private), in connection with the execution, delivery, performance, issuance,
sale and/or delivery of this Agreement and the Related Recapitalization
Documents, and consummation by the Company of the transactions contemplated
hereby and thereby, except as listed in Schedule 4.7.5.

          4.7.6 Capitalization. The authorized capital stock of the Company
consists of 125,000,000 shares of Common Stock, par value $0.001 per share and
15,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the
date hereof, 19,028,779 shares of Common Stock and no shares of preferred stock
of any kind are issued and outstanding. No other shares of any class or series
of the Company's capital stock are authorized and/or issued and outstanding. All
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and non-assessable, and have
been offered, sold and delivered by the Company in compliance with all
applicable federal and state securities laws. Except as set forth in Schedule
4.7.6, no subscription, warrant, option, convertible security, or other right
(direct or indirect, contingent or otherwise) to purchase or otherwise acquire
any equity securities of the Company is authorized or outstanding, and there is
no agreement, promise, commitment, undertaking or letter of intent of any kind
(direct or indirect, contingent or otherwise) by the Company to issue any
shares, subscriptions, warrants, options, convertible securities, or other such
rights, or to distribute to holders of any of its equity securities any evidence
of indebtedness or asset. Except as set forth in Schedule 4.7.6, the Company has
no obligation of any kind (direct or indirect, contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Schedule 4.7.6 includes a true, accurate and complete statement
describing the total number of shares of the Company outstanding as of the date
of this Agreement (on a fully diluted basis, including, without limitation, all
warrants and options outstanding (whether or not currently exercisable), all
convertible instruments of any kind (whether or not currently convertible),
shares of all classes of stock, and any agreements, promises, commitments,
undertakings or letters of intent to issue any of the foregoing.

          4.7.7 Authorization of the Shares. The Company has, or before the
first closing of the Anticipated Equity Financing hereunder will have,
authorized the issuance and sale of a sufficient number of shares of Convertible
Preferred Stock, par value $0.001 per share, and Common Stock of the Company to
fully implement the Recapitalization Plan, while maintaining such additional
authorized but unissued shares as reasonably determined by Holder to be
appropriate. Of such authorized shares, a sufficient number of shares shall be
reserved for issuance upon any exercise of the Bridge Warrants and/or Preferred
Stock Warrants. If at any time the number of authorized but unissued shares of
Convertible Preferred Stock and/or of Common Stock is not sufficient to effect
the conversion of all then outstanding convertible Notes and other instruments,
and the exercise of all then outstanding warrants, options and similar
instruments, then, in addition to such other remedies as may be available to
Investor, including, without limitation, the exercise of Investor's right of
first refusal set forth in Section 2.7(f)


                                      23.



hereof, the Company shall take such corporate action as may be necessary to
increase its authorized but unissued shares of Convertible Preferred Stock
and/or Common Stock to such number of shares as will be sufficient for such
purposes. Such corporate action shall include, without limitation, obtaining all
requisite regulatory approvals and any requisite shareholder approval of any
necessary amendment to the Company's Charter.

          4.7.8 Litigation. Except as set forth in Schedule 4.7.8 of the
Disclosure Schedule, there is no action, suit, proceeding or investigation
pending or, to the knowledge of the Company, currently threatened against the
Company, or its officers, directors, advisors, agents, properties, assets or
business, in each case relating to the Company. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

          4.7.9 No Liens. Except for liens for the benefit of Investor, created
by this Agreement and/or any of the Related Recapitalization Documents, and
except as set forth in Schedule 4.7.9 of the Disclosure Schedule, none of the
material assets of the Company, including the Collateral, are subject to any
existing lien, pledge, security interest or other encumbrance of any kind,
direct or indirect, contingent or otherwise.

          4.7.10 Full Disclosure. Notwithstanding any other provision of this
Agreement or any Related Recapitalization Document, neither this Agreement, any
of the Related Recapitalization Documents nor any exhibit hereto or thereto, nor
any written report, certificate, instrument or other information furnished to
Investor in connection with the transactions contemplated under and/or in
connection with this Agreement and the Related Recapitalization Documents
contain any material misstatement (including, without limitation, any material
omission), or is misleading in any material respect.

          4.7.11 No Other Security Interests or Other Encumbrances. Except as
set forth in Schedule 4.7.11 (and only to the amounts set forth on such
schedule), there are no existing security interests, pledges, liens or other
encumbrances of any kind, direct or indirect, contingent or otherwise (including
without limitation any licensing or partnering arrangements or agreements), in
or relating to any assets of the Company, including, without limitation, any
Intellectual Property (as defined in the Note) or other Collateral. All existing
security interests, pledges, liens or other encumbrances of any kind, other than
those set forth in Schedule 4.7.11 hereto (and only to the amounts set forth on
such schedule), are subordinate to the security interest established pursuant to
the Notes, in accordance with Section 11 thereof, all necessary consents,
subordination agreements and waivers, if any, have been obtained, and all
amended filings and/or re-filings shall be made immediately upon the Effective
Date.

          4.7.12 "Small Business".

          (a) Small Business Status. The Company together with its "affiliates"
(as that term is defined in Section 121.103 of Title 13 of Code of Federal
Regulations (the "FEDERAL REGULATIONS")) is a "small business concern" within
the meaning of the Small Business Investment Act of 1958, as amended (the "SMALL
BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder, including
Section 121.301(c) of Title 13, Code of Federal Regulations.


                                      24.



          (b) Information for SBA Reports. The Company has delivered and/or will
deliver to Investor certain information, set forth by and regarding the Company
and its affiliates in connection with this Agreement, on SBA Forms 480, 652 and
Part A and B of Form 1031. This information delivered was true, accurate,
complete and correct, and any information yet to be delivered will be true,
accurate, complete and correct, and in form and substance acceptable to
Investor.

          (c) Eligibility. The Company is eligible for financing by any SBIC
Investor pursuant to Section 107.720 of Title 13 of the Federal Regulations.

          4.7.13 Intellectual Property.

          (a) Definitions. "INTELLECTUAL PROPERTY" means all foreign and
domestic intangible property and rights, owned, licensed, sub-licensed or
otherwise obtained by the Company, including, without limitation, (i)
inventions, discoveries and ideas, whether patentable or not, and all patents,
registrations and applications therefor, including divisions, continuations,
continuations-in-part, requests for continued examination, and renewal
applications, and including renewals, extensions and reissues, including without
limitation those items referenced on Appendix 2 to Exhibit A of the Note
(collectively, "PATENTS"); (ii) confidential and proprietary information, trade
secrets and know-how, including without limitation processes, schematics,
formulae, drawings, prototypes, models, designs and customer lists
(collectively, "TRADE SECRETS"); (iii) all data, slides, observations, and
laboratory results, produced by, for or on behalf of the Company, or which the
Company has rights to obtain (collectively, "DATA"); (iv) all FDA applications,
registrations, filings and other rights (collectively, "FDA RIGHTS") and all
data and documentation supporting or relating thereto; (iv) published and
unpublished works of authorship, whether copyrightable or not (including,
without limitation, databases and other compilations of information), copyrights
therein and thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof (collectively,
"COPYRIGHTS"); (v) trademarks, service marks, brand names, certification marks,
collective marks, d/b/a's, Internet domain names, logos, symbols, data, trade
dress, assumed names, fictitious names, trade names, and other indicia of
origin, all applications and registrations for the foregoing, and all goodwill
associated therewith and symbolized thereby, including all extensions,
modifications and renewals of same, including without limitation those items
referenced on Appendix 1 to Exhibit A of the Note (collectively, "TRADEMARKS");
(vi) all other intellectual property or proprietary rights, including, without
limitation, all claims or causes of action arising out of or related to any
infringement, misappropriation or other violation of any of the foregoing,
including rights to recover for past, present and future violations thereof
(collectively, "OTHER PROPRIETARY RIGHTS").

     "INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving, relating
to or affecting the Intellectual Property, including, without limitation,
agreements granting rights to use the Licensed or Sub-Licensed Intellectual
Property, agreements granting rights to use Owned Intellectual Property,
confidentiality agreements, Trademark coexistence agreements, Trademark consent
agreements and non-assertion agreements.


                                      25.



     "LICENSED OR SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual
Property that the Company is licensed, sub-licensed or otherwise permitted by
other persons or entities to use.

     "OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by the
Company.

     "REGISTERED" means issued, registered, renewed or the subject of a pending
application.

          (b) Schedule 4.7.13 ("INTELLECTUAL PROPERTY") sets forth a true and
complete list and summary description of (A) all Registered or material Owned
Intellectual Property (each identified as a Patent, Trademark, Trade Secret,
Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or
Sub-Licensed Intellectual Property and (C) all Intellectual Property Contracts.

          (c) All Intellectual Property is valid, subsisting and enforceable. No
Owned Intellectual Property has been canceled, suspended, adjudicated invalid,
not maintained, expired or lapsed, or is subject to any outstanding order,
judgment or decree restricting its use or adversely affecting or reflecting the
Company's rights thereto. No Licensed or Sub-Licensed Intellectual Property has
been canceled, suspended, not renewed or extended, adjudicated invalid, not
maintained, expired or lapsed, or is subject to any outstanding order, judgment
or decree restricting its use or adversely affecting or reflecting the Company's
rights thereto.

          (d) The Owned Intellectual Property is owned exclusively by the
Company and has been used with all patent, trademark, copyright, confidential,
proprietary and other Intellectual Property notices and legends prescribed by
law or otherwise permitted.

          (e) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"SUIT") is pending or threatened concerning any claim or position:

               (i) that the Company, or another person or entity, has violated
any Intellectual Property rights. To the Company's best knowledge, the Company
is not violating and has not violated any intellectual property rights of any
other party.

               (ii) that the Company, or another person or entity, has breached
any Intellectual Property Contract. There exists no event, condition or
occurrence which, with the giving of notice or lapse of time, or both, would
constitute a breach or default by the Company, or a breach or default by another
person or entity, under any Intellectual Property Contract. No party to any
Intellectual Property Contract has given the Company notice of its intention to
cancel, terminate or fail to renew any Intellectual Property Contract.

               (iii) that the Intellectual Property has been violated or is
invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or
not owned exclusively by the Company. No such claim has been threatened or
asserted. To the Company's best knowledge, no valid basis for any such Suits or
claims exists.


                                      26.



          (f) To the Company's best knowledge, no other person or entity is
violating, infringing upon or claiming rights incompatible with the Company's
rights to any Intellectual Property. The Company has provided to Investor and
all Other Investors copies of all information reasonably available to it
relevant to intellectual property rights claimed by third parties and possible
infringement thereof including, without limitation, any freedom to practice or
freedom to operate opinions.

          (g) The Company owns or otherwise holds valid rights to use all
Intellectual Property used in its business.

          (h) The Company has timely made all filings and payments with the
appropriate foreign and domestic agencies and other parties required to maintain
in full force and effect all Intellectual Property. Except as set forth on
Schedule 4.7.13, no due dates for filings or payments concerning the
Intellectual Property (including, without limitation, office action responses,
affidavits of use, affidavits of continuing use, renewals, requests for
extension of time, maintenance fees, application fees and foreign convention
priority filings) fall due within ninety (90) days prior to or after the
closing, whether or not such due dates are extendable. The Company is in
compliance with all applicable rules and regulations of such agencies and other
parties with respect to the Intellectual Property. All documentation necessary
to confirm and effect the Intellectual Property, if acquired from other persons
or entities, has been recorded in the United States Patent and Trademark Office,
the United States Copyright Office and other official offices.

          (i) The Company has undertaken and consistently implemented best
efforts to protect the secrecy, confidentiality and value of all non-public
Intellectual Property used in its business (including, without limitation,
entering into appropriate confidentiality agreements with all officers,
directors, employees and other persons or entities with access to such
non-public Intellectual Property). Company management has not disclosed any such
non-public Intellectual Property to any persons or entities other than (i)
Company employees or Company contractors who had a need to know and use such
non-public Intellectual Property in the ordinary course of employment or
contract performance, or (ii) prospective customers, and in each case who
executed appropriate confidentiality agreements.

          (j) The Company has taken all reasonable measures to confirm that no
current or former Company employee is or was a party to any confidentiality
agreement or agreement not to compete that restricts or forbids, or restricted
or forbade at any time during such employee's employment by the Company, such
employee's performance of the Company's business, or any other activity that
such employee was hired to perform or otherwise performed on behalf of or in
connection with such employee's employment by the Company.

          4.7.14 SEC Filings; Financial Statements.

          (a) The Company has delivered or made available to Investor accurate
and complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since January 1, 2003, and all amendments thereto (the "COMPANY SEC
DOCUMENTS"). Except as set forth on Schedule 4.7.14, all statements, reports,
schedules, forms and other documents required to have


                                      27.



been filed by the Company with the SEC have been so filed on a timely basis. As
of the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Company SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

          (b) The financial statements (including any related notes) contained
in the Company SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments that will not, individually or in the aggregate,
be material in amount), and (iii) fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the respective
dates thereof and the consolidated results of operations and cash flows of the
Company and its consolidated subsidiaries for the periods covered thereby.

          4.7.15 Liabilities. The Company has no accrued, contingent and/or
other liabilities of any nature, either mature or immature, as of the
Restatement Date other than (i) tax liabilities to the State of Washington in
the maximum amount of $492,000, (ii) amounts payable to Cognate and (iii) future
lease payments to Benaroya Capital Co. LLC for the Company's premises lease not
yet due, in the aggregate in excess of $450,000, of which $325,000 are currently
due payables, $69,000 are the aggregate balances of capital leases payable in
monthly installments in the amounts set forth in the budget included in the
Schedule of Exceptions through the first calendar quarter of 2006, decreasing
thereafter, the last of which is fully amortized in May 2007, and $55,000 are
accrued vacation and sick pay.

          4.7.16 Compliance with All Standstill Provisions. The Company has
complied in all respects with all standstill, exclusivity and confidentiality
provisions of (a) this Agreement, the Notes and the Related Recapitalization
Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between the Company and Investor dated as of February 2, 2004 and
(c) Section 13 of that certain 10% Convertible, Secured Promissory Note by and
between the Company and Investor dated as of March 1, 2004.

     4.8 Representations and Warranties of Investor: Investor hereby represents
and warrants to the Company, as of the Effective Date and, independently as of
the date upon which each Note is issued to Investor that subject to, and based
in part on, the Company's representation and warranty in Section 4.7.10 hereof,

          (a) Investor has conducted its own due diligence review of the Company
and received copies or originals of all documents it has requested from the
Company; Notwithstanding the foregoing, this representation shall not in any way
be deemed to prohibit, limit, restrict or otherwise impact Investor's rights to
indemnification, and/or to any other rights


                                      28.



or remedies available at law or equity, from the Company and its affiliates in
the event of a breach by the Company of any representation, warranty, covenant
or other term hereof or of any Related Recapitalization Document; and

          (b) Investor is aware of the Company's financial prospects and
acknowledges that the sources of repayment of the Notes and the payment of
Investor's fees, costs and expenses pursuant to Section 4.11 are limited to
additional capital raised in bridge or other debt financing, the Anticipated
Equity Financing or other future financing transaction or foreclosure of the
Collateral.

     4.9 Conditions to Closing: Notwithstanding anything to the contrary, and,
in each case, unless expressly waived in writing in advance by Investor (any
such waiver by Investor shall be applicable only as to such closing and shall
not be deemed a waiver of such condition as to future closings, if any), and
only to the extent expressly waived, all closings contemplated under this
Agreement and the Related Recapitalization Documents shall be conditional upon
and subject to the satisfaction or waiver of each of the following conditions
precedent, with each such satisfaction or waiver to be determined by Investor in
its sole discretion (including, without limitation, the acceptability to
Investor of any exception set forth in a disclosure schedule), on or before the
applicable closing date. Investor shall make all such determinations in its sole
discretion. These conditions are in addition to the conditions set forth in
Section 2.4. The conditions precedent to each closing under this Agreement and
the Related Recapitalization Documents shall include the following, unless
waived by Investor in its sole discretion:

          (a) Performance of Obligations. The Company has in all material
respects performed all obligations and agreements and complied with all
covenants and other items contained in the Agreement and the Related
Recapitalization Documents required to be performed or fulfilled on or before
the applicable closing date.

          (b) Representations True and Complete. All of the representations and
warranties made by the Company in the Agreement and the Related Recapitalization
Documents true, correct and complete, with no material inaccuracies or
omissions, as of the applicable closing date.

          (c) No Material Adverse Change. There has been no change that has had
or could reasonably be expected to have a material adverse effect on the
business, affairs, prospects, operations, properties, assets, liabilities,
structure or condition, financial or otherwise, of the Company (as such business
is presently conducted and/or as it is proposed to be conducted) (a "MATERIAL
ADVERSE EFFECT") since December 31, 2003.

          (d) Proceedings. All corporate and other proceedings, and all
documents applicable to the transactions involved in the purchase and sale of
any securities issued or to be issued under this Agreement or the Related
Recapitalization Documents, are satisfactory in substance and form to Investor
and, if applicable Other Investors), and Investor and its counsel and Other
Investors (as applicable) and their respective counsel have received all such
counterpart originals or certified or other copies of such documents as they may
have requested including, without limitation, the following:


                                       29.



               (i) The Company's Charter (including any amendments, restatements
and certificates of designation thereto) filed with and certified by the
Delaware Secretary of State;

               (ii) A certificate, as of the most recent practicable date prior
to or on the applicable closing date, as to the corporate good standing of the
Company, issued by the Delaware Secretary of State and any other applicable
state tax department;

               (iii) The Bylaws of the Company, certified by the Secretary of
the Company as of the applicable closing date;

               (iv) The resolutions of the Board of Directors of the Company
authorizing and approving all matters in connection with this Agreement and the
Related Recapitalization Documents and the transactions contemplated hereby and
thereby, certified by the Secretary of the Company as of the applicable closing
date.

               (v) As applicable, the resolutions of the Company's stockholders
or stockholder vote, certified by the Secretary of the Company, of the
stockholders approving any matter in connection with this Agreement and/or the
Related Recapitalization Documents upon which the stockholders are required to
vote under applicable law as of any applicable closing date whereby such
stockholder approval would be necessary to issue securities due at such closing
date or otherwise effectuate such closing.

          (e) Executed Agreements. The Company will have executed, delivered and
maintained in force this Agreement and the Related Recapitalization Documents.

          (f) Due Diligence. The Company will have provided prior to the
applicable closing date all due diligence information requested by Investor or
any Other Investor, and/or necessary to enable such investor to complete a
thorough due diligence review and obtain a complete and accurate understanding
of the business, operations, prospects, assets, liabilities, structure, legal
aspects and condition, financial or otherwise, of the Company.

          (g) No Severance Agreements. The Company will not have entered into,
increased, expanded, extended, or renewed any severance, separation, retention,
change of control or similar agreement with any employee, or agreed, promised or
committed to do so, within the six month period prior to any closing hereunder,
without the prior written approval of Investor.

          (h) Termination of Soma Partners. The Company shall deliver to
Investor written evidence satisfactory to Investor that all existing agreements
with Soma have been terminated, and that the Company has notified Soma that
Investor was not introduced to the Company by Soma and that in accordance with
Section 7 of the letter agreement by and between Soma and the Company, dated as
of October 15, 2003, Soma is not entitled to any compensation (cash or
securities) from the Company by virtue of any investment by Investor in the
Company (other than an existing obligation of $3,000).

          (i) Board Certification of Shares Outstanding. The Board of Directors
of the Company shall deliver to the Investor a certified statement detailing, to
the best of the board's


                                       30.



knowledge, the total number of shares of the Company outstanding as of the date
of each closing (on a fully-diluted basis, including, without limitation, all
shares of stock of all series and classes, all options, warrants, convertible
instruments of any kind (whether or not exercised or converted as the case may
be), and any promises, commitments, agreements, undertakings or letters of
intent to issue any of the foregoing).

          (j) Bridge Funding Conditions. The Company has complied with all of
the Closing Conditions of Bridge Funding as listed in Section 2.4 hereof.

          (k) Officer's Certificate. The Chief Executive Officer of the Company,
or other officer of the Company acceptable to Investor in Investor's sole
discretion, will deliver to Investor at each closing a certificate certifying
that the conditions specified in this Section 4.9 (other than actions to be
taken by parties other than the Company or existing shareholders) have been
fulfilled. For each subsequent closing, there shall have been no material
inaccuracy or omission in any certificate delivered to Investor pursuant to this
Section 4.9(k) on the Effective Date or at any closing occurring after the
Effective Date.

          (l) The Board of Directors of the Company shall have amended the
Stockholder Rights Agreement (the "RIGHTS AGREEMENT") dated as of February 26,
2002 between the Company and Mellon Investor Services LLC, as Rights Agent such
that (i) Investor, Other Investors, and their respective affiliates shall be
excluded from the definition of the "ACQUIRING PERSON" thereunder (and any
additional, conforming changes that are deemed necessary to prevent the
transactions contemplated hereby from triggering the occurrence of a
"DISTRIBUTION DATE" thereunder) and (ii) the Rights Agreement may not be further
amended without the consent of Investor except in the event that the Company's
obligation to effect the Anticipated Equity Financing is terminated pursuant to
Section 3.2 hereof.

          (m) The Company shall have obtained the written agreement, in a form
acceptable to Investor, of each Key Stockholder (as listed in Schedule 4.6
hereto) to vote in favor of the approval of this Agreement, the Related
Recapitalization Documents and all transactions contemplated hereunder and
thereunder, including, without limitation, the approval of an amendment to the
Company's Charter in order to authorize sufficient capital stock to permit the
Anticipated Equity Financing. Such written agreement of the Key Stockholders
shall, without limitation, include a provision whereby each Key Stockholder
agrees that it will not take any action in opposition to the transactions
contemplated hereby or attempt to frustrate the purposes hereof.

     4.10 SBA Matters. The Company acknowledges that Investor has informed the
Company that it is a Federal licensee or sub-licensee under the Small Business
Investment Act ("SBIA") and a participant in the Small Business Investment
Company ("SBIC") program of the United States Small Business Administration
("SBA") and, as such, in its business and investment activities is required to
comply with the SBIA and all regulations, advice, direction and guidance
applicable to SBIC's. In addition, such laws and regulations also require
certain practices on the part of the companies in which Investor makes
investments, including but not limited to those requirements specifically
enumerated in this Agreement. So long as Investor holds any securities of the
Company:


                                      31.



          (a) The Company will not change the nature of its business activity in
a manner that would cause a violation of Sections 107.720 and/or 107.760(b) of
Title 13 of the Code of Federal Regulations (including, without limitation, by
undertaking real estate, film production or oil and gas exploration activities).
In the event that the Company changes the nature of its business activity such
that such change would render the Company ineligible for financing pursuant to
applicable SBA rules and regulations, the Company agrees to use its best efforts
to facilitate a transfer or redemption of any securities then held by Investor.

          (b) The Company will at all times comply with the non-discrimination
requirements of Parts 112, 113 and 117 of Title 13 of the Code of Federal
Regulations.

          (c) Promptly after the end of each fiscal year (but in any event prior
to February 28 of each year), and at such other times as Investor may reasonably
request, the Company will deliver to Investor a written assessment, in form and
substance satisfactory to Investor, of the economic impact of Investor's
financing hereunder, specifying the full-time equivalent jobs created or
retained in connection with such investment, and the impact of the financing on
the Company's business in terms of revenues and profits and on taxes paid by the
Company and its employees.

          (d) The Company will provide to Investor and any Other Investor that
is a participant in a SBIC (each, an "SBIC INVESTOR") all financial information
required by such SBIC Investor, on a timely basis, including without limitation,
its quarterly and annual balance sheets and income statement. Such financial
information will be certified by a member of management of the Company at least
annually. Financial information required will also include such information as
is necessary for such SBIC Investor to file Form 468 with the SBA. The Company
will also provide on a timely basis any other information reasonably requested
or required by any governmental agency asserting jurisdiction over Investor. The
Company agrees to allow SBA examiners access to the Company's books and records,
as reasonably required by such examiners, in connection with their annual audits
of Investor or for any other legitimate purposes reasonably related to the
investment of the SBA in Investor. The Company will also provide, in good faith
and in a timely manner, all other assistance and cooperation reasonably required
to enable any SBIC or SBIC Investor to make all necessary filings and comply
with all applicable SBA and SBIC-related requirements.

          (e) The proceeds from the sale of securities (including, without
limitation, the Notes, Bridge Warrants, Preferred Stock Warrants and/or shares
of Convertible Preferred Stock) to any SBIC Investor (the "PROCEEDS"), shall be
used by the Company for its growth, modernization and/or expansion and/or for
general corporate purposes as permitted by applicable SBA rules and regulations.

     4.11 Fees; Expenses The Company shall pay, reimburse or otherwise satisfy,
upon demand of Investor, all fees, costs and expenses incurred and/or
undertaken, and to be incurred and/or undertaken, by Investor relating to the
preparation for, development of and implementation of the Recapitalization Plan
set forth in this Agreement, including, without limitation, all due diligence
expenses and all expenses relating to the Bridge Funding, the Anticipated Equity
Financing and the transactions contemplated hereby and the documentation of all
of the foregoing (including, without limitation all legal fees and expenses and
costs


                                      32.



incurred and to be incurred in connection with any SBA filings), which shall be
satisfied by the Company upon Investor's demand, including but without
limitation upon each closing of the Bridge Funding or Anticipated Equity
Financing. This obligation shall apply regardless of whether or not all of the
transactions contemplated in this Agreement close. At each closing of Bridge
Funding or Anticipated Equity Financing, at Investor's sole discretion, and with
respect to any or all of such fees, costs and expenses accrued through such
closing, the Company shall (a) pay Investor in cash concurrently with such
closing (or at Investor's sole discretion, Investor may withhold such amount
from the wire of investment proceeds), (b) issue a Note in the form of Exhibit
A-5 in principal amount equal to such fees, costs and expenses (which at
Investor's option may instead be evidenced as an increase in the principal
amount of any Note issued in connection with such closing); or (c) treat such
fees, costs and expenses as an unsecured payable. At any time following such
closing, Investor may require any amounts that it elected to have the Company
treat as unsecured amounts payable to be paid in cash or satisfied by issuance
of a Note in the principal amount of some or all of such unsecured obligation.

     4.12 Confidentiality. Notwithstanding the fiduciary exception set forth in
Section 3.2 hereof, during the Standstill Period the Company and its officers,
directors, employees, agents, advisers, consultants, partners and collaborators
shall maintain confidentiality, and shall not provide copies, excerpts,
summaries or descriptions, or communicate in any way with any third parties,
either directly or indirectly, as to any aspects of the recapitalization of the
Company and/or any financing by Investor, including, without limitation, the
identity of the parties involved, any terms of this Agreement and/or the Related
Recapitalization Documents, the Convertible Preferred Stock or any other matter
relating to the recapitalization of the Company or the progress or status of any
activities or processes relating to the recapitalization of the Company;
provided, however, nothing herein shall prohibit the Company from filing this
Agreement and any Related Recapitalization Document with the Securities and
Exchange Commission (the "SEC"), if required by the regulations of the SEC
(subject to the covenant in Section 2.5(a) hereof).

     4.13 Miscellaneous:

          (a) Counterparts. This Agreement may be executed in counterparts, each
of which when so executed and delivered will constitute a complete and original
instrument but all of which together will constitute one and the same agreement,
and it will not be necessary when making proof of this Agreement or any
counterpart thereof to account for any counterpart other than the counterpart of
the party against whom enforcement is sought.

          (b) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of law. Each party to this Agreement hereby irrevocably and
unconditionally agrees that any legal action, suit or proceeding arising out of
or relating to this Agreement or any agreements or transactions contemplated
hereby will be brought in any federal or state court located in Delaware, and
hereby irrevocably and unconditionally expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and hereby
irrevocably and unconditionally waives any claim (by way of motion, as a defense
or otherwise) of improper venue, that it is not subject personally to the
jurisdiction of such court, that such courts are an inconvenient forum or that
this Agreement or the subject matter may not be enforced in or by


                                      33.



such courts. Each party hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such action, suit
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth or provided for in Section 4.13(c) of
this Agreement, such service to become effective upon delivery, in accordance
with Section 4.13(c) below. Nothing herein contained will be deemed to affect
the right of any party to serve process in any manner permitted by law or
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction to enforce judgments obtained in any action, suit or
proceeding brought pursuant to this Section.

          (c) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to be effective upon delivery when delivered (a)
personally; (b) by facsimile, provided a copy is mailed on the same day by
overnight delivery with a nationally recognized overnight delivery service; (c)
by overnight delivery with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications will be, in the case of Investor;

                                        Linda F. Powers
                                        Managing Director
                                        Toucan Capital Corp.
                                        7600 Wisconsin Ave, 7th floor
                                        Bethesda, MD 20814
                                        Tel: 240-497-4060
                                        Fax: 240-497-4065
                                        lpowers@toucancapital.com

                                        And in the case of the Company:

                                        Northwest Biotherapeutics, Inc.
                                        Attention: Alton Boynton
                                        22322 20th Avenue, SE, Suite 150
                                        Bothell, Washington 98021
                                        Fax: 425-608-3009

or at such other address and facsimile number as the receiving party will have
furnished to the sending party in writing. Each party will provide five (5)
business days' prior written notice to the other parties of any change in
address or facsimile number.

          (d) Survivability. The representations, warranties, covenants and
agreements made herein will survive any investigation made by or on behalf of
the Investor or the Company, and will survive for two years after the applicable
closing date.

          (e) Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the respective successors, assigns, heirs, executors and administrators of the
parties hereto. Notwithstanding anything to the contrary in this Agreement or
the Related Recapitalization Documents, Investor may transfer or assign all or
any portion of its rights under this Agreement and the other Related


                                      34.



Recapitalization Documents to any person or entity, or designate another party
to exercise all or any portion of Investor's rights under this Agreement and the
other Related Recapitalization Documents, so long as such transfer or assignment
is permissible under applicable federal and state securities laws. Without
limiting the generality of the foregoing, all representations, warranties,
covenants and agreements benefiting Investor will inure to the benefit of any
and all subsequent holders from time to time of the Notes, the Bridge Warrants,
Preferred Stock Warrants, the shares of Convertible Preferred Stock contemplated
by this Agreement, and any Debt Securities and/or Equity Securities issued or
issuable upon exercise or conversion of any of the foregoing.

          (f) Entire Agreement; Amendments. This Agreement (including the
Schedules and Exhibits hereto, which are an integral part of this Agreement) and
the Related Recapitalization Documents constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Except as otherwise expressly provided herein, neither this
Agreement, the Related Recapitalization Documents nor any term hereof or thereof
may be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and Investor. Notwithstanding anything to the contrary, no
provision that applies to any person or entity specifically designated by name
will be amended, waived, discharged or terminated without the express written
consent of such named person or entity. Also notwithstanding anything to the
contrary, this Agreement and/or the other Related Recapitalization Documents
will be amended as and to the extent necessary to comply with the Small Business
Investment Act and all regulations, advice, direction and guidance applicable to
SBICs.

          (g) Interpretation. All pronouns and any variations thereof will be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or persons or entity or entities may require. All
references to "$" or dollars herein will be construed to refer to United States
dollars. The titles of the Sections and subsections of this Agreement are for
convenience or reference only and are not to be considered in construing this
Agreement.

          (h) Rights, Separability. In case any provision of this Agreement or
the Related Recapitalization Documents will be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.

                            [SIGNATURE PAGE FOLLOWS]


                                      35.



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Restatement Date.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton Boynton
                                            ------------------------------------
                                        Name: Alton Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda F. Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                   EXHIBIT A-1
                                     FORM OF
     $50,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED
                      PROMISSORY NOTE DATED APRIL 26, 2004



                                   EXHIBIT A-2
                                     FORM OF
     $50,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED
                      PROMISSORY NOTE DATED APRIL 26, 2004



                                   EXHIBIT A-3
                                     FORM OF
    $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED
                      PROMISSORY NOTE DATED APRIL 26, 2004



                                   EXHIBIT A-4
                                     FORM OF
    $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED
                       PROMISSORY NOTE DATED JUNE 11, 2004


                                   EXHIBIT A-5

                                     FORM OF
       $2,000,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                   SECURED PROMISSORY NOTE DATED JULY 30, 2004



                                    EXHIBIT B
                     CONVERTIBLE PREFERRED STOCK TERM SHEET



                                    EXHIBIT C
                   INITIAL BRIDGE WARRANT DATED APRIL 26, 2004



                                   EXHIBIT C-1
                   INITIAL BRIDGE WARRANT DATED JUNE 11, 2004



                                    EXHIBIT D
                         FORM OF PREFERRED STOCK WARRANT



                                    EXHIBIT E
                             SUBORDINATION AGREEMENT



                                    EXHIBIT F
                           NOTICE, CONSENT AND WAIVER



                                    EXHIBIT G
             FIRST AMENDMENT TO CONVERTIBLE SECURED PROMISSORY NOTE



                                    EXHIBIT H
              FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES



                                    EXHIBIT I
                             SCHEDULE OF EXCEPTIONS



                                    EXHIBIT J
                            SUBSEQUENT BRIDGE WARRANT



       AMENDMENT NO. 1 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     This AMENDMENT NO. 1 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "Amendment") is made and entered into as of October 22, 2004 (the
"Amendment Date") by and between Northwest Biotherapeutics, Inc., and its
affiliates, if any (collectively, the "Company"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and Toucan
Capital Fund II, L.P., and its designees (collectively, "Investor"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     Whereas, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"Agreement");

     Whereas, the Company and Investor desire to amend the Agreement in order
for Investor to provide the Company with up to $1,000,000 of additional Bridge
Funding and to make such other changes to the Agreement as are set forth herein;
and

     Whereas, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

Amendment

     Now, Therefore, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

     1. Section 1.1 of the Agreement is hereby amended by replacing "one hundred
eighty (180)" with "two hundred twenty five (225) (or in the event the November
Bridge Funding (as defined herein) is not provided, one hundred ninety five
(195))."

     2. Section 1.2 of the Agreement is hereby amended by inserting ", including
without limitation, the Loan Agreement, Security Agreement and 10% Convertible,
Secured Promissory Note dated October 22, 2004 attached hereto as Exhibit A-6,
the October 22 Bridge Warrant (as defined herein) in the form attached hereto as
Exhibit K-1 and, if issued, the Note evidencing the November Bridge Funding (as
defined herein) in the form attached hereto as Exhibit A-7 and the November
Bridge Warrant (as defined herein) in the form attached hereto as Exhibit K-2"
immediately following the phrase "such other documents and agreements" in
subsection (g) thereof.


                                        1



     3. Section 2.1 of the Agreement is hereby amended by adding a new
subsection (k) immediately following Section 2.1(j) as follows:

[***]*

     4. Action 2.2(a) of the Agreement is hereby amended by replacing "A-5" with
"A-6 (and if issued, A-7)."

     5. Section 2.3(b) of the Agreement is hereby amended by adding the
following text immediately following the third sentence thereof:

     "On October 22, 2004 (the "Amendment Date"), Investor is providing an
     additional $500,000 of Bridge Funding (the "October 22 Bridge Funding") to
     cover general operating expenses and certain other expenses of the Company
     agreed in advance by Investor during the remaining Bridge Period following
     the period covered by the Subsequent Bridge Funding. The October 22 Bridge
     Funding shall be evidenced by a Note in the form attached hereto as Exhibit
     A-6 and shall be provided on the terms and conditions set forth herein. The
     October 22 Bridge Funding shall be used only for the purposes and in the
     amounts set forth in the budget included in the Schedule of Exceptions in
     connection with the October 22 Bridge Funding. Subject to the satisfaction,
     or waiver by Investor, of the conditions set forth in Section 2.4(t) and
     Section 2.4(u) (as well as all other closing conditions contained herein),
     on or before November 5, 2004 Investor shall provide an additional $500,000
     of Bridge Funding (the "November Bridge Funding") to cover general
     operating expenses and certain other expenses of the Company agreed in
     advance by Investor during the remaining Bridge Period following the period
     covered by the Subsequent Bridge Funding. If provided, the November Bridge
     Funding shall be evidenced by a Note in the form attached hereto as Exhibit
     A-7 and shall be provided on the terms and conditions set forth herein. If
     provided, the November Bridge Funding shall be used only for the purposes
     and in the amounts set forth in the budget included in the Schedule of
     Exceptions in connection with the November Bridge Funding."

     6. Section 2.3(b) of the Agreement is hereby further amended by replacing
the phrase "Subsequent Bridge Note funds" with "Subsequent Bridge Funding,
October 22 Bridge Funding or, if provided, November Bridge Funding" in the
fourth sentence thereof (i.e., the tenth sentence thereof after giving effect to
the inclusion of the six new sentences therein per Section 5 of this Amendment).

     7. Section 2.5(i) of the Agreement is hereby amended and restated in its
entirety as follows:

- ----------
*    Confidential Treatment Requested


                                        2



          "(i) not deviate, during the period covered by such budgets, more than
          $10,000 in aggregate from the budget included in the Schedule of
          Exceptions in connection with the Subsequent Bridge Funding or the
          budget included in the Schedule of Exceptions in connection with the
          October 22 Bridge Funding or the November Bridge Funding, nor take any
          action or make any promise, undertaking or commitment that would
          result in the Company incurring or accumulating payables and/or other
          financial obligations of any kind, whether current or deferred, direct
          or indirect, for purposes other than as set forth in budgets expressly
          agreed to by Investor, and/or in any amounts in excess of the amounts
          set forth in such agreed budgets, which equal or exceed $10,000 in
          aggregate, and which have not been approved in writing in advance by
          Investor."

     8. Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each
amended by replacing "one hundred eighty (180)" with "two hundred twenty five
(225)."

     9. Section 2.4 of the Agreement is hereby amended by adding new subsections
2.4(t) and 2.4(u) immediately following Section 2.4(s) thereof, as follows:

          "(t) with respect to the October 22 Bridge Funding and the November
          Bridge Funding only, the Company and Investor shall have agreed to a
          mutually acceptable budget for the period from the Amendment Date
          through December 7, 2004.

          (u) with respect to the October 22 Bridge Funding and the November
          Bridge Funding only, the Company to have reported to Investor the
          Company's cash position and all expenditures and agreements
          commitments or undertakings for expenditures as of the Amendment Date
          and as of the date of such closing."

     10. The Agreement is hereby amended by adding new Sections 2.11 and 2.12,
immediately following Section 2.10 thereof, as follows:

          "2.11 October 22 Bridge Warrant:

               (a) Issuance of October 22 Bridge Warrant. On the Amendment Date,
          Investor shall receive a warrant with coverage equal to one hundred
          percent (100%) of the principal amount due under the Note evidencing
          the October 22 Bridge Funding (the "October 22 Bridge Warrant"). The
          Company shall, therefore, issue $500,000 in warrant coverage on the
          $500,000 of October 22 Bridge Funding provided on the Amendment Date.
          The number of shares subject to the October 22 Bridge Warrant to be so
          issued shall be determined on the basis of $0.10 per share (subject to
          adjustment for stock splits, stock dividends and the like). The total
          number of shares for which Investor shall initially be able to
          exercise the October 22 Bridge Warrant shall therefore be 5,000,000
          shares as of the Amendment Date.


                                        3



               (b) Exercise of October 22 Bridge Warrant. The October 22 Bridge
          Warrant shall be immediately exercisable upon issuance and continue to
          be exercisable for a period of seven (7) years after its issuance
          date. The exercise price of the October 22 Bridge Warrant shall be the
          lesser of $0.10 per share (subject to adjustment for stock splits,
          stock dividends and the like, as provided more fully in the October 22
          Bridge Warrant) and a 35% discount to the average closing price during
          the twenty trading days prior to the first closing of the sale of
          Convertible Preferred Stock; provided, however that in no event will
          the exercise price be less than $0.04 per share (subject to adjustment
          for stock splits, stock dividends and the like, as provided more fully
          in the October 22 Bridge Warrant). In the event the Convertible
          Preferred Stock is approved and authorized, and the terms and
          conditions are the same as set forth herein and in the Convertible
          Preferred Stock Term Sheet, and Other Investors have purchased in cash
          (and not by conversion of debt, exercise of warrants or options, or
          conversion or exercise of other securities or instruments) a minimum
          of $15 million of such Convertible Preferred Stock, on the terms and
          conditions set forth herein and in the Convertible Preferred Stock
          Term Sheet, then the October 22 Bridge Warrant shall be exercisable
          solely for such Convertible Preferred Stock (subject to Section 5
          thereof). However, if, for any reason, such Convertible Preferred
          Stock is not approved or authorized, and/or is approved or authorized
          on any terms different than any terms set forth herein and in the
          Convertible Preferred Stock Term Sheet, and/or if Other Investors have
          not purchased in cash (and not by conversion of debt, exercise of
          warrants or options, or conversion or exercise of other securities or
          instruments) a minimum of $15 million of such Convertible Preferred
          Stock, on the terms and conditions set forth herein and in the
          Convertible Preferred Stock Term Sheet, the October 22 Bridge Warrant
          shall be exercisable for any Equity Security and/or Debt Security
          (each as defined in Section 2.7 hereof) and/or any combination
          thereof, in each case that Investor shall designate in Investor's sole
          discretion (the securities so elected being the "Investor Designated
          Securities").

               (c) No Impairment. The Company shall not, by amendment of its
          Charter or through a reorganization, transfer of assets,
          consolidation, merger, dissolution, issue or sale of securities, or
          any other voluntary action, omission, or agreement, avoid or seek to
          avoid the observance or performance of any of the terms to be observed
          or performed by the Company under and/or in connection with the
          October 22 Bridge Warrant, but shall at all times in good faith use
          best efforts to assist in carrying out of all the provisions of and/or
          relating to such October 22 Bridge Warrant and in taking all such
          action as may be necessary or appropriate to protect Investor's
          rights, preferences and privileges under and/or in connection with the
          October 22 Bridge Warrant against impairment. Investor's rights,
          preferences and privileges granted under and/or in connection with the
          October 22 Bridge Warrant may not be amended, modified or waived
          without Investor's prior written consent, and the documentation
          providing for such rights, preferences and privileges will
          specifically provide as such.


                                        4



               (d) Tax Treatment of October 22 Bridge Warrant and Note. The
          Company and Investor, as a result of arm's length bargaining, agree
          that the fair market value of the Note to be issued in connection with
          the October 22 Bridge Funding, if issued apart from the October 22
          Bridge Warrant, is $495,000, and the fair market value of the October
          22 Bridge Warrant, if issued apart from such Note, is $5,000. The
          Company and Investor further agree that all tax filings and records
          relating to or including this Agreement, the Note to be issued in
          connection with the October 22 Bridge Funding and/or the October 22
          Bridge Warrant shall be prepared on the basis of, and consistently
          reflect, the agreed fair market values set forth in this Section
          2.11(d), and the Company shall instruct its accountants and other
          tax-preparation professionals to prepare all tax filings and returns
          on the basis of the foregoing.

          2.12 November Bridge Warrant:

               (a) Issuance of November Bridge Warrant. Within fourteen (14)
          calendar days of the Amendment Date, Investor shall receive a warrant
          with coverage equal to one hundred percent (100%) of the principal
          amount due under the Note evidencing the November Bridge Funding (the
          "November Bridge Warrant"). Therefore, if the November Bridge Funding
          is provided, the Company shall issue $500,000 in warrant coverage on
          the $500,000 of November Bridge Funding provided. The number of shares
          subject to the November Bridge Warrant to be so issued shall be
          determined on the basis of $0.10 per share (subject to adjustment for
          stock splits, stock dividends and the like). The total number of
          shares for which Investor shall initially be able to exercise the
          November Bridge Warrant, if issued, shall therefore be 5,000,000
          shares as of issuance.

               (b) Exercise of November Bridge Warrant. The November Bridge
          Warrant, if issued, shall be immediately exercisable upon issuance and
          continue to be exercisable for a period of seven (7) years after its
          issuance date. The exercise price of the November Bridge Warrant, if
          issued, shall be the lesser of $0.10 per share (subject to adjustment
          for stock splits, stock dividends and the like, as provided more fully
          in the November Bridge Warrant) and a 35% discount to the average
          closing price during the twenty trading days prior to the first
          closing of the sale of Convertible Preferred Stock; provided, however
          that in no event will the exercise price be less than $0.04 per share
          (subject to adjustment for stock splits, stock dividends and the like,
          as provided more fully in the November Bridge Warrant). In the event
          the Convertible Preferred Stock is approved and authorized, and the
          terms and conditions are the same as set forth herein and in the
          Convertible Preferred Stock Term Sheet, and Other Investors have
          purchased in cash (and not by conversion of debt, exercise of warrants
          or options, or conversion or exercise of other securities or
          instruments) a minimum of $15 million of such Convertible Preferred
          Stock, on the terms and conditions set forth herein and in the
          Convertible Preferred Stock Term Sheet, then the November Bridge
          Warrant, if issued, shall be exercisable solely for such Convertible
          Preferred Stock (subject to Section 5 thereof). However, if, for any
          reason, such Convertible Preferred Stock is not approved or
          authorized, and/or is approved or authorized on any terms different
          than any terms set forth herein and in the Convertible Preferred Stock
          Term Sheet, and/or if Other Investors have not purchased in cash (and
          not by conversion of debt, exercise of warrants or options, or
          conversion or exercise of other securities or instruments) a minimum
          of $15 million of such Convertible Preferred Stock, on the terms and
          conditions set forth herein and in the Convertible Preferred Stock
          Term Sheet, the November Bridge Warrant, if issued, shall be
          exercisable for any Equity Security and/or Debt Security (each as
          defined in Section 2.7 hereof) and/or any combination thereof, in each
          case that Investor shall designate in Investor's sole discretion (the
          securities so elected being the "Investor Designated Securities").


                                        5




               (c) No Impairment. The Company shall not, by amendment of its
          Charter or through a reorganization, transfer of assets,
          consolidation, merger, dissolution, issue or sale of securities, or
          any other voluntary action, omission, or agreement, avoid or seek to
          avoid the observance or performance of any of the terms to be observed
          or performed by the Company under and/or in connection with the
          November Bridge Warrant, if issued, but shall at all times in good
          faith use best efforts to assist in carrying out of all the provisions
          of and/or relating to such November Bridge Warrant, if issued, and in
          taking all such action as may be necessary or appropriate to protect
          Investor's rights, preferences and privileges under and/or in
          connection with the November Bridge Warrant, if issued, against
          impairment. Investor's rights, preferences and privileges granted
          under and/or in connection with the November Bridge Warrant, if
          issued, may not be amended, modified or waived without Investor's
          prior written consent, and the documentation providing for such
          rights, preferences and privileges will specifically provide as such.

               (d) Tax Treatment of November Bridge Warrant and Note. The
          Company and Investor, as a result of arm's length bargaining, agree
          that, if the November Bridge Funding is provided, the fair market
          value of the Note to be issued in connection with the November Bridge
          Funding, if issued apart from the November Bridge Warrant, is
          $495,000, and the fair market value of the October 22 Bridge Warrant,
          if issued apart from such Note, is $5,000. The Company and Investor
          further agree that, if the November Bridge Funding is provided, all
          tax filings and records relating to or including this Agreement, the
          Note to be issued in connection with the November Bridge Funding
          and/or the November Bridge Warrant shall be prepared on the basis of,
          and consistently reflect, the agreed fair market values set forth in
          this Section 2.12(d), and the Company shall instruct its accountants
          and other tax-preparation professionals to prepare all tax filings and
          returns on the basis of the foregoing."


                                        6



     11. Section 3.4(b) of the Agreement is hereby amended by:

          a. replacing "$8 million" with "$7 million (or, in the event that the
November Bridge Funding is not provided, $7,500,000)" in the first sentence
thereof; and

          b. replacing "80,000,000" with "70,000,000 (or, in the event that the
November Bridge Funding is not provided, 75,000,000)" in the third sentence
thereof.

     12. Section 4.6(g) of the Agreement is hereby amended and restated in its
entirety as follows:

          "(g) The Company shall not deviate, during the period covered by such
          budgets, more than $10,000 in aggregate from the budget included in
          the Schedule of Exceptions in connection with the Subsequent Bridge
          Funding, the budget included in the Schedule of Exceptions in
          connection with the October 22 Bridge Funding, or the Schedule of
          Exceptions in connection with the November Bridge Funding, if issued,
          nor take any action or make any promise, undertaking or commitment
          that would result in the Company incurring or accumulating payables
          and/or other financial obligations of any kind, whether current or
          deferred, direct or indirect, for purposes other than as set forth in
          budgets expressly agreed to by Investor, and/or in any amounts in
          excess of the amounts set forth in such agreed budgets, which equal or
          exceed $10,000 in aggregate, and which have not been approved in
          writing in advance by Investor;"

     13. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. Other than (i) tax liabilities to the State of
     Washington in the maximum amount of $492,000, (ii) amounts payable to
     Cognate Therapeutics and (iii) future lease payments to Benaroya Capital
     Co. LLC for the Company's premises lease not yet due, the Company's
     aggregate accrued, contingent and/or other liabilities of any nature,
     either mature or immature, as of the Amendment Date, do not exceed
     $400,000, of which (X) $276,000 are currently due payables (including
     $204,966 for attorney and auditor fees), (Y) $65,000 are the aggregate
     balances of capital leases payable in monthly installments in the amounts
     set forth in the budget included in the Schedule of Exceptions through the
     first calendar quarter of 2006, decreasing thereafter, the last of which is
     fully amortized in May 2007, and (Z) $59,000 are accrued vacation and sick
     pay."


                                        7



     14. The Agreement is hereby amended by adding new Exhibits A-6 and A-7,
immediately following Exhibit A-5 thereto, in the forms attached as Exhibits A-6
and A-7 hereto.

     15. The Agreement is hereby amended by adding new Exhibits K-1 and K-2,
immediately following Exhibit J thereto, in the forms attached as Exhibits K-1
and K-2 hereto.

     16. The October 22 Bridge Warrant in the form attached hereto as Exhibit
K-1 (and, if issued, the November Bridge Warrant attached hereto as Exhibit K-2)
shall be deemed to be a "Bridge Warrant" and a "Warrant" for all purposes under
the Agreement and any Related Recapitalization Document. The Note evidencing the
October 22 Bridge Funding in the form attached hereto as Exhibit A-6 issued on
the Amendment Date (and, if issued, the Note evidencing the November Bridge
Funding in the form attached hereto as Exhibit A-7) shall be deemed to be a
"Note" for all purposes under the Agreement and any Related Recapitalization
Document. Each of the October 22 Bridge Warrant and the Note evidencing the
October 22 Bridge Funding (and, if issued, the November Bridge Warrant and the
Note evidencing the November Bridge Funding) shall be deemed to be "Related
Recapitalization Documents" for all purposes under the Agreement and all other
Related Recapitalization Documents.

     17. The Agreement is hereby amended by replacing Exhibit B thereto (the
"Convertible Preferred Stock Term Sheet") with the Amended and Restated
Convertible Preferred Stock Term Sheet in the form attached hereto as Exhibit B,
which shall be deemed the "Convertible Preferred Stock Term Sheet" for all
purposes under this Agreement and all other Related Recapitalization Documents.

     18. Except as amended and/or restated hereby, all other terms and
conditions of the Agreement shall be unaffected hereby and remain in full force
and effect.

     19. This Amendment (including the Exhibits hereto, which are an integral
part of the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

     20. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

     21. This Amendment may be executed in one or more counterparts, each of
which will be deemed an original but all of which together shall constitute one
and the same agreement.

     22. This Amendment shall take effect immediately upon execution by the
Company and Investor.


                                        8



                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        9


     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 1
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the AMENDMENT DATE
above written.

                                        Northwest Biotherapeutics, Inc.


                                        By: /s/ Alton Boynton
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        Toucan Capital Fund II, LP


                                        By: /s/ Linda Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director


                                       10



                                   EXHIBIT A-6

Form of $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Note Dated October 22, 2004


                                       11



                                   EXHIBIT A-7

Form of $500,000 Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Note to Evidence November Bridge Funding (If Provided)

                                    EXHIBIT B

                     AMENDED AND RESTATED BINDING TERM SHEET
                           CONVERTIBLE PREFERRED STOCK
                         Northwest Biotherapeutics, Inc.
                                October 22, 2004



                                   EXHIBIT K-1

                        FORM OF OCTOBER 22 BRIDGE WARRANT



                                   EXHIBIT K-2

                         FORM OF NOVEMBER BRIDGE WARRANT



       AMENDMENT NO. 2 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of November 10, 2004 by and
between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any
(collectively, the "COMPANY"), a Delaware corporation with offices at 22322 20th
Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN CAPITAL FUND II, L.P.,
and its designees (collectively, "INVESTOR"), a Delaware limited partnership
with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814. All capitalized terms
used herein but not otherwise defined shall have the meaning given such terms in
the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1.   Section 1.1 of the Agreement is hereby amended by replacing "two hundred
     twenty five (225)" with "two hundred thirty-five (235)" and by replacing
     "one hundred ninety five (195)" with "two hundred (200)."

2.   Section 2.3(b) of the Agreement is hereby amended by replacing "November 5,
     2004" with "November 12, 2004."

3.   Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each amended
     by replacing "two hundred twenty five (225)" with "two hundred thirty-five
     (235) (or in the event the November Bridge Funding is not provided, two
     hundred (200))."

4.   Section 2.12(a) of the Agreement is hereby amended by replacing "Within
     fourteen (14) calendar days of the Amendment Date" with "If Investor
     provides the November Bridge Funding."


                                        1



5.   Section 2.12(d) of the Agreement is hereby amended by replacing "October 22
     Bridge Warrant" with "November Bridge Warrant."

6.   Except as amended and/or restated hereby, all other terms and conditions of
     the Agreement shall be unaffected hereby and remain in full force and
     effect.

7.   This Amendment (including the Exhibits hereto, which are an integral part
     of the Amendment), together with the Agreement, as amended (including the
     Schedules and Exhibits thereto, which are an integral part of the
     Agreement) and the Related Recapitalization Documents, constitute the
     entire agreement among the parties hereto and thereto with regard to the
     subjects hereof and thereof and supersede all prior agreements and
     understandings relating to the subject matter hereof and thereof.

8.   This Amendment shall be governed by and construed under the laws of the
     State of Delaware, without regard to its conflicts of law provisions.

9.   This Amendment may be executed in one or more counterparts, each of which
     will be deemed an original but all of which together shall constitute one
     and the same agreement.

10.  This Amendment shall take effect immediately upon execution by the Company
     and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        2



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 2
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the date above written.


                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton Boynton
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director


                                        3



       AMENDMENT NO. 3 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of December 27, 2004 (the "THIRD
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.1 of the Agreement is hereby amended by replacing "two hundred
thirty-five (235) (or in the event the November Bridge Funding (as defined
herein) is not provided, two hundred (200))" with "two hundred fifty seven
(257)."

2. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
December 27, 2004 attached hereto as Exhibit A-8, and the December 27 Bridge
Warrant (as defined herein) in the form attached hereto as Exhibit K-3"
immediately following the phrase "in the form attached hereto as Exhibit K-2" in
subsection (g) thereof.


                                        1



3. Section 2.1(k) of the Agreement is hereby deleted from the Agreement in its
entirety and shall no longer be a covenant to which the Company is subject.

4. Section 2.2(a) of the Agreement is hereby amended by replacing "A-6 (and if
issued, A-7)" with "A-8."

5. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the ninth sentence thereof:

     "On December 27, 2004 (the "THIRD AMENDMENT DATE"), Investor is providing
     an additional $250,000 of Bridge Funding (the "DECEMBER 27 BRIDGE FUNDING")
     to cover general operating expenses and certain other expenses of the
     Company agreed in advance by Investor during the remaining Bridge Period
     following the period covered by the November Bridge Funding. The December
     27 Bridge Funding shall be evidenced by a Note in the form attached hereto
     as Exhibit A-8 and shall be provided on the terms and conditions set forth
     herein. The December 27 Bridge Funding shall be used only for the purposes
     and in the amounts agreed to in writing by Investor and the Company."

6. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "or if provided, November Bridge Funding" with "November Bridge Funding
or December 27 Bridge Funding" in the tenth sentence thereof (i.e., the
thirteenth sentence thereof after giving effect to the inclusion of the three
new sentences therein per Section 4 of this Amendment).

7. Section 2.6(a) and Section 2.6(b) of the Agreement are hereby each amended by
replacing "two hundred thirty-five (235) (or in the event the November Bridge
Funding (as defined herein) is not provided, two hundred (200))" with "two
hundred fifty-seven (257)."

8. The Agreement is hereby amended by adding a new Section 2.13, immediately
following Section 2.12 thereof, as follows:

     "2.13 December 27 Bridge Warrant:

          (a) Issuance of December 27 Bridge Warrant. On the Third Amendment
     Date, Investor shall receive a warrant with coverage equal to one hundred
     percent (100%) of the principal amount due under the Note evidencing the
     December 27 Bridge Funding (the "DECEMBER 27 BRIDGE WARRANT"). The Company
     shall, therefore, issue $250,000 in warrant coverage on the $250,000 of
     December 27 Bridge Funding provided on the Third Amendment Date. The number
     of shares subject to the December 27 Bridge Warrant to be so issued shall
     be determined on the basis of $0.10 per share (subject to adjustment for
     stock splits, stock dividends and the like). The total number of shares for
     which Investor shall initially be able to exercise the December 27 Bridge
     Warrant shall therefore be 2,500,000 shares as of the Third Amendment Date.

          (b) Exercise of December 27 Bridge Warrant. The December 27 Bridge
     Warrant shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the


                                        2



     December 27 Bridge Warrant shall be the lesser of $0.10 per share (subject
     to adjustment for stock splits, stock dividends and the like, as provided
     more fully in the December 27 Bridge Warrant) and a 35% discount to the
     average closing price during the twenty trading days prior to the first
     closing of the sale of Convertible Preferred Stock; provided, however that
     in no event will the exercise price be less than $0.04 per share (subject
     to adjustment for stock splits, stock dividends and the like, as provided
     more fully in the December 27 Bridge Warrant). In the event the Convertible
     Preferred Stock is approved and authorized, and the terms and conditions
     are the same as set forth herein and in the Convertible Preferred Stock
     Term Sheet, and Other Investors have purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms and conditions set forth
     herein and in the Convertible Preferred Stock Term Sheet, then the December
     27 Bridge Warrant shall be exercisable solely for such Convertible
     Preferred Stock (subject to Section 5 thereof). However, if, for any
     reason, such Convertible Preferred Stock is not approved or authorized,
     and/or is approved or authorized on any terms different than any terms set
     forth herein and in the Convertible Preferred Stock Term Sheet, and/or if
     Other Investors have not purchased in cash (and not by conversion of debt,
     exercise of warrants or options, or conversion or exercise of other
     securities or instruments) a minimum of $15 million of such Convertible
     Preferred Stock, on the terms and conditions set forth herein and in the
     Convertible Preferred Stock Term Sheet, the December 27 Bridge Warrant
     shall be exercisable for any Equity Security and/or Debt Security (each as
     defined in Section 2.7 hereof) and/or any combination thereof, in each case
     that Investor shall designate in Investor's sole discretion (the securities
     so elected being the "INVESTOR DESIGNATED SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the December 27 Bridge Warrant, but shall
     at all times in good faith use best efforts to assist in carrying out of
     all the provisions of and/or relating to such December 27 Bridge Warrant
     and in taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the December 27 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the
     December 27 Bridge Warrant may not be amended, modified or waived without
     Investor's prior written consent, and the documentation providing for such
     rights, preferences and privileges will specifically provide as such.

          (d) Tax Treatment of December 27 Bridge Warrant and Note. The Company
     and Investor, as a result of arm's length bargaining, agree that the fair
     market value of the Note to be issued in connection with the December 27
     Bridge Funding, if issued apart from the December 27 Bridge Warrant, is
     $247,500, and the fair market value of the December 27 Bridge Warrant, if
     issued apart from such Note, is $2,500. The Company and Investor further
     agree that all tax filings and records relating to or including this
     Agreement, the Note to be issued in connection with the December 27


                                        3



     Bridge Funding and/or the December 27 Bridge Warrant shall be prepared on
     the basis of, and consistently reflect, the agreed fair market values set
     forth in this Section 2.13(d), and the Company shall instruct its
     accountants and other tax-preparation professionals to prepare all tax
     filings and returns on the basis of the foregoing."

9. Section 3.4(b) of the Agreement is hereby amended by:

     (a) replacing "$7 million (or, in the event that the November Bridge
Funding is not provided, $7,500,000)" with "$6.75 million" in the first sentence
thereof; and

     (b) replacing " "70,000,000 (or, in the event that the November Bridge
Funding is not provided, 75,000,000)" with "67,500,000" in the third sentence
thereof.

10. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $486,000, (ii) amounts payable to Cognate Therapeutics and (iii)
     future sublease payments to MediQuest Corporation for the Company's
     premises sublease not yet due, and a contingent lease liability to Benaroya
     Capital Co. LLC for premises currently occupied by MediQuest Corporation
     should Mediquest Corporation default on its lease with Benaroya Capital Co.
     LLC and which is not yet due, (iv) the Company's aggregate accrued,
     contingent and/or other liabilities of any nature, either mature or
     immature, as of the Third Amendment Date, do not exceed $427,690 (excluding
     amounts payable to Cognate), of which (x) $307,690 are currently due
     payables (including $283,747 for attorney and auditor fees), (y) $56,000
     are the aggregate balances of capital leases payable in monthly
     installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $64,000 are accrued vacation and sick pay."

11. The Agreement is hereby amended by adding new Exhibit A-8, immediately
following Exhibit A-7 thereto, in the form attached as Exhibit A-8 hereto.

12. The Agreement is hereby amended by adding new Exhibit K-3, immediately
following Exhibit K-2 thereto, in the form attached as Exhibit K-3 hereto.

13. The December 27 Bridge Warrant in the form attached hereto as Exhibit K-3
shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under
the Agreement and any Related Recapitalization Document. The Note evidencing the
December 27 Bridge Funding in the form attached hereto as Exhibit A-8 issued on
the Third Amendment Date shall be deemed to be a "NOTE" for all purposes under
the Agreement and any Related Recapitalization Document. Each of the December 27
Bridge Warrant and the Note evidencing the December 27 Bridge Funding shall be
deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the
Agreement and all other Related Recapitalization Documents.


                                        4



14. Exhibit B to the Agreement is hereby amended by Exhibit B-1 hereto (the
"AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET").
Exhibit B, as so amended by the Amendment to the Amended and Restated
Convertible Preferred Stock Term Sheet, shall be deemed to constitute the
"CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under this Agreement
and all other Related Recapitalization Documents.

15. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

16. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

17. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

18. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

19. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        5



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 3
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Third Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton Boynton
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                   EXHIBIT A-8

    FORM OF $250,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                 SECURED PROMISSORY NOTE DATED DECEMBER 27, 2004



                                   EXHIBIT B-1

      FORM OF AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK
                                   TERM SHEET



                                   EXHIBIT K-3

                       FORM OF DECEMBER 27 BRIDGE WARRANT



       AMENDMENT NO. 4 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of January 26, 2005 (the "FOURTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 2.2(a) of the Agreement is hereby amended by adding the phrase " and,
to the extent that Investor determines in its sole discretion to do so, during
the Equity Financing Period" immediately following "Bridge Period" in the first
sentence thereof.

2. Section 2.3 (c) of the Agreement is hereby amended by adding the phrase
"(including any Bridge Funding provided by Investor during the Equity Financing
Period)" immediately following "Subsequent Bridge Funding, if any" in the first
sentence thereof.


                                        1



3. Section 3.3 of the Agreement is hereby amended by adding a new subsection
3.3(c) immediately following Section 3.3(b) thereof, as follows:

     "(c) Board of Directors Composition: On the Fourth Amendment Date, the
     authorized number of directors shall be one (1). The authorized number of
     directors may not be increased or decreased without the consent of the
     holders of a majority of the shares of Convertible Preferred Stock. The
     holders of a majority of the shares of Convertible Preferred Stock, acting
     in their sole discretion, may require the Company to increase the total
     number of authorized directors at any time following the Fourth Amendment
     Date, up to a maximum of seven (7) directors. Subject to the limitation in
     the following sentence, any newly created directorships shall be designated
     by the holders of a majority of the shares of Convertible Preferred Stock,
     acting in their sole discretion, to be filled by either: (i) an outside
     director with significant industry experience, who is reasonably acceptable
     to the holders of a majority of the Convertible Preferred Stock, to be
     elected by the holders of the Company's Common Stock (which may, subject to
     applicable law, the Charter or the Bylaws, be filled initially by vote of
     the remaining director(s)) (a "COMMON DIRECTORSHIP"); or (ii) a director to
     be designated by the holders of a majority of the Convertible Preferred
     Stock (a "PREFERRED DIRECTORSHIP"). Notwithstanding the foregoing, no more
     than four (4) directorships shall be designated as Preferred Directorships,
     no more than two (2) directorships shall be designated as Common
     Directorships, and one (1) director shall be the chief executive officer of
     the Company."

4. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $486,000, (ii) amounts payable to Cognate Therapeutics and (iii)
     future sublease payments to MediQuest Corporation for the Company's
     premises sublease not yet due, and a contingent lease liability to Benaroya
     Capital Co. LLC for premises currently occupied by MediQuest Corporation
     should Mediquest Corporation default on its lease with Benaroya Capital Co.
     LLC and which is not yet due, (iv) the Company's aggregate accrued,
     contingent and/or other liabilities of any nature, either mature or
     immature, as of the Fourth Amendment Date, do not exceed $370,378
     (excluding amounts payable to Cognate), of which (x) $243,778 are currently
     due payables (including $209,023 for attorney and auditor fees), (y)
     $52,000 are the aggregate balances of capital leases payable in monthly
     installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $67,000 are accrued vacation and sick pay."

5. Exhibit B to the Agreement, as amended on December 27, 2004, is hereby
further amended by Exhibit B-2 hereto (the "SECOND AMENDMENT TO THE AMENDED AND
RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended,
shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for
all purposes under the Agreement and all other Related Recapitalization
Documents.


                                        2



6. Exhibit D to the Agreement is hereby amended and restated by Exhibit D
hereto. Exhibit D, as so amended and restated, shall be deemed to constitute the
"PREFERRED STOCK WARRANT" for all purposes under the Agreement and all other
Related Recapitalization Documents.

7. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

8. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

9. This Amendment shall be governed by and construed under the laws of the State
of Delaware, without regard to its conflicts of law provisions.

10. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

11. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        3


     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 4
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Fourth Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton Boynton
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                   EXHIBIT B-2

     FORM OF SECOND AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



                                    EXHIBIT D

                         FORM OF PREFERRED STOCK WARRANT



       AMENDMENT NO. 5 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of April 12, 2005 (the "FIFTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
April 12, 2005 attached hereto as Exhibit A-9, and the April 12 Bridge Warrant
(as defined herein) in the form attached hereto as Exhibit K-4" immediately
following the phrase "in the form attached hereto as Exhibit K-3" in subsection
(g) thereof.


                                        1



2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-8" with
"A-9."

3. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the twelfth sentence thereof:

     "On April 12, 2005 (the "FIFTH AMENDMENT DATE"), Investor is providing an
     additional $450,000 of Bridge Funding (the "APRIL 12 BRIDGE FUNDING") to
     cover general operating expenses and certain other expenses of the Company
     agreed in advance by Investor during the period from March 25, 2005 through
     April 30, 2005. The April 12 Bridge Funding shall be evidenced by a Note in
     the form attached hereto as Exhibit A-9 and shall be provided on the terms
     and conditions set forth herein. The April 12 Bridge Funding shall be used
     only for the purposes and in the amounts agreed to in writing by Investor
     and the Company."

4. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "or December 27 Bridge Funding" with "December 27 Bridge Funding or April
12 Bridge Funding" in the thirteenth sentence thereof (i.e., the sixteenth
sentence thereof after giving effect to the inclusion of the three new sentences
therein per Section 3 of this Amendment).

5. The Agreement is hereby amended by adding a new Section 2.14, immediately
following Section 2.13 thereof, as follows:

     "2.14 April 12 Bridge Warrant:

          (a) Issuance of April 12 Bridge Warrant. On the Fifth Amendment Date,
     Investor shall receive a warrant with coverage equal to one hundred percent
     (100%) of the principal amount due under the Note evidencing the April 12
     Bridge Funding (the "APRIL 12 BRIDGE WARRANT"). The Company shall,
     therefore, issue $450,000 in warrant coverage on the $450,000 of April 12
     Bridge Funding provided on the Fifth Amendment Date. The number of shares
     subject to the April 12 Bridge Warrant to be so issued shall be determined
     on the basis of $0.10 per share (subject to adjustment for stock splits,
     stock dividends and the like). The total number of shares for which
     Investor shall initially be able to exercise the April 12 Bridge Warrant
     shall therefore be 4,500,000 shares as of the Fifth Amendment Date.

          (b) Exercise of April 12 Bridge Warrant. The April 12 Bridge Warrant
     shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the April 12 Bridge Warrant shall be $0.04 (subject to
     adjustment for stock splits, stock dividends and the like, as provided more
     fully in the April 12 Bridge Warrant). In the event the Convertible
     Preferred Stock is approved and authorized, and the terms and conditions
     are the same as set forth herein and in the Convertible Preferred Stock
     Term Sheet, and Other Investors have purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms and conditions set forth
     herein and in the Convertible Preferred Stock Term Sheet, then the April 12
     Bridge Warrant shall be exercisable solely for such Convertible Preferred
     Stock (subject to Section 5 thereof). However, if, for any reason, such
     Convertible


                                        2



     Preferred Stock is not approved or authorized, and/or is approved or
     authorized on any terms different than any terms set forth herein and in
     the Convertible Preferred Stock Term Sheet, and/or if Other Investors have
     not purchased in cash (and not by conversion of debt, exercise of warrants
     or options, or conversion or exercise of other securities or instruments) a
     minimum of $15 million of such Convertible Preferred Stock, on the terms
     and conditions set forth herein and in the Convertible Preferred Stock Term
     Sheet, the April 12 Bridge Warrant shall be exercisable for any Equity
     Security and/or Debt Security (each as defined in Section 2.7 hereof)
     and/or any combination thereof, in each case that Investor shall designate
     in Investor's sole discretion (the securities so elected being the
     "INVESTOR DESIGNATED SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the April 12 Bridge Warrant, but shall at
     all times in good faith use best efforts to assist in carrying out of all
     the provisions of and/or relating to such April 12 Bridge Warrant and in
     taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the April 12 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the
     April 12 Bridge Warrant may not be amended, modified or waived without
     Investor's prior written consent, and the documentation providing for such
     rights, preferences and privileges will specifically provide as such.

          (d) Tax Treatment of April 12 Bridge Warrant and Note. The Company and
     Investor, as a result of arm's length bargaining, agree that the fair
     market value of the Note to be issued in connection with the April 12
     Bridge Funding, if issued apart from the April 12 Bridge Warrant, is
     $445,500, and the fair market value of the April 12 Bridge Warrant, if
     issued apart from such Note, is $4,500. The Company and Investor further
     agree that all tax filings and records relating to or including this
     Agreement, the Note to be issued in connection with the April 12 Bridge
     Funding and/or the April 12 Bridge Warrant shall be prepared on the basis
     of, and consistently reflect, the agreed fair market values set forth in
     this Section 2.14(d), and the Company shall instruct its accountants and
     other tax-preparation professionals to prepare all tax filings and returns
     on the basis of the foregoing."

6. Section 3.4(b) of the Agreement is hereby amended by:

     (a)  replacing "$6.75 million" with "$6.3 million" in the first sentence
          thereof; and

     (b)  replacing " "67,500,000" with "63,000,000" in the third sentence
          thereof.

7. Section 4.7.6 of the Agreement is hereby amended and restated in its entirety
as follows:

          "4.7.6. Capitalization. The authorized capital stock of the Company
     consists of 300,000,000 shares of Common Stock, par value $0.001 per share
     and 100,000,000


                                        3



     shares of Preferred Stock, par value of $0.001 per share. As of the date
     hereof, 19,028,779 shares of Common Stock and 32,500,000 shares of series A
     preferred stock are issued and outstanding. No other shares of any class or
     series of the Company's capital stock are authorized and/or issued and
     outstanding. All issued and outstanding shares of capital stock of the
     Company have been duly authorized and validly issued, and are fully paid
     and non-assessable, and have been offered, sold and delivered by the
     Company in compliance with all applicable federal and state securities
     laws. Except as set forth in Schedule 4.7.6, no subscription, warrant,
     option, convertible security, or other right (direct or indirect,
     contingent or otherwise) to purchase or otherwise acquire any equity
     securities of the Company is authorized or outstanding, and there is no
     agreement, promise, commitment, undertaking or letter of intent of any kind
     (direct or indirect, contingent or otherwise) by the Company to issue any
     shares, subscriptions, warrants, options, convertible securities, or other
     such rights, or to distribute to holders of any of its equity securities
     any evidence of indebtedness or asset. Except as set forth in Schedule
     4.7.6, the Company has no obligation of any kind (direct or indirect,
     contingent or otherwise) to purchase, redeem or otherwise acquire any of
     its equity securities or any interest therein or to pay any dividend or
     make any other distribution in respect thereof. Schedule 4.7.6 includes a
     true, accurate and complete statement describing the total number of shares
     of the Company outstanding as of the date of this Agreement (on a fully
     diluted basis, including, without limitation, all warrants and options
     outstanding (whether or not currently exercisable), all convertible
     instruments of any kind (whether or not currently convertible), shares of
     all classes of stock, and any agreements, promises, commitments,
     undertakings or letters of intent to issue any of the foregoing."

8. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $494,000, (ii) amounts payable to Cognate Therapeutics and (iii)
     future sublease payments to MediQuest Corporation for the Company's
     premises sublease not yet due, and a contingent lease liability to Benaroya
     Capital Co. LLC for premises currently occupied by MediQuest Corporation
     should Mediquest Corporation default on its lease with Benaroya Capital Co.
     LLC and which is not yet due, (iv) the Company's aggregate accrued,
     contingent and/or other liabilities of any nature, either mature or
     immature, as of the Fifth Amendment Date, do not exceed $350,525 (excluding
     amounts payable to Cognate), of which (x) $231,356 are currently due
     payables (including $204,812 for attorney and auditor fees), (y) $43,505
     are the aggregate balances of capital leases payable in monthly
     installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $75,664 are accrued vacation and sick pay."

9. The Agreement is hereby amended by adding new Exhibit A-9, immediately
following Exhibit A-8 thereto, in the form attached as Exhibit A-9 hereto.

10. Exhibit B to the Agreement, as amended on December 27, 2004 and January 26,
2005, is hereby further amended by Exhibit B-3 hereto (the "THIRD AMENDMENT TO
THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as
so amended, shall be deemed to constitute


                                        4



the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the
Agreement and all other Related Recapitalization Documents.

11. The Agreement is hereby amended by adding new Exhibit K-4, immediately
following Exhibit K-3 thereto, in the form attached as Exhibit K-4 hereto.

12. The April 12 Bridge Warrant in the form attached hereto as Exhibit K-4 shall
be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the
Agreement and any Related Recapitalization Document. The Note evidencing the
April 12 Bridge Funding in the form attached hereto as Exhibit A-9 issued on the
Fifth Amendment Date shall be deemed to be a "NOTE" for all purposes under the
Agreement and any Related Recapitalization Document. Each of the April 12 Bridge
Warrant and the Note evidencing the April 12 Bridge Funding shall be deemed to
be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and
all other Related Recapitalization Documents.

13. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

14. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

15. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

16. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

17. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        5



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 5
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Fifth Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton L. Boynton
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda F. Powers
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                   EXHIBIT A-9

    FORM OF $450,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                  SECURED PROMISSORY NOTE DATED APRIL 12, 2005



                                   EXHIBIT B-3

      FORM OF THIRD AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



                                   EXHIBIT K-4
                         FORM OF APRIL 12 BRIDGE WARRANT



       AMENDMENT NO. 6 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

          THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED RECAPITALIZATION
AGREEMENT (this "AMENDMENT") is made and entered into as of May 13, 2005 (the
"SIXTH AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

          WHEREAS, the Company and Investor have entered into that certain
Amended and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

          WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

          WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

          WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

          WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

          WHEREAS, on April 12, 2005, the Company and Investor entered into
Amendment No. 5 to the Agreement;

          WHEREAS, the Company and Investor desire to further amend the
Agreement to make such changes to the Agreement as are set forth herein; and

          WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement
may be amended or modified only by a written instrument signed by the Company
and Investor.

                                    AMENDMENT

          NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
May 13, 2005 attached hereto as Exhibit A-10, and the May 13 Bridge Warrant (as
defined herein) in the form attached hereto as Exhibit K-5" immediately
following the phrase "in the form attached hereto as Exhibit K-4" in subsection
(g) thereof.

2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-9" with
"A-10."

3. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the fifteenth sentence thereof:

     "On May 13, 2005 (the "SIXTH AMENDMENT DATE"), Investor is providing an
     additional $450,000 of Bridge Funding (the "MAY 13 BRIDGE FUNDING") to
     cover general operating expenses and certain other expenses of the Company
     agreed in advance by Investor during the period from May 13, 2005 through
     June 30, 2005. The May 13 Bridge Funding shall be evidenced by a Note in
     the form attached hereto as Exhibit A-



     10 and shall be provided on the terms and conditions set forth herein. The
     May 13 Bridge Funding shall be used only for the purposes and in the
     amounts agreed to in writing by Investor and the Company."

4. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "December 27 Bridge Funding or April 12 Bridge Funding" with "December 27
Bridge Funding, April 12 Bridge Funding or May 13 Bridge Funding") in the
sixteenth sentence thereof (i.e., the nineteenth sentence thereof after giving
effect to the inclusion of the three new sentences therein per Section 3 of this
Amendment).

5. The Agreement is hereby amended by adding a new Section 2.15, immediately
following Section 2.14 thereof, as follows:

     "2.15 May 13 Bridge Warrant:

          (a) Issuance of May 13 Bridge Warrant. On the Sixth Amendment Date,
     Investor shall receive a warrant with coverage equal to one hundred percent
     (100%) of the principal amount due under the Note evidencing the May 13
     Bridge Funding (the "MAY 13 BRIDGE WARRANT"). The Company shall, therefore,
     issue $450,000 in warrant coverage on the $450,000 of May 13 Bridge Funding
     provided on the Sixth Amendment Date. The number of shares subject to the
     May 13 Bridge Warrant to be so issued shall be determined on the basis of
     $0.10 per share (subject to adjustment for stock splits, stock dividends
     and the like). The total number of shares for which Investor shall
     initially be able to exercise the May 13 Bridge Warrant shall therefore be
     4,500,000 shares as of the Sixth Amendment Date.

          (b) Exercise of May 13 Bridge Warrant. The May 13 Bridge Warrant shall
     be immediately exercisable upon issuance and continue to be exercisable for
     a period of seven (7) years after its issuance date. The exercise price of
     the May 13 Bridge Warrant shall be $0.04 (subject to adjustment for stock
     splits, stock dividends and the like, as provided more fully in the May 13
     Bridge Warrant). In the event the Convertible Preferred Stock is approved
     and authorized, and the terms and conditions are the same as set forth
     herein and in the Convertible Preferred Stock Term Sheet, and Other
     Investors have purchased in cash (and not by conversion of debt, exercise
     of warrants or options, or conversion or exercise of other securities or
     instruments) a minimum of $15 million of such Convertible Preferred Stock,
     on the terms and conditions set forth herein and in the Convertible
     Preferred Stock Term Sheet, then the May 13 Bridge Warrant shall be
     exercisable solely for such Convertible Preferred Stock (subject to Section
     5 thereof). However, if, for any reason, such Convertible Preferred Stock
     is not approved or authorized, and/or is approved or authorized on any
     terms different than any terms set forth herein and in the Convertible
     Preferred Stock Term Sheet, and/or if Other Investors have not purchased in
     cash (and not by conversion of debt, exercise of warrants or options, or
     conversion or exercise of other securities or instruments) a minimum of $15
     million of such Convertible Preferred Stock, on the terms and conditions
     set forth herein and in the Convertible Preferred Stock Term Sheet, the May
     13 Bridge Warrant shall be exercisable for any Equity Security and/or Debt
     Security (each as defined in Section 2.7 hereof) and/or any combination
     thereof, in each case that Investor shall designate in Investor's sole
     discretion (the securities so elected being the "INVESTOR DESIGNATED
     SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the May 13 Bridge Warrant, but shall at all
     times in good faith use best efforts to assist in carrying out of all the
     provisions of and/or relating to such May 13 Bridge Warrant and in taking
     all such action as may be necessary or appropriate to protect Investor's
     rights, preferences and privileges under and/or in connection with the May
     13 Bridge Warrant against impairment. Investor's rights, preferences and
     privileges granted under and/or in connection with the May 13 Bridge
     Warrant may not be amended, modified or waived without Investor's prior
     written consent, and the documentation providing for such rights,
     preferences and privileges will specifically provide as such.

          (d) Tax Treatment of May 13 Bridge Warrant and Note. The Company and
     Investor, as a result of arm's length bargaining, agree that the fair
     market value of the Note to be issued in connection with the May 13 Bridge
     Funding, if issued apart from the May 13 Bridge Warrant, is $445,500, and
     the fair



     market value of the May 13 Bridge Warrant, if issued apart from such Note,
     is $4,500. The Company and Investor further agree that all tax filings and
     records relating to or including this Agreement, the Note to be issued in
     connection with the May 13 Bridge Funding and/or the May 13 Bridge Warrant
     shall be prepared on the basis of, and consistently reflect, the agreed
     fair market values set forth in this Section 2.15(d), and the Company shall
     instruct its accountants and other tax-preparation professionals to prepare
     all tax filings and returns on the basis of the foregoing."

6. Section 3.4(b) of the Agreement is hereby amended by:

          (A) replacing "$6.3 million" with "$5.85 million" in the first
     sentence thereof; and

          (B) replacing " "63,000,000" with "58,500,000" in the third sentence
     thereof.

7. Section 4.7.6 of the Agreement is hereby amended and restated in its entirety
as follows:

          "4.7.6. Capitalization. The authorized capital stock of the Company
     consists of 300,000,000 shares of Common Stock, par value $0.001 per share
     and 100,000,000 shares of Preferred Stock, par value of $0.001 per share.
     As of the date hereof, 19,078,048 shares of Common Stock and 32,500,000
     shares of series A preferred stock are issued and outstanding. No other
     shares of any class or series of the Company's capital stock are authorized
     and/or issued and outstanding. All issued and outstanding shares of capital
     stock of the Company have been duly authorized and validly issued, and are
     fully paid and non-assessable, and have been offered, sold and delivered by
     the Company in compliance with all applicable federal and state securities
     laws. Except as set forth in Schedule 4.7.6, no subscription, warrant,
     option, convertible security, or other right (direct or indirect,
     contingent or otherwise) to purchase or otherwise acquire any equity
     securities of the Company is authorized or outstanding, and there is no
     agreement, promise, commitment, undertaking or letter of intent of any kind
     (direct or indirect, contingent or otherwise) by the Company to issue any
     shares, subscriptions, warrants, options, convertible securities, or other
     such rights, or to distribute to holders of any of its equity securities
     any evidence of indebtedness or asset. Except as set forth in Schedule
     4.7.6, the Company has no obligation of any kind (direct or indirect,
     contingent or otherwise) to purchase, redeem or otherwise acquire any of
     its equity securities or any interest therein or to pay any dividend or
     make any other distribution in respect thereof. Schedule 4.7.6 includes a
     true, accurate and complete statement describing the total number of shares
     of the Company outstanding as of the date of this Agreement (on a fully
     diluted basis, including, without limitation, all warrants and options
     outstanding (whether or not currently exercisable), all convertible
     instruments of any kind (whether or not currently convertible), shares of
     all classes of stock, and any agreements, promises, commitments,
     undertakings or letters of intent to issue any of the foregoing."

8. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $503,000, (ii) amounts payable to Cognate Therapeutics and (iii)
     future sublease payments to MediQuest Corporation for the Company's
     premises sublease not yet due, and a contingent lease liability to Benaroya
     Capital Co. LLC for premises currently occupied by MediQuest Corporation
     should Mediquest Corporation default on its lease with Benaroya Capital Co.
     LLC and which is not yet due, (iv) the Company's aggregate accrued,
     contingent and/or other liabilities of any nature, either mature or
     immature, as of the Sixth Amendment Date, do not exceed $474,539 (excluding
     amounts payable to Cognate), of which (x) $355,963 are currently due
     payables (including $347,629 for attorney and auditor fees), (y) $39,360
     are the aggregate balances of capital leases payable in monthly
     installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $79,216 are accrued vacation and sick pay."

9. The Agreement is hereby amended by adding new Exhibit A-10, immediately
following Exhibit A-9 thereto, in the form attached as Exhibit A-10 hereto.



10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26,
2005, and April 12, 2005 is hereby further amended by Exhibit B-4 hereto (the
"FOURTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM
SHEET"). Exhibit B, as so amended, shall be deemed to constitute the
"CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement
and all other Related Recapitalization Documents.

11. The Agreement is hereby amended by adding new Exhibit K-5, immediately
following Exhibit K-4 thereto, in the form attached as Exhibit K-5 hereto.

12. The May 13 Bridge Warrant in the form attached hereto as Exhibit K-5 shall
be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the
Agreement and any Related Recapitalization Document. The Note evidencing the May
13 Bridge Funding in the form attached hereto as Exhibit A-10 issued on the
Sixth Amendment Date shall be deemed to be a "NOTE" for all purposes under the
Agreement and any Related Recapitalization Document. Each of the May 13 Bridge
Warrant and the Note evidencing the May 13 Bridge Funding shall be deemed to be
"RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and
all other Related Recapitalization Documents.

13. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

14. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

15. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

16. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

17. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]



IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 6 TO
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Sixth Amendment Date
above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By:
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                  EXHIBIT A-10

FORM OF $450,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE, SECURED
                       PROMISSORY NOTE DATED MAY 13, 2005



                                   EXHIBIT B-4

     FORM OF FOURTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET


                                   EXHIBIT K-5
                          FORM OF MAY 13 BRIDGE WARRANT

                                WAIVER AGREEMENT

          The undersigned, Toucan Capital Fund II, L.P. ("Toucan") is a party to
that certain Northwest Biotherapeutics Amended and Restated Recapitalization
Agreement with Northwest Biotherapeutics, Inc. (the "Company"), dated July 30,
2004, as amended on October 22, 2004, November 10, 2004, December 27, 2004,
January 26, 2005, April 12, 2005 and May 13, 2005 (the "Recapitalization
Agreement").

          WHEREAS, The Company is not able to fulfill certain of the conditions
set forth in Sections 2.4 and 4.9 of the Recapitalization Agreement and Toucan
is willing to allow limited waivers of certain of the conditions solely in
connection with the closing of the bridge funding on May 13, 2005 (the "May 13
Bridge Funding").

          Toucan hereby waives the following conditions and relinquishes the
Company from complying with such conditions solely in connection with and as
applicable to the closing of the May 13 Bridge Funding:

1. The conditions set forth in Section 2.4 (a) and (g) to the extent they relate
to Related Recapitalization Documents that have not been executed by the
Company.

2. The conditions set forth in Section 2.4 (k) as to Dan Wilds.

3. The conditions set forth in Section 4.9 (a), (b), (d), and (e) to the extent
they relate to Related Recapitalization Documents that have not been executed by
the Company.

The waiver of the foregoing conditions in connection with the May 13 Bridge
Funding shall apply only to the May 13 Bridge Funding and shall not be deemed to
be a waiver of any condition or conditions as to any future closing or closings
of the Bridge Funding, if any, or the Anticipated Equity Financing, if any.

Capitalized terms used, but not otherwise defined herein shall have the meaning
ascribed to them in the Recapitalization Agreement.

DATED: May 13, 2005.                    TOUCAN CAPITAL FUND II, L.P.


                                        By:
                                            ------------------------------------
                                            Linda F. Powers
                                        Its: Managing Director



     AMENDMENT NO. 7 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 7 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of June 16, 2005 (the "SEVENTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

     WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment
No. 5 to the Agreement;

     WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment
No. 6 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT


                                        1



     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
June 16, 2005 attached hereto as Exhibit A-11, and the June 16 Bridge Warrant
(as defined herein) in the form attached hereto as Exhibit K-6" immediately
following the phrase "in the form attached hereto as Exhibit K-5" in subsection
(g) thereof.

2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-10" with
"A-11."

3. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the eighteenth sentence thereof:

     "On June 16, 2005 (the "SEVENTH AMENDMENT DATE"), Investor is providing an
     additional $500,000 of Bridge Funding (the "JUNE 16 BRIDGE FUNDING") to
     cover general operating expenses and certain other expenses of the Company
     agreed in advance by Investor during the period from June 16, 2005 through
     July 29, 2005. The June 16 Bridge Funding shall be evidenced by a Note in
     the form attached hereto as Exhibit A-11 and shall be provided on the terms
     and conditions set forth herein. The June 16 Bridge Funding shall be used
     only for the purposes and in the amounts agreed to in writing by Investor
     and the Company."

4. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "May 13 Bridge Funding" with "May 13 Bridge Funding or June 16 Bridge
Funding") in the nineteenth sentence thereof (i.e., the twenty-second sentence
thereof after giving effect to the inclusion of the three new sentences therein
per Section 3 of this Amendment).

5. The Agreement is hereby amended by adding a new Section 2.16, immediately
following Section 2.15 thereof, as follows:

     "2.16 June 16 Bridge Warrant:

          (a) Issuance of June 16 Bridge Warrant. On the Seventh Amendment Date,
     Investor shall receive a warrant with coverage equal to one hundred percent
     (100%) of the principal amount due under the Note evidencing the June 16
     Bridge Funding (the "JUNE 16 BRIDGE WARRANT"). The Company shall,
     therefore, issue $500,000 in warrant coverage on the $500,000 of June 16
     Bridge Funding provided on the Seventh Amendment Date. The number of shares
     subject to the June 16 Bridge Warrant to be so issued shall be determined
     on the basis of $0.10 per share (subject to adjustment for stock splits,
     stock dividends and the like). The total number of shares for which
     Investor shall initially be able to exercise the June 16 Bridge Warrant
     shall therefore be 5,000,000 shares as of the Seventh Amendment Date.

          (b) Exercise of June 16 Bridge Warrant. The June 16 Bridge Warrant
     shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the June 16 Bridge


                                        2



     Warrant shall be $0.04 (subject to adjustment for stock splits, stock
     dividends and the like, as provided more fully in the June 16 Bridge
     Warrant). In the event the Convertible Preferred Stock is approved and
     authorized, and the terms and conditions are the same as set forth herein
     and in the Convertible Preferred Stock Term Sheet, and Other Investors have
     purchased in cash (and not by conversion of debt, exercise of warrants or
     options, or conversion or exercise of other securities or instruments) a
     minimum of $15 million of such Convertible Preferred Stock, on the terms
     and conditions set forth herein and in the Convertible Preferred Stock Term
     Sheet, then the June 16 Bridge Warrant shall be exercisable solely for such
     Convertible Preferred Stock (subject to Section 5 thereof). However, if,
     for any reason, such Convertible Preferred Stock is not approved or
     authorized, and/or is approved or authorized on any terms different than
     any terms set forth herein and in the Convertible Preferred Stock Term
     Sheet, and/or if Other Investors have not purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms and conditions set forth
     herein and in the Convertible Preferred Stock Term Sheet, the June 16
     Bridge Warrant shall be exercisable for any Equity Security and/or Debt
     Security (each as defined in Section 2.7 hereof) and/or any combination
     thereof, in each case that Investor shall designate in Investor's sole
     discretion (the securities so elected being the "INVESTOR DESIGNATED
     SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the June 16 Bridge Warrant, but shall at
     all times in good faith use best efforts to assist in carrying out of all
     the provisions of and/or relating to such June 16 Bridge Warrant and in
     taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the June 16 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the June
     16 Bridge Warrant may not be amended, modified or waived without Investor's
     prior written consent, and the documentation providing for such rights,
     preferences and privileges will specifically provide as such.

          (d) Tax Treatment of June 16 Bridge Warrant and Note. The Company and
     Investor, as a result of arm's length bargaining, agree that the fair
     market value of the Note to be issued in connection with the June 16 Bridge
     Funding, if issued apart from the June 16 Bridge Warrant, is $495,000, and
     the fair market value of the June 16 Bridge Warrant, if issued apart from
     such Note, is $5,000. The Company and Investor further agree that all tax
     filings and records relating to or including this Agreement, the Note to be
     issued in connection with the June 16 Bridge Funding and/or the June 16
     Bridge Warrant shall be prepared on the basis of, and consistently reflect,
     the agreed fair market values set forth in this Section 2.16(d), and the
     Company shall instruct its accountants and other tax-preparation
     professionals to prepare all tax filings and returns on the basis of the
     foregoing."


                                        3



6. Section 3.4(b) of the Agreement is hereby amended by:

     (a) replacing "$5.85 million" with "$5.35 million" in the first sentence
     thereof; and

     (b) replacing "58,500,000" with "53,500,000" in the third sentence thereof.

7. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $512,000, (ii) amounts payable to Cognate Therapeutics and (iii)
     future sublease payments to MediQuest Corporation for the Company's
     premises sublease not yet due, and a contingent lease liability to Benaroya
     Capital Co. LLC for premises currently occupied by MediQuest Corporation
     should Mediquest Corporation default on its lease with Benaroya Capital Co.
     LLC and which is not yet due, (iv) the Company's aggregate accrued,
     contingent and/or other liabilities of any nature, either mature or
     immature, as of the Seventh Amendment Date, do not exceed $448,602
     (excluding amounts payable to Cognate), of which (x) $331,383 are currently
     due payables (including $284,497 for attorney and auditor fees), (y)
     $35,219 are the aggregate balances of capital leases payable in monthly
     installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $82,000 are accrued vacation and sick pay."

8. The Agreement is hereby amended by adding new Exhibit A-11, immediately
following Exhibit A-10 thereto, in the form attached as Exhibit A-11 hereto.

9. Exhibit B to the Agreement, as amended on December 27, 2004, January 26,
2005, April 12, 2005 and May 13, 2005 is hereby further amended by Exhibit B-5
hereto (the "FIFTH AMENDMENT TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED
STOCK TERM SHEET"). Exhibit B, as so amended, shall be deemed to constitute the
"CONVERTIBLE PREFERRED STOCK TERM SHEET" for all purposes under the Agreement
and all other Related Recapitalization Documents.

10. The Agreement is hereby amended by adding new Exhibit K-6, immediately
following Exhibit K-5 thereto, in the form attached as Exhibit K-6 hereto.

11. The June 16 Bridge Warrant in the form attached hereto as Exhibit K-6 shall
be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the
Agreement and any Related Recapitalization Document. The Note evidencing the
June 16 Bridge Funding in the form attached hereto as Exhibit A-11 issued on the
Seventh Amendment Date shall be deemed to be a "NOTE" for all purposes under the
Agreement and any Related Recapitalization Document. Each of the June 16 Bridge
Warrant and the Note evidencing the June 16 Bridge Funding shall be deemed to be
"RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and
all other Related Recapitalization Documents.

12. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.


                                        4



13. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

14. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

15. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

16. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        5



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 7
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Seventh Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By:
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                  EXHIBIT A-11

    FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                   SECURED PROMISSORY NOTE DATED JUNE 16, 2005



                                   EXHIBIT B-5

      FORM OF FIFTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



                                   EXHIBIT K-6

                         FORM OF JUNE 16 BRIDGE WARRANT



     AMENDMENT NO. 8 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 8 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of July 26, 2005 (the "EIGHTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

     WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment
No. 5 to the Agreement;

     WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment
No. 6 to the Agreement;

     WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment
No. 7 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and


                                         1



     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
July 26, 2005 attached hereto as Exhibit A-12, and the July 26 Bridge Warrant
(as defined herein) in the form attached hereto as Exhibit K-7" immediately
following the phrase "in the form attached hereto as Exhibit K-6" in subsection
(g) thereof.

2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-11" with
"A-12."

3. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the twenty-first sentence thereof:

     "On July 26, 2005 (the "EIGHTH AMENDMENT DATE"), Investor is providing an
     additional $500,000 of Bridge Funding (the "JULY 26 BRIDGE FUNDING") to
     cover general operating expenses and certain other expenses of the Company
     agreed in advance by Investor during the period from July 26, 2005 through
     August 23, 2005. The July 26 Bridge Funding shall be evidenced by a Note in
     the form attached hereto as Exhibit A-12 and shall be provided on the terms
     and conditions set forth herein. The July 26 Bridge Funding shall be used
     only for the purposes and in the amounts agreed to in writing by Investor
     and the Company."

4. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "June 16 Bridge Funding" with "June 16 Bridge Funding or July 26 Bridge
Funding") in the twenty-second sentence thereof (i.e., the twenty-fifth sentence
thereof after giving effect to the inclusion of the three new sentences therein
per Section 3 of this Amendment).

5. The Agreement is hereby amended by adding a new Section 2.17, immediately
following Section 2.16 thereof, as follows:

     "2.17 July 26 Bridge Warrant:

          (a) Issuance of July 26 Bridge Warrant. On the Eighth Amendment Date,
     Investor shall receive a warrant with coverage equal to one hundred percent
     (100%) of the principal amount due under the Note evidencing the July 26
     Bridge Funding (the "JULY 26 BRIDGE WARRANT"). The Company shall,
     therefore, issue $500,000 in warrant coverage on the $500,000 of July 26
     Bridge Funding provided on the Eighth Amendment Date. The number of shares
     subject to the July 26 Bridge Warrant to be so issued shall be determined
     on the basis of $0.10 per share (subject to adjustment for stock splits,
     stock dividends and the like). The total number of shares for which
     Investor shall initially be able to exercise the July 26 Bridge Warrant
     shall therefore be 5,000,000 shares as of the Eighth Amendment Date.

          (b) Exercise of July 26 Bridge Warrant. The July 26 Bridge Warrant
     shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the July 26 Bridge Warrant shall be $0.04 (subject to
     adjustment for stock splits, stock dividends and the like, as provided more
     fully in the July 26 Bridge Warrant). In the event the Convertible
     Preferred Stock is approved and authorized, and the terms and conditions
     are the same as set forth herein and in the Convertible Preferred Stock
     Term Sheet, and Other Investors have purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms


                                        2



     and conditions set forth herein and in the Convertible Preferred Stock Term
     Sheet, then the July 26 Bridge Warrant shall be exercisable solely for such
     Convertible Preferred Stock (subject to Section 5 thereof). However, if,
     for any reason, such Convertible Preferred Stock is not approved or
     authorized, and/or is approved or authorized on any terms different than
     any terms set forth herein and in the Convertible Preferred Stock Term
     Sheet, and/or if Other Investors have not purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms and conditions set forth
     herein and in the Convertible Preferred Stock Term Sheet, the July 26
     Bridge Warrant shall be exercisable for any Equity Security and/or Debt
     Security (each as defined in Section 2.7 hereof) and/or any combination
     thereof, in each case that Investor shall designate in Investor's sole
     discretion (the securities so elected being the "INVESTOR DESIGNATED
     SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the July 26 Bridge Warrant, but shall at
     all times in good faith use best efforts to assist in carrying out of all
     the provisions of and/or relating to such July 26 Bridge Warrant and in
     taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the July 26 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the July
     26 Bridge Warrant may not be amended, modified or waived without Investor's
     prior written consent, and the documentation providing for such rights,
     preferences and privileges will specifically provide as such.

            (d) Tax Treatment of July 26 Bridge Warrant and Note. The Company
      and Investor, as a result of arm's length bargaining, agree that the fair
      market value of the Note to be issued in connection with the July 26
      Bridge Funding, if issued apart from the July 26 Bridge Warrant, is
      $495,000, and the fair market value of the July 26 Bridge Warrant, if
      issued apart from such Note, is $5,000. The Company and Investor further
      agree that all tax filings and records relating to or including this
      Agreement, the Note to be issued in connection with the July 26 Bridge
      Funding and/or the July 26 Bridge Warrant shall be prepared on the basis
      of, and consistently reflect, the agreed fair market values set forth in
      this Section 2.17(d), and the Company shall instruct its accountants and
      other tax-preparation professionals to prepare all tax filings and returns
      on the basis of the foregoing."

6. Section 3.4(a) of the Agreement is hereby amended by replacing the phrase "of
12 months commencing at the first closing of Convertible Preferred Stock" with
"beginning with the first closing of Convertible Preferred Stock and ending on
December 31, 2006 (or such later date as is mutually agreed by the parties
hereto)" in the first sentence thereof.

7. Section 3.4(b) of the Agreement is hereby amended by:

     (a)  replacing "$5.35 million" with "$4.85 million" in the first sentence
          thereof; and

     (b)  replacing "53,500,000" with "48,500,000" in the third sentence
          thereof.

8. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $322,017, (ii) amounts payable to Cognate Therapeutics and
     Investor, (iii) future sublease payments to MediQuest Corporation and a
     contingent lease liability to Benaroya Capital Co. LLC for the Company's
     premises should Mediquest Corporation default on its lease with Benaroya
     Capital Co. LLC and which is not yet due, and (iv) the Company's aggregate
     accrued, contingent and/or other liabilities of any nature, either mature
     or immature, as of the Eighth Amendment Date, not in excess of $472,524
     (excluding amounts payable to Cognate and Investor), of which (x) $356,694
     are currently due payables (including $248,598 for attorney and auditor
     fees), (y) $31,076 are the aggregate balances of capital leases payable in
     monthly installments in the amounts set forth in the budget


                                        3



      included in the Schedule of Exceptions through the first calendar quarter
      of 2006, decreasing thereafter, the last of which is fully amortized in
      May 2007, and (z) $84,754 are accrued vacation and sick pay."

9. The Agreement is hereby amended by adding new Exhibit A-12, immediately
following Exhibit A-11 thereto, in the form attached as Exhibit A-12 hereto.

10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26,
2005, April 12, 2005, May 13, 2005 and June 16, 2005 is hereby further amended
by Exhibit B-6 hereto (the "SIXTH AMENDMENT TO THE AMENDED AND RESTATED
CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B, as so amended, shall be
deemed to constitute the "CONVERTIBLE PREFERRED STOCK TERM SHEET" for all
purposes under the Agreement and all other Related Recapitalization Documents.

11. The Agreement is hereby amended by adding new Exhibit K-7, immediately
following Exhibit K-6 thereto, in the form attached as Exhibit K-7 hereto.

12. The July 26 Bridge Warrant in the form attached hereto as Exhibit K-7 shall
be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under the
Agreement and any Related Recapitalization Document. The Note evidencing the
July 26 Bridge Funding in the form attached hereto as Exhibit A-12 issued on the
Eighth Amendment Date shall be deemed to be a "NOTE" for all purposes under the
Agreement and any Related Recapitalization Document. Each of the July 26 Bridge
Warrant and the Note evidencing the July 26 Bridge Funding shall be deemed to be
"RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the Agreement and
all other Related Recapitalization Documents.

13. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

14. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

15. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

16. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

17. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        4



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 8
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Eighth Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By:
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                  EXHIBIT A-12

    FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                   SECURED PROMISSORY NOTE DATED JULY 26, 2005



                                   EXHIBIT B-6

      FORM OF SIXTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



                                   EXHIBIT K-7

                         FORM OF JULY 26 BRIDGE WARRANT


                                                                    Exhibit 10.1

       AMENDMENT NO. 9 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 9 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of September 7, 2005 (the "NINTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

     WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment
No. 5 to the Agreement;

     WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment
No. 6 to the Agreement;

     WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment
No. 7 to the Agreement;

     WHEREAS, on July 26, 2005, the Company and Investor entered into Amendment
No. 8 to the Agreement;

     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and


                                        1



     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

     1. Section 1.2 of the Agreement is hereby amended by inserting "and the
     Loan Agreement, Security Agreement and 10% Convertible, Secured Promissory
     Note dated September 7, 2005 attached hereto as Exhibit A-13, and the
     September 7 Bridge Warrant (as defined herein) in the form attached hereto
     as Exhibit K-8" immediately following the phrase "in the form attached
     hereto as Exhibit K-7" in subsection (g) thereof.

     2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-12"
     with "A-13."

     3. Section 2.3(b) of the Agreement is hereby amended by adding the
     following text immediately following the twenty-first sentence thereof:

     "On September 7, 2005 (the "NINTH AMENDMENT DATE"), Investor is providing
     an additional $500,000 of Bridge Funding (the "SEPTEMBER 7 BRIDGE FUNDING")
     to cover general operating expenses and certain other expenses of the
     Company agreed in advance by Investor during the period from September 7,
     2005 through September 30, 2005. The September 7 Bridge Funding shall be
     evidenced by a Note in the form attached hereto as Exhibit A-13 and shall
     be provided on the terms and conditions set forth herein. The September 7
     Bridge Funding shall be used only for the purposes and in the amounts
     agreed to in writing by Investor and the Company."

     4. Section 2.3(b) of the Agreement is hereby further amended by replacing
     the phrase "July 26 Bridge Funding" with "July 26 Bridge Funding or
     September 7 Bridge Funding") in the twenty-fifth sentence thereof (i.e.,
     the twenty-eighth sentence thereof after giving effect to the inclusion of
     the three new sentences therein per Section 3 of this Amendment).

     5. The Agreement is hereby amended by adding a new Section 2.18,
     immediately following Section 2.17 thereof, as follows:

     "2.18 September 7 Bridge Warrant:

          (a) Issuance of September 7 Bridge Warrant. On the Ninth Amendment
     Date, Investor shall receive a warrant with coverage equal to one hundred
     percent (100%) of the principal amount due under the Note evidencing the
     September 7 Bridge Funding (the "SEPTEMBER 7 BRIDGE Warrant"). The Company
     shall, therefore, issue $500,000 in warrant coverage on the $500,000 of
     September 7 Bridge Funding provided on the Ninth Amendment Date. The number
     of shares subject to the September 7 Bridge Warrant to be so issued shall
     be determined on the basis of $0.10


                                        2



     per share (subject to adjustment for stock splits, stock dividends and the
     like). The total number of shares for which Investor shall initially be
     able to exercise the September 7 Bridge Warrant shall therefore be
     5,000,000 shares as of the Ninth Amendment Date.

          (b) Exercise of September 7 Bridge Warrant. The September 7 Bridge
     Warrant shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the September 7 Bridge Warrant shall be $0.04 (subject to
     adjustment for stock splits, stock dividends and the like, as provided more
     fully in the September 7 Bridge Warrant). In the event the Convertible
     Preferred Stock is approved and authorized, and the terms and conditions
     are the same as set forth herein and in the Convertible Preferred Stock
     Term Sheet, and Other Investors have purchased in cash (and not by
     conversion of debt, exercise of warrants or options, or conversion or
     exercise of other securities or instruments) a minimum of $15 million of
     such Convertible Preferred Stock, on the terms and conditions set forth
     herein and in the Convertible Preferred Stock Term Sheet, then the
     September 7 Bridge Warrant shall be exercisable solely for such Convertible
     Preferred Stock (subject to Section 5 thereof). However, if, for any
     reason, such Convertible Preferred Stock is not approved or authorized,
     and/or is approved or authorized on any terms different than any terms set
     forth herein and in the Convertible Preferred Stock Term Sheet, and/or if
     Other Investors have not purchased in cash (and not by conversion of debt,
     exercise of warrants or options, or conversion or exercise of other
     securities or instruments) a minimum of $15 million of such Convertible
     Preferred Stock, on the terms and conditions set forth herein and in the
     Convertible Preferred Stock Term Sheet, the September 7 Bridge Warrant
     shall be exercisable for any Equity Security and/or Debt Security (each as
     defined in Section 2.7 hereof) and/or any combination thereof, in each case
     that Investor shall designate in Investor's sole discretion (the securities
     so elected being the "INVESTOR DESIGNATED SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the September 7 Bridge Warrant, but shall
     at all times in good faith use best efforts to assist in carrying out of
     all the provisions of and/or relating to such September 7 Bridge Warrant
     and in taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the September 7 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the
     September 7 Bridge Warrant may not be amended, modified or waived without
     Investor's prior written consent, and the documentation providing for such
     rights, preferences and privileges will specifically provide as such.

          (d) Tax Treatment of September 7 Bridge Warrant and Note. The Company
     and Investor, as a result of arm's length bargaining, agree that the fair
     market value of the Note to be issued in connection with the September 7
     Bridge Funding, if issued


                                        3



     apart from the September 7 Bridge Warrant, is $495,000, and the fair market
     value of the September 7 Bridge Warrant, if issued apart from such Note, is
     $5,000. The Company and Investor further agree that all tax filings and
     records relating to or including this Agreement, the Note to be issued in
     connection with the September 7 Bridge Funding and/or the September 7
     Bridge Warrant shall be prepared on the basis of, and consistently reflect,
     the agreed fair market values set forth in this Section 2.18(d), and the
     Company shall instruct its accountants and other tax-preparation
     professionals to prepare all tax filings and returns on the basis of the
     foregoing."

     6. Section 3.4(b) of the Agreement is hereby amended by:

     (a)  replacing "$4.85 million" with "$4.35 million" in the first sentence
          thereof; and

     (b)  replacing "48,500,000" with "43,500,000" in the third sentence
          thereof.

     7. Section 4.7.15 of the Agreement is hereby amended and restated in its
     entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the maximum
     amount of $322,017, (ii) amounts payable to Cognate Therapeutics and
     Investor, (iii) future sublease payments to MediQuest Corporation and a
     contingent lease liability to Benaroya Capital Co. LLC for the Company's
     premises should Mediquest Corporation default on its lease with Benaroya
     Capital Co. LLC and which is not yet due, and (iv) the Company's aggregate
     accrued, contingent and/or other liabilities of any nature, either mature
     or immature, as of the Ninth Amendment Date, not in excess of $278,524
     (excluding amounts payable to Cognate and Investor), of which (x) $168,282
     are currently due payables (including $100,042 for attorney and auditor
     fees), (y) $25,134 are the aggregate balances of capital leases payable in
     monthly installments in the amounts set forth in the budget included in the
     Schedule of Exceptions through the first calendar quarter of 2006,
     decreasing thereafter, the last of which is fully amortized in May 2007,
     and (z) $85,522 are accrued vacation and sick pay."

     8. The Agreement is hereby amended by adding new Exhibit A-13, immediately
     following Exhibit A-12 thereto, in the form attached as Exhibit A-13
     hereto.

     9. Exhibit B to the Agreement, as amended on December 27, 2004, January 26,
     2005, April 12, 2005, May 13, 2005, June 16, 2005 and July 26, 2006 is
     hereby further amended by Exhibit B-7 hereto (the "SEVENTH AMENDMENT TO THE
     AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B,
     as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED
     STOCK TERM SHEET" for all purposes under the Agreement and all other
     Related Recapitalization Documents.

     10. The Agreement is hereby amended by adding new Exhibit K-8, immediately
     following Exhibit K-7 thereto, in the form attached as Exhibit K-8 hereto.

     11. The September 7 Bridge Warrant in the form attached hereto as Exhibit
     K-8 shall be deemed to be a "BRIDGE WARRANT" and a "Warrant" for all
     purposes under the Agreement and


                                        4



     any Related Recapitalization Document. The Note evidencing the September 7
     Bridge Funding in the form attached hereto as Exhibit A-13 issued on the
     Ninth Amendment Date shall be deemed to be a "NOTE" for all purposes under
     the Agreement and any Related Recapitalization Document. Each of the
     September 7 Bridge Warrant and the Note evidencing the September 7 Bridge
     Funding shall be deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all
     purposes under the Agreement and all other Related Recapitalization
     Documents.

     12. Except as amended and/or restated hereby, all other terms and
     conditions of the Agreement shall be unaffected hereby and remain in full
     force and effect.

     13. This Amendment (including the Exhibits hereto, which are an integral
     part of the Amendment), together with the Agreement (including the
     Schedules and Exhibits thereto, which are an integral part of the
     Agreement) and the Related Recapitalization Documents, constitute the
     entire agreement among the parties hereto and thereto with regard to the
     subjects hereof and thereof and supersede all prior agreements and
     understandings relating to the subject matter hereof and thereof.

     14. This Amendment shall be governed by and construed under the laws of the
     State of Delaware, without regard to its conflicts of law provisions.

     15. This Amendment may be executed in one or more counterparts, each of
     which will be deemed an original but all of which together shall constitute
     one and the same agreement.

     16. This Amendment shall take effect immediately upon execution by the
     Company and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        5



     IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 9
TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Ninth Amendment
Date above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By:
                                            ------------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director



                                  EXHIBIT A-13

    FORM OF $500,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                 SECURED PROMISSORY NOTE DATED SEPTEMBER 7, 2005



                                   EXHIBIT B-7

     FORM OF SEVENTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



       AMENDMENT NO. 10 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT

     THIS AMENDMENT NO. 10 TO AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
(this "AMENDMENT") is made and entered into as of November 14, 2005 (the "TENTH
AMENDMENT DATE") by and between NORTHWEST BIOTHERAPEUTICS, INC., and its
affiliates, if any (collectively, the "COMPANY"), a Delaware corporation with
offices at 22322 20th Ave SE, Suite 150, Bothell, Washington, 98021, and TOUCAN
CAPITAL FUND II, L.P., and its designees (collectively, "INVESTOR"), a Delaware
limited partnership with offices at 7600 Wisconsin Avenue, Bethesda, MD 20814.
All capitalized terms used herein but not otherwise defined shall have the
meaning given such terms in the Agreement (as defined below).

                                    RECITALS

     WHEREAS, the Company and Investor have entered into that certain Amended
and Restated Recapitalization Agreement, dated as of July 30, 2004 (the
"AGREEMENT");

     WHEREAS, on October 22, 2004, the Company and Investor entered into
Amendment No. 1 to the Agreement;

     WHEREAS, on November 10, 2004, the Company and Investor entered into
Amendment No. 2 to the Agreement;

     WHEREAS, on December 27, 2004, the Company and Investor entered into
Amendment No. 3 to the Agreement;

     WHEREAS, on January 26, 2005, the Company and Investor entered into
Amendment No. 4 to the Agreement;

     WHEREAS, on April 12, 2005, the Company and Investor entered into Amendment
No. 5 to the Agreement;

     WHEREAS, on May 13, 2005, the Company and Investor entered into Amendment
No. 6 to the Agreement;

     WHEREAS, on June 16, 2005, the Company and Investor entered into Amendment
No. 7 to the Agreement;

     WHEREAS, on July 26, 2005, the Company and Investor entered into Amendment
No. 8 to the Agreement;

     WHEREAS, on September 7, 2005, the Company and Investor entered into
Amendment No. 9 to the Agreement;


                                        1



     WHEREAS, the Company and Investor desire to further amend the Agreement to
make such changes to the Agreement as are set forth herein; and

     WHEREAS, Section 4.13(f) of the Agreement provides that the Agreement may
be amended or modified only by a written instrument signed by the Company and
Investor.

                                    AMENDMENT

     NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Investor hereby agree as follows:

1. Section 1.2 of the Agreement is hereby amended by inserting "and the Loan
Agreement, Security Agreement and 10% Convertible, Secured Promissory Note dated
November 14, 2005 attached hereto as Exhibit A-14, and the November 14 Bridge
Warrant (as defined herein) in the form attached hereto as Exhibit K-9"
immediately following the phrase "in the form attached hereto as Exhibit K-8" in
subsection (g) thereof.

2. Section 2.2(a) of the Agreement is hereby amended by replacing "A-13" with
"A-14."

3. Section 2.3(b) of the Agreement is hereby amended by adding the following
text immediately following the twenty-fourth sentence thereof:

     "On November 14, 2005 (the "TENTH AMENDMENT DATE"), Toucan Partners, LLC
     ("TOUCAN PARTNERS"), the designee of Toucan Capital Fund II, L.P., is
     providing an additional $400,000 of Bridge Funding (the "NOVEMBER 14 BRIDGE
     FUNDING") to cover general operating expenses and certain other expenses of
     the Company agreed in advance by Investor during the period from November
     14, 2005 through December 7, 2005. The November 14 Bridge Funding shall be
     evidenced by a Note in the form attached hereto as Exhibit A-14 and shall
     be provided on the terms and conditions set forth herein. The November 14
     Bridge Funding shall be used only for the purposes and in the amounts
     agreed to in writing by Toucan Partners and the Company."

4. Section 2.3(b) of the Agreement is hereby further amended by replacing the
phrase "September 7 Bridge Funding" with "September 7 Bridge Funding or November
14 Bridge Funding") in the twenty-eighth sentence thereof (i.e., the
thirty-first sentence thereof after giving effect to the inclusion of the three
new sentences therein per Section 3 of this Amendment).

5. The Agreement is hereby amended by adding a new Section 2.19, immediately
following Section 2.18 thereof, as follows:

     "2.19 November 14 Bridge Warrant:

          (a) Issuance of November 14 Bridge Warrant. On the Tenth Amendment
     Date, Toucan Partners shall receive a warrant with coverage equal to one
     hundred percent (100%) of the principal amount due under the Note
     evidencing the November 14 Bridge Funding (the "NOVEMBER 14 BRIDGE
     WARRANT"). The Company shall, therefore, issue $400,000 in warrant coverage
     on the $400,000 of November 14 Bridge Funding provided on the Tenth
     Amendment Date. The number of shares subject to the November 14 Bridge
     Warrant to be so issued shall be determined on the basis of $0.10 per share
     (subject to adjustment for stock splits, stock dividends and the like). The
     total number of shares for which Toucan Partners shall initially be able to
     exercise the November 14 Bridge Warrant shall therefore be 4,000,000 shares
     as of the Tenth Amendment Date.

          (b) Exercise of November 14 Bridge Warrant. The November 14 Bridge
     Warrant shall be immediately exercisable upon issuance and continue to be
     exercisable for a period of seven (7) years after its issuance date. The
     exercise price of the November 14 Bridge Warrant shall be $0.04 (subject to
     adjustment for stock splits, stock dividends and the like, as provided more
     fully in the November 14 Bridge Warrant). In the event the Convertible
     Preferred Stock is approved and authorized, and the terms and conditions
     are the same as set forth herein and in the Convertible Preferred Stock
     Term Sheet, and


                                        2



     Other Investors have purchased in cash (and not by conversion of debt,
     exercise of warrants or options, or conversion or exercise of other
     securities or instruments) a minimum of $15 million of such Convertible
     Preferred Stock, on the terms and conditions set forth herein and in the
     Convertible Preferred Stock Term Sheet, then the November 14 Bridge Warrant
     shall be exercisable solely for such Convertible Preferred Stock (subject
     to Section 5 thereof). However, if, for any reason, such Convertible
     Preferred Stock is not approved or authorized, and/or is approved or
     authorized on any terms different than any terms set forth herein and in
     the Convertible Preferred Stock Term Sheet, and/or if Other Investors have
     not purchased in cash (and not by conversion of debt, exercise of warrants
     or options, or conversion or exercise of other securities or instruments) a
     minimum of $15 million of such Convertible Preferred Stock, on the terms
     and conditions set forth herein and in the Convertible Preferred Stock Term
     Sheet, the November 14 Bridge Warrant shall be exercisable for any Equity
     Security and/or Debt Security (each as defined in Section 2.7 hereof)
     and/or any combination thereof, in each case that Investor shall designate
     in Investor's sole discretion (the securities so elected being the
     "INVESTOR DESIGNATED SECURITIES").

          (c) No Impairment. The Company shall not, by amendment of its Charter
     or through a reorganization, transfer of assets, consolidation, merger,
     dissolution, issue or sale of securities, or any other voluntary action,
     omission, or agreement, avoid or seek to avoid the observance or
     performance of any of the terms to be observed or performed by the Company
     under and/or in connection with the November 14 Bridge Warrant, but shall
     at all times in good faith use best efforts to assist in carrying out of
     all the provisions of and/or relating to such November 14 Bridge Warrant
     and in taking all such action as may be necessary or appropriate to protect
     Investor's rights, preferences and privileges under and/or in connection
     with the November 14 Bridge Warrant against impairment. Investor's rights,
     preferences and privileges granted under and/or in connection with the
     November 14 Bridge Warrant may not be amended, modified or waived without
     Investor's prior written consent, and the documentation providing for such
     rights, preferences and privileges will specifically provide as such.

          (d) Tax Treatment of November 14 Bridge Warrant and Note. The Company
     and Toucan Partners, as a result of arm's length bargaining, agree that the
     fair market value of the Note to be issued in connection with the November
     14 Bridge Funding, if issued apart from the November 14 Bridge Warrant, is
     $396,000, and the fair market value of the November 14 Bridge Warrant, if
     issued apart from such Note, is $4,000. The Company and Toucan Partners
     further agree that all tax filings and records relating to or including
     this Agreement, the Note to be issued in connection with the November 14
     Bridge Funding and/or the November 14 Bridge Warrant shall be prepared on
     the basis of, and consistently reflect, the agreed fair market values set
     forth in this Section 2.19(d), and the Company shall instruct its
     accountants and other tax-preparation professionals to prepare all tax
     filings and returns on the basis of the foregoing.

6. Section 3.4(b) of the Agreement is hereby amended by:

     (a)  replacing "$4.35 million" with "$3.95 million" in the first sentence
          thereof; and

     (b)  replacing "43,500,000" with "39,500,000" in the third sentence
          thereof.

7. Section 4.7.15 of the Agreement is hereby amended and restated in its
entirety as follows:

          "4.7.15 Liabilities. The Company has the following accrued
     liabilities: (i) tax liabilities to the State of Washington in the
     approximate amount of $329,243, (ii) amounts payable to Cognate
     Therapeutics and Investor, (iii) future sublease payments to MediQuest
     Corporation and a contingent lease liability to Benaroya Capital Company,
     LLC for the Company's premises should Mediquest Corporation default on its
     lease with Benaroya Capital Company, LLC and which is not yet due, and (iv)
     the Company's aggregate accrued, contingent and/or other liabilities of any
     nature, either mature or immature, as of the Tenth Amendment Date, not in
     excess of $407,126 (excluding amounts payable to Cognate and Investor), of
     which (x) $296,028 are currently due payables (including $212,021 for
     attorney fees), (y) $18,103 are the aggregate balances of capital leases
     payable in monthly installments in the amounts set forth in the budget
     included in the Schedule of Exceptions through the first calendar quarter
     of 2006, decreasing thereafter, the last of which is fully amortized in May
     2007, and (z) $92,995 are accrued vacation and sick pay."

8. The AGREEMENT is hereby amended to add a new Section 4.14 as follows:


                                        3



          "4.14 Designee. The parties hereto agree that Toucan Partners, LLC, a
     Delaware limited liability company, as a designee of Toucan Capital Fund
     II, L.P., is entitled to all rights, privileges and remedies afforded
     Investor by this Agreement and all Related Recapitalization Documents, to
     the extent it participates in any closing contemplated hereby."

9. The Agreement is hereby amended by adding new Exhibit A-14, immediately
following Exhibit A-13 thereto, in the form attached as Exhibit A-14 hereto.

10. Exhibit B to the Agreement, as amended on December 27, 2004, January 26,
2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26, 2005 and September
7, 2005 is hereby further amended by Exhibit B-8 hereto (the "EIGHTH AMENDMENT
TO THE AMENDED AND RESTATED CONVERTIBLE PREFERRED STOCK TERM SHEET"). Exhibit B,
as so amended, shall be deemed to constitute the "CONVERTIBLE PREFERRED STOCK
TERM SHEET" for all purposes under the Agreement and all other Related
Recapitalization Documents.

11. The Agreement is hereby amended by adding new Exhibit K-9, immediately
following Exhibit K-8 thereto, in the form attached as Exhibit K-9 hereto.

12. The November 14 Bridge Warrant in the form attached hereto as Exhibit K-9
shall be deemed to be a "BRIDGE WARRANT" and a "WARRANT" for all purposes under
the Agreement and any Related Recapitalization Document. The Note evidencing the
November 14 Bridge Funding in the form attached hereto as Exhibit A-14 issued on
the Tenth Amendment Date shall be deemed to be a "NOTE" for all purposes under
the Agreement and any Related Recapitalization Document. Each of the November 14
Bridge Warrant and the Note evidencing the November 14 Bridge Funding shall be
deemed to be "RELATED RECAPITALIZATION DOCUMENTS" for all purposes under the
Agreement and all other Related Recapitalization Documents.

13. Except as amended and/or restated hereby, all other terms and conditions of
the Agreement shall be unaffected hereby and remain in full force and effect.

14. This Amendment (including the Exhibits hereto, which are an integral part of
the Amendment), together with the Agreement (including the Schedules and
Exhibits thereto, which are an integral part of the Agreement) and the Related
Recapitalization Documents, constitute the entire agreement among the parties
hereto and thereto with regard to the subjects hereof and thereof and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

15. This Amendment shall be governed by and construed under the laws of the
State of Delaware, without regard to its conflicts of law provisions.

16. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.

17. This Amendment shall take effect immediately upon execution by the Company
and Investor.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        4



IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 10 TO
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT as of the Tenth Amendment Date
above written.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By: /s/ Alton L. Boynton
                                            -----------------------------------
                                        Name: Alton L. Boynton
                                        Title: President


                                        TOUCAN CAPITAL FUND II, LP


                                        By: /s/ Linda F. Powers
                                            -----------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Director


                                        TOUCAN PARTNERS, LLC


                                        By: /s/ Linda F. Powers
                                            -----------------------------------
                                        Name: Linda F. Powers
                                        Title: Managing Member



                                  EXHIBIT A-14

    FORM OF $400,000 LOAN AGREEMENT, SECURITY AGREEMENT AND 10% CONVERTIBLE,
                 SECURED PROMISSORY NOTE DATED NOVEMBER 14, 2005



                                   EXHIBIT B-8

     FORM OF EIGHTH AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PREFERRED
                                STOCK TERM SHEET



                                   EXHIBIT K-9

                       FORM OF NOVEMBER 14 BRIDGE WARRANT

EX-10.24

                                                                   Exhibit 10.24

                     AMENDED AND RESTATED BINDING TERM SHEET
                           CONVERTIBLE PREFERRED STOCK
                         Northwest Biotherapeutics, Inc.

                                October 22, 2004

THIS AMENDED AND RESTATED BINDING CONVERTIBLE PREFERRED STOCK TERM SHEET AMENDS
AND RESTATES THAT CERTAIN BINDING CONVERTIBLE PREFERRED STOCK TERM SHEET BY AND
BETWEEN THE PARTIES HERETO DATED AS OF APRIL 26, 2004.

                          
Issuer:                      Northwest Biotherapeutics, Inc. (the "Company"), a
                             Delaware corporation.

Purchasers:                  Toucan Capital Fund II, L.P and/or its designee(s)
                             (collectively, "Investor"), and such other
                             investors as may subsequently be identified (the
                             "Other Investors").

Election to lead             At Investor's election on or before the end of the
equity financing:            Bridge Funding Period, Investor shall have the
                             right to lead the equity financing and assemble the
                             syndicate of Other Investors.

Securities to be             10% Cumulative Convertible Preferred Stock
Issued:                      ("Convertible Preferred" or "Convertible Preferred
                             Stock"), convertible into common stock of the
                             Company ("Common" or "Common Stock").

Share price:                 The price per share shall be the lesser of $0.10
                             per share or 35% discount to the average closing
                             price during the twenty trading days prior to
                             closing; provided, however, that in no event will
                             the price per share be less than $.04. The share
                             price provided herein is subject to adjustment for
                             dividends, splits, etc.

Amount of Issuance:          Up to $40 million (including any shares issuable
                             upon conversion of Bridge Funding, but not
                             including any shares issuable upon exercise of
                             warrants, options, and similar instruments or
                             obligations) (the "Maximum Issuance"), in one or
                             more tranches.

First Closing:               First closing ("First Closing") to occur upon
                             completion of Bridge Period, documentation and
                             fulfillment of conditions to closing.

Subsequent Closings:         Additional closings of the Convertible Preferred
                             Stock after the First Closing ("Subsequent
                             Closings") may take place at any time on or before
                             12 months after the First Closing (the "Equity
                             Financing Period"), so long as the aggregate amount
                             raised does not exceed the Maximum Issuance. All
                             subsequent closings of the Convertible Preferred
                             Stock shall be on the same terms and conditions as
                             in the First Closing and shall use the same
                             documentation as in the First Closing.

Warrants:                    The Company shall issue $7 million (or, in the
                             event that the November Bridge Funding is not
                             provided, $7.5 million) in warrant coverage on the
                             first $7 million




                                       A-1



                          
                             (or, in the event that the November Bridge Funding
                             is not provided, $7.5 million) Convertible
                             Preferred Stock purchased for cash (the "Preferred
                             Stock Warrants"). Preferred Stock Warrants shall
                             not be issued upon conversion of notes, exercise of
                             warrants, or other conversion or exercise. The
                             number of warrants to be so issued shall be
                             determined on the basis of $0.10 per share. If the
                             total of $7 million (or, in the event that the
                             November Bridge Funding is not provided, $7.5
                             million) is invested in Convertible Preferred
                             Stock, the number of warrants issued shall be
                             exercisable for 70 million (or, in the event that
                             the November Bridge Funding is not provided, 75
                             million) shares of Convertible Preferred Stock. The
                             exercise price of such Preferred Stock Warrants
                             shall be the lesser of $0.10 per share (subject to
                             adjustment for stock splits, stock dividends and
                             the like) and 35% discount to the average closing
                             price during the twenty trading days prior to the
                             First Closing; provided, however, that in no event
                             will the exercise price be less than $.04 per share
                             (subject to adjustment for stock splits, stock
                             dividends and the like). The exercise period shall
                             commence upon issuance of the Preferred Stock
                             Warrants, and shall continue for a period of seven
                             (7) years after their respective issuance dates.

Tax Treatment of Warrants:   The Company and the purchasers of the Convertible
                             Preferred Stock shall agree upon the fair market
                             value of the Preferred Stock Warrants, and the
                             Company shall make all of its tax filings on this
                             basis, and instruct its accountants and other
                             tax-preparation professionals to prepare all tax
                             filings and returns on the basis of the foregoing.

Right of First Refusal:      Investor shall have a right of first refusal to
                             purchase up to $15 million of the Convertible
                             Preferred Stock. This right of first refusal shall
                             apply at each closing during the Equity Financing
                             Period, until the $15 million amount is reached.
                             Such purchases shall be determined in addition to,
                             and shall not be deemed to include, any purchases
                             of Convertible Preferred Stock by Investor
                             (including its designees) through conversion of
                             Bridge Funding, or exercise of any warrants or
                             similar instruments. Such right of first refusal
                             shall apply regardless of whether or not Investor
                             leads the financing during any part of the Equity
                             Financing Period.

Conditions to Closings:      The following conditions shall apply to each
                             closing for the purchase and sale of Convertible
                             Preferred Stock. Each such condition must be
                             satisfied or waived, and such satisfaction and/or
                             waiver of each such condition shall be determined
                             by Investor and, as applicable, Other Investors in
                             their respective sole discretion, individually and
                             not jointly.

                             -    The Company shall have in all material
                                  respects performed, and be in compliance with,
                                  all obligations, agreements, covenants,
                                  closing conditions and other provisions
                                  contained in the Amended and Restated
                                  Recapitalization Agreement by and between the
                                  parties hereto dated July 30, 2004, as amended
                                  on October 22, 2004 (the "Recapitalization
                                  Agreement"), the Notes evidencing Bridge
                                  Funding (to the extent any such notes remain
                                  outstanding), and the other Related
                                  Recapitalization.




                                       A-2



                          
                                  Documents including, without limitation, the
                                  financing documents associated with the
                                  issuance of the Convertible Preferred Stock
                                  (the "Financing Documents"), required to be
                                  performed or fulfilled on or before the
                                  applicable closing date.

                             -    All representations and warranties set forth
                                  in the Recapitalization Agreement, the Notes
                                  evidencing Bridge Funding (to the extent any
                                  such notes remain outstanding), and the other
                                  Related Recapitalization Documents shall be
                                  true and complete as of each closing.

                             -    There shall have been no change that has had
                                  or is reasonably likely to have a material
                                  adverse effect on the business, affairs,
                                  prospects, operations, properties, assets,
                                  liabilities, structure or condition, financial
                                  or otherwise, of the Company (as such business
                                  is presently conducted and/or as it is
                                  proposed to be conducted) between the date of
                                  the Recapitalization Agreement and each
                                  closing of purchases of Convertible Preferred
                                  Stock.

                             -    All corporate and other proceedings, and all
                                  documents relating to the issuance and sale of
                                  Convertible Preferred Stock pursuant to the
                                  Recapitalization Agreement shall be
                                  satisfactory in substance and form to Investor
                                  and Other Investors, as applicable. Investor's
                                  counsel and each Other Investors' counsel (if
                                  applicable) shall have received all such
                                  counterpart originals or certified or other
                                  copies of such documents as they may have
                                  requested including, without limitation:

                                  -    The resolutions of the Board of Directors
                                       of the Company, authorizing and approving
                                       all matters in connection with the sale
                                       of the Convertible Preferred Stock
                                       certified by the Secretary of the Company
                                       as of the Closing Date.

                                  -    All stockholder consents, votes or other
                                       approval required by applicable state or
                                       federal law (including any and all SEC
                                       rules and regulations) and any consents
                                       required by applicable securities
                                       exchanges or markets or corporate
                                       partners required to authorize and
                                       approve all matters in connection with
                                       the sale of Convertible Preferred Stock
                                       as contemplated by this term sheet.

                                  -    The Company shall have executed,
                                       delivered and maintained in force (i) a
                                       Convertible Preferred Stock purchase
                                       agreement, (ii) an Investors' Rights
                                       Agreement, (iii) an amended and restated
                                       certificate of incorporation (or if
                                       appropriate, a certificate of
                                       designation), (iv) a voting agreement, if
                                       applicable, and (v) such other documents
                                       as may be necessary or desirable in the
                                       determination of Investor and Other
                                       Investors, as applicable.

                                  -    The Investor and Other Investors shall
                                       have received from counsel




                                       A-3



                          
                                       to the Company an opinion letter
                                       containing opinions customary for
                                       transactions similar to the Proposed
                                       Equity Financing in the form reasonably
                                       acceptable to Investor and Other
                                       Investors (including, but not limited to,
                                       an opinion that the issuance of the
                                       Convertible Preferred Stock, the
                                       Preferred Stock Warrants and the
                                       securities issuable upon conversion
                                       and/or exercise thereof pursuant to the
                                       Proposed Equity Financing are exempt from
                                       the registration provisions of the
                                       federal and state securities laws).

                                  -    The Company shall have taken all
                                       necessary steps to set the number of
                                       directors on the Company's board of
                                       directors at seven (7) and elect
                                       directors according to the "Board of
                                       Directors" section below, including,
                                       without limitation, execution of a Voting
                                       Agreement if necessary or desirable in
                                       the determination of Investor and Other
                                       Investors, as applicable.

                                  -    The Company shall have delivered a
                                       certificate of its Chief Executive
                                       Officer, or other authorized and
                                       responsible officer of the Company
                                       acceptable to Investor and Other
                                       Investors, as applicable, in their
                                       respective sole discretion, certifying
                                       that all closing conditions have been
                                       fulfilled and that all representations
                                       and warranties are applicable and true as
                                       of the date of such closing.

                                  -    The Company shall have provided prior to
                                       the applicable closing date all due
                                       diligence information requested by any
                                       investor, and/or necessary to enable such
                                       investor to complete a thorough due
                                       diligence review and obtain a complete
                                       and accurate understanding of the
                                       business, operations, prospects, assets,
                                       liabilities, structure, legal aspects and
                                       condition, financial or otherwise, of the
                                       Company.

                                  -    Within the six month period prior to any
                                       closing of Convertible Preferred Stock,
                                       the Company shall not have entered into,
                                       increased, expanded, extended, renewed or
                                       reinstated (or agreed, promised,
                                       committed or undertaken to do so), any
                                       severance, separation, retention, change
                                       of control or similar agreement with any
                                       employee, other than such agreements
                                       entered into with the prior written
                                       approval of Investor and Other Investors,
                                       as applicable.

                                  -    Within the six month period prior to any
                                       closing of Convertible Preferred Stock,
                                       the Company shall not have hired, or
                                       agreed to hire, any employee or engaged,
                                       or agreed to engage, any consultant,
                                       independent contractor or any other
                                       non-employee personnel, except in
                                       accordance with the Company's budget that
                                       has been approved by the Company's board
                                       of directors and the Investor and Other
                                       Investors, as applicable;




                                       A-4



                          
                                  -    Within the six month period prior to any
                                       closing of Convertible Preferred Stock,
                                       the Company shall not have purchased,
                                       leased, hired, rented or otherwise
                                       acquired directly or indirectly any
                                       rights in or to any asset or facility in
                                       an amount in excess of $10,000, or
                                       agreed, promised or committed to do so,
                                       except in accordance with the Company's
                                       budget that has been approved by the
                                       Company's board of directors and the
                                       Investor and Other Investors, as
                                       applicable.

                                  -    [***]*

                                  -    All Intellectual Property licenses,
                                       agreements, patent applications and
                                       filings shall be current and in good
                                       standing.

                                  -    The Company shall have obtained the
                                       approval of the required number of its
                                       stockholders (the Company shall be
                                       obligated to use its best efforts in good
                                       faith comply with these terms and
                                       conditions to obtain stockholder consent
                                       and, in the event that it uses its best
                                       efforts in good faith to do so and fails
                                       to achieve stockholder approval, the
                                       Company shall not be required to sell the
                                       Convertible Preferred Stock).

                                  -    The satisfaction of other customary
                                       conditions of transactions of this sort
                                       that Investor may reasonably require.

Conversion:                  The Convertible Preferred Stock shall be
                             convertible at any time, in whole or in part, at
                             the option of the holder (without any further
                             payment by the holder) into Common Stock of the
                             Company. The initial conversion ratio shall be one
                             share of Common Stock for each share of Convertible
                             Preferred Stock (the "Conversion Ratio"). The
                             Conversion Ratio shall be subject to appropriate
                             adjustment in the event of (i) any subdivision or
                             combination of the Company's outstanding Common
                             Stock, (ii) any distribution by the Company of a
                             stock dividend or assets, (iii) any capital
                             reorganization or reclassification of the Company
                             affecting the conversion price, or other similar
                             transactions, as applicable. The Conversion Ratio
                             shall also be subject to adjustment pursuant to the
                             anti-dilution provisions (below).

Rights, Preferences,         (1) Dividends: A cumulative dividend shall accrue
Privileges and               at the rate of 10% per annum, compounding quarterly
Restrictions:                on the Convertible Preferred Stock. No dividends
                             shall be paid on the Common or any other securities
                             issued by the Company other than the Convertible
                             Preferred Stock. Dividends shall be payable as and
                             when determined



- ----------
*    Confidential Treatment Requested.


                                       A-5



                          

                             by the Board of Directors, and upon the occurrence
                             of a liquidation. A liquidation shall be deemed to
                             include, without limitation, a merger resulting in
                             a change in control of the Company, sale of all or
                             substantially all of the assets of the Company, or
                             transfer of control (not including any transfer of
                             control that is the result of the sale and issuance
                             of the Convertible Preferred Stock contemplated
                             hereunder, the conversion of any of the Bridge
                             Funding or exercise of any Bridge Warrants or
                             Preferred Stock Warrants).

                             (2) Liquidation Preference: In the event of
                             liquidation or winding up of the Company, the
                             holders of shares of Convertible Preferred shall be
                             entitled (at such holders' option) to convert such
                             shares to Common Stock or to receive, in preference
                             to the holders of Common, (i) an amount equal to
                             the original purchase price with respect to such
                             Convertible Preferred Stock, plus (ii) (to the
                             extent of current and/or retained earnings) any
                             dividends accrued but not paid on such Convertible
                             Preferred Stock, or such lesser amount as is the
                             maximum amount acceptable under applicable SBA and
                             SEC rules and regulations. Thereafter, all
                             remaining assets shall be distributed pro-rata to
                             the holders of Common Stock and all Convertible
                             Preferred Stock on an as converted basis. A
                             liquidation shall be deemed to include, without
                             limitation, a merger resulting in a change in
                             control of the Company, sale of all or
                             substantially all of the assets of the Company, or
                             transfer of control (not including any transfer of
                             control that is the result of the sale and issuance
                             of the Convertible Preferred Stock contemplated
                             hereunder, the conversion of any of the Bridge
                             Funding or exercise of any Bridge Warrants or
                             Preferred Stock Warrants).

                             (3) Anti-dilution: Notwithstanding anything herein
                             to the contrary, except for issuances to management
                             and employees, which must be approved by the Board
                             pursuant to written benefit plans, and except for
                             issuances relating to the Bridge Funding under the
                             Recapitalization Agreement, if the Company issues
                             (or, directly or indirectly promises, commits, or
                             undertakes to issue) any additional securities or
                             instruments at a nominal or effective purchase
                             price less than the price resulting from the
                             application of the Conversion Ratio, calculated on
                             a fully diluted basis with respect to the
                             Convertible Preferred Stock, then the Conversion
                             Ratio of such Convertible Preferred Stock shall be
                             reduced on a full ratchet basis to eliminate the
                             effect of such dilutive issuance on such
                             Convertible Preferred Stock.

                             (4) Protective Provisions: Until fewer than
                             1,000,000 shares of Convertible Preferred Stock are
                             outstanding (as adjusted for stock splits, stock
                             dividends and the like), the Company shall not,
                             without the approval of the Board of Directors and
                             the affirmative vote or written consent of the
                             holders of a majority of the then outstanding
                             shares of Convertible Preferred Stock: (i)
                             authorize or issue (including, without limitation,
                             by way of recapitalization), or obligate itself to
                             authorize or issue, any equity security of the
                             Corporation, or any other security exercisable for
                             or convertible into an equity security of the
                             Corporation, that has redemption rights or that is
                             senior to or on parity with the Convertible
                             Preferred Stock as to dividend rights, voting
                             rights, liquidation preferences or any other




                                       A-6



                          
                             rights, preferences or privileges; (ii) increase or
                             decrease (other than by conversion) the total
                             number of authorized shares of Convertible
                             Preferred Stock or Common Stock; (iii) effect any
                             sale, lease, assignment, transfer or other
                             conveyance or encumbrance of all or substantially
                             all of the assets of the Corporation or any of its
                             subsidiaries in one or more related transactions,
                             or any consolidation or merger resulting in a
                             change in control of the Company, or any
                             reclassification, recapitalization or other change
                             of any capital stock of the Corporation; (iv)
                             change the authorized number of directors of the
                             Corporation; (v) amend or repeal the Certificate
                             (including by way of any Certificate of
                             Designation) or the Corporation's Bylaws; (vi)
                             redeem, purchase or otherwise acquire (or pay into
                             or set aside for a sinking fund for such purpose)
                             any of the Common Stock or common stock
                             equivalents; provided, however, that this
                             restriction shall not apply to the repurchase of up
                             to a maximum of $100,000 of Common Stock per year
                             from employees, officers, directors, consultants,
                             advisors or other persons performing services for
                             the Corporation, pursuant to agreements under which
                             the Corporation has the option to repurchase such
                             shares at cost upon the occurrence of certain
                             events, such as the termination of employment;
                             (vii) effect the liquidation, dissolution or
                             winding up of the Corporation; or (viii) agree,
                             promise, commit or undertake to do any of the
                             foregoing.

                             (5) Voting Rights: The holders of Convertible
                             Preferred will have the right to that number of
                             votes equal to the number of shares of Common Stock
                             issuable upon conversion of such Preferred Stock.

Private Placement:           The Convertible Preferred Stock shall not be
                             registered under the Securities Act of 1933, as
                             amended (the "Act") and may not be resold without
                             such registration or an exemption under the
                             provisions of the Act. The Convertible Preferred
                             Stock shall be sold only to "accredited investors,"
                             as defined in Regulation D under the Act.

Registration Rights          At the request of Investor, the Company will use
                             its best efforts to prepare and file, within 60
                             days following the First Closing and each
                             Subsequent Closing, a registration statement on
                             Form SB-2 or Form S-1 (or if Form S-3 is available,
                             on Form S-3) (the "Registration Statement") for the
                             resale of the shares of Common Stock issuable to
                             the Investor and Other Investors upon conversion of
                             the Convertible Preferred Stock and upon exercise
                             of the Warrants, and use its commercially
                             reasonable efforts to cause the Registration
                             Statement to become effective within 120 days after
                             such closing. The Company agrees to make such
                             filings as are necessary to keep the Registration
                             Statement effective until the earlier of (A) the
                             date that the investors have completed the
                             distribution related to the Common Stock, or (B)
                             such time that all Common Stock then held by the
                             investors (including shares of Common Stock
                             issuable upon conversion of Preferred Stock held by
                             the investors) can be sold without compliance with
                             the registration requirements of the Securities Act
                             pursuant to Rule 144(k) under the Securities Act.




                                       A-7



                          
                             Liquidated Damages: In the event that the Company
                             shall fail to cause the Registration Statement to
                             be timely filed, timely declared effective, or to
                             be kept effective (other than pursuant to customary
                             permissible suspension periods), the Company shall
                             pay as liquidated damages the amount of 1% per
                             month of the aggregate purchase price for the
                             securities remaining to be sold pursuant to the
                             Registration Statement or such lesser amount that
                             is the maximum permitted under applicable SBA rules
                             and regulations.

                             In the event that the Company's Common Stock is no
                             longer registered under the Securities Exchange Act
                             of 1934, as amended following completion of the
                             First Closing, or for any reason the Company does
                             not register for resale all shares of Common into
                             which the Convertible Preferred converts, as
                             provided for above, Investor and each Other
                             Investor shall have the following registration
                             rights with respect to the Common Stock into which
                             such investor's Convertible Preferred converts:

                                  (1) Demand Registration Rights. If, at any
                                  time after the initial purchase of the
                                  Convertible Preferred Stock, holders of at
                                  least 20% of the Common Stock issued or
                                  issuable upon conversion of the Convertible
                                  Preferred Stock request that the Company file
                                  a Registration Statement covering at least 10%
                                  of the Common issued or issuable upon
                                  conversion of the Convertible Preferred (or
                                  any lesser percentage if the anticipated
                                  aggregate offering price would exceed
                                  $2,000,000), the Company shall cause the
                                  shares attributable to the Convertible
                                  Preferred Stock to be registered. The Company
                                  shall not be obligated to effect more than two
                                  registrations per year under these demand
                                  right provisions.

                                  (2) Registration on Form S-3: Holders of
                                  Common issued or issuable upon conversion of
                                  the Convertible Preferred Stock shall have the
                                  right to require the Company to file unlimited
                                  Registration Statements on Form S-3 (or any
                                  equivalent successor form), provided the
                                  Company is otherwise eligible to use Form S-3
                                  for such a registration and the anticipated
                                  aggregate offering price in each registration
                                  on Form S-3 exceeds $1,000,000.

                                  (3) Piggy-Back Registration: Holders of Common
                                  issued or issuable upon conversion of the
                                  Convertible Preferred Stock shall be entitled
                                  to unlimited 'piggy-back' registration rights
                                  on all registrations of the Company.

                                  (4) Transfer of Registration Rights: The
                                  registration rights may be transferred to any
                                  transferee permitted under applicable Federal
                                  and state securities laws, provided that the
                                  Company is given written notice thereof and
                                  provided that the transferee agrees in writing
                                  to be bound by the terms of the stock purchase
                                  agreement and other agreements relating to
                                  this transaction.




                                       A-8



                          
                                  (5) Costs: The Company shall bear all expenses
                                  relating to all such preparation and filings.

                                  (6) Indemnification: The Company shall provide
                                  the Investors with the maximum indemnification
                                  allowed under applicable law with regard to
                                  the registration rights.

Regulatory Costs             The Company shall be responsible for completing and
                             shall bear all costs associated with all regulatory
                             filings that are necessary in connection with the
                             transactions described herein, including, without
                             limitation, U.S. Securities and Exchange Commission
                             filings (whether these filings are made by the
                             Company, the purchasers of the Convertible
                             Preferred Stock or their affiliates), blue sky
                             filings and/or other necessary filings under
                             applicable securities market or exchange rules and
                             regulations.

Board of Directors:          The authorized number of directors shall be seven
                             (7). Four (4) of the seven directors shall be
                             designated by the holders of a majority of the
                             Convertible Preferred Stock, two (2) of the
                             directors shall be outsiders with significant
                             industry experience who are reasonably acceptable
                             to the holders of a majority of the Convertible
                             Preferred Stock, and one (1) of the directors shall
                             be the CEO of the Company.

D&O Insurance:               As promptly as practicable after the First Closing,
                             the Company shall use best efforts to obtain and
                             maintain in force $10 million in director and
                             officer liability insurance coverage.

SBA Provisions:              The Company shall make such representations,
                             warranties and covenants, and shall provide such
                             documentation and information rights as may be
                             necessary (e.g., certification that at the time of
                             Investor's investment the Company is a "small"
                             business, has the majority of its operations in the
                             US, and is not engaged in oil and gas exploration,
                             movie production or certain other prohibited
                             activities), to satisfy the requirements of the SBA
                             in regard to investment by Investor in the Company.

Documentation:               The purchase of the Convertible Preferred Stock
                             shall be made pursuant to a Stock Purchase
                             Agreement, Investor Rights Agreement, Voting
                             Agreement (if applicable) and Amended and Restated
                             Certificate of Incorporation (or if appropriate,
                             certificate of designation) to be drafted by
                             counsel to the Investor. Such agreements and other
                             documents shall contain, among other things,
                             appropriate representations and warranties
                             (including, without limitation, reps and warranties
                             concerning the Intellectual Property, the financial
                             condition of the Company, the absence of litigation
                             or threats thereof, and full disclosure of all
                             material information), covenants, protective
                             provisions, and conditions of closing including
                             those noted above.




                                       A-9



                          
Miscellaneous:               Customary provisions, including applicable law
                             (Delaware), severability, assignment (except as
                             provided under the rights of first refusal above,
                             holders of Convertible Preferred Stock shall be
                             free to assign or transfer their Convertible
                             Preferred Stock or rights hereunder to any party
                             permitted under applicable federal and state
                             securities laws, as long as transferee agrees to
                             the terms and obligations of the Convertible
                             Preferred Stock, respectively), etc.

Transaction Expenses:        The Company shall pay, reimburse or otherwise
                             satisfy, upon demand of Investor, all fees, costs
                             and expenses incurred and/or undertaken by Investor
                             relating to the preparation for, development of and
                             implementation of the Recapitalization Plan set
                             forth in the Recapitalization Agreement, including,
                             without limitation, all due diligence expenses and
                             all expenses relating to the Bridge Funding and the
                             Anticipated Equity Financing and the transactions
                             contemplated hereby and by the Recapitalization
                             Agreement and the documentation of all of the
                             foregoing (including, without limitation all legal
                             fees and expenses). This obligation shall apply
                             regardless of whether or not all of the
                             transactions contemplated in the Recapitalization
                             Agreement close. At each closing of the Anticipated
                             Equity Financing, at Investor's sole discretion,
                             and with respect to any or all of such fees, costs
                             and expenses accrued through such closing, the
                             Company shall (a) pay Investor in cash concurrently
                             with such closing (or at Investor's sole
                             discretion, Investor may withhold such amount from
                             the wire of investments proceeds), (b) issue a
                             promissory note in the form of the Notes in
                             principal amount equal to such fees, costs and
                             expenses; or (c) treat such fees, costs and
                             expenses as an unsecured payable. At any time
                             following such closing, Investor may require any
                             amounts that it elected to have the Company treat
                             as unsecured amounts payable to be paid in cash or
                             satisfied by issuance of a Note in the principal
                             amount of some or all of such unsecured obligation.

Cross-default:               The Company acknowledges that the financing
                             contemplated by this term sheet is part of an
                             integrated Recapitalization Plan, as set forth in
                             the Recapitalization Agreement. The Company further
                             acknowledges and agrees that this term sheet is
                             subject to all terms and conditions set forth in
                             the Recapitalization Agreement and the other
                             Related Recapitalization Documents and that the
                             Recapitalization Agreement and the other Related
                             Recapitalization Documents are subject to all terms
                             and conditions set forth in this Term Sheet. The
                             Company agrees that any default by the Company
                             under any provision of this Term Sheet, the
                             Recapitalization Agreement or any of the other
                             Related Recapitalization Documents will constitute
                             a default under this Term Sheet, each other Related
                             Recapitalization Document and the Recapitalization
                             Agreement.

Standstill/exclusivity:      The standstill/exclusivity provision in the
                             Recapitalization Agreement shall remain in full
                             force and effect during the Equity Financing
                             Period.

Termination                  The Company's obligations to issue any securities
                             in connection with the Anticipated Equity Financing
                             may terminate only in accordance with Section 3.2
                             of the Recapitalization Agreement; however, such
                             termination shall not have any




                                      A-10



                          

                             impact on the other rights and obligations of the
                             parties under the Recapitalization Agreement or the
                             Related Recapitalization Documents, except as
                             explicitly set forth in Section 3.2 of the
                             Recapitalization Agreement.

No Offer                     For purposes of applicable securities laws, this
                             Term Sheet does not constitute an offer to sell or
                             the solicitation of an offer to buy any of the
                             securities described herein.

Binding Agreement            This Term Sheet constitutes a binding commitment on
                             the part of the Company. The obligations of
                             Investor and Other Investors under this Term Sheet
                             are subject to the conditions contained herein and
                             in the Related Recapitalization Documents.



                                        AGREED AND ACCEPTED:

TOUCAN CAPITAL FUND II, LP              NORTHWEST
                                        BIOTHERAPEUTICS, INC.


By: /s/ Linda Powers                    By: /s/ Alton Boynton
    ---------------------------------       ------------------------------------
Name: Linda F. Powers                   Name: Alton Boynton
Title: Managing Director                Title: President

Date: October 22, 2004                  Date: October 22, 2004


                                      A-11


              AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET

     This AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of December 27, 2004 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 (as so amended and restated, the
"CONVERTIBLE PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 3 (the "THIRD
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Third Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $6.75 million in warrant coverage on the first
     $6.75 million Convertible Preferred Stock purchased for cash (the
     "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued
     upon conversion of notes, exercise of warrants, or other conversion or
     exercise. The number of warrants to be so issued shall be determined on the
     basis of $0.10 per share. If the total of $6.75 million is invested in
     Convertible Preferred Stock, the number of warrants issued shall be
     exercisable for 67.5 million shares of Convertible Preferred Stock. The
     exercise price of such Preferred Stock Warrants shall be the lesser of
     $0.10 per share (subject to adjustment for stock splits, stock dividends
     and the like) and 35% discount to the average closing price during the
     twenty trading days prior to the First Closing; provided, however, that in
     no event will the exercise price be less than $.04 per share (subject to
     adjustment for stock splits, stock dividends and the like). The exercise
     period shall commence upon issuance of the Preferred Stock Warrants, and
     shall continue for a period of seven (7) years after their respective
     issuance dates."

     2. The thirteenth bullet in the paragraph entitled "Conditions to Closing"
of the Convertible Preferred Stock term Sheet is hereby deleted in its entirety
and shall not be a



condition precedent to the obligation of any Investor to Purchase Convertible
Preferred Stock from the Company.

     3. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       2.



     The Company and Toucan have executed this AMENDMENT TO AMENDED AND RESTATED
BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By: /s/ Linda Powers                    By: /s/ Alton Boynton
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                       3.



                SECOND AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

     This SECOND AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of January 26, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27, 2004
(the "CONVERTIBLE PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 4 (the "FOURTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Fourth Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Board of Directors:" is hereby amended and restated in its entirety as follows:

     "The authorized number of directors shall initially be one (1). The
     authorized number of directors may not be increased or decreased without
     the consent of the holders of a majority of the shares of Convertible
     Preferred Stock. The holders of a majority of the shares of Convertible
     Preferred Stock, acting in their sole discretion, may require the Company
     to increase the total number of authorized directors at any time following
     the first closing of the Convertible Preferred Stock, up to a maximum of
     seven (7) directors. Subject to the limitation in the following sentence,
     any newly created directorships shall be designated by the holders of a
     majority of the shares of Convertible Preferred Stock, acting in their sole
     discretion, to be filled by either: (i) an outside director with
     significant industry experience, who is reasonably acceptable to the
     holders of a majority of the Convertible Preferred Stock, to be elected by
     the holders of the Company's Common Stock (which may, subject to applicable
     law, the Certificate of Incorporation or the Bylaws, be filled initially by
     vote of the remaining director(s)) (a "COMMON DIRECTORSHIP"); or (ii) a
     director to be designated by the holders of a majority of the Convertible
     Preferred Stock (a "PREFERRED



     DIRECTORSHIP"). Notwithstanding the foregoing, no more than four (4)
     directorships shall be designated as Preferred Directorships, no more than
     two (2) directorships shall be designated as Common Directorships, and one
     (1) director shall be the chief executive officer of the Company."

     2. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       2.



     The Company and Toucan have executed this SECOND AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By: /s/ Linda Powers                    By: /s/ Alton Boynton
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                       3.



                 THIRD AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

     This THIRD AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of April 12, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27, 2004
and January 26, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 5 (the "FIFTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Fifth Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $6.3 million in warrant coverage on the first $6.3
     million Convertible Preferred Stock purchased for cash (the "Preferred
     Stock Warrants"). Preferred Stock Warrants shall not be issued upon
     conversion of notes, exercise of warrants, or other conversion or exercise.
     The number of warrants to be so issued shall be determined on the basis of
     $0.10 per share. If the total of $6.3 million is invested in Convertible
     Preferred Stock, the number of warrants issued shall be exercisable for 63
     million shares of Convertible Preferred Stock. The exercise price of such
     Preferred Stock Warrants shall be $.04 per share (subject to adjustment for
     stock splits, stock dividends and the like). The exercise period shall
     commence upon issuance of the Preferred Stock Warrants, and shall continue
     for a period of seven (7) years after their respective issuance dates."

     2. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.



     3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       2.



      The Company and Toucan have executed this THIRD AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By: /s/ Linda Powers                    By: /s/ Alton Boynton
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                       3.



                FOURTH AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

          This FOURTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of May 13, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

          WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27,
2004, January 26, 2005 and April 12, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM
SHEET").

          WHEREAS, concurrently herewith, the Company and its affiliates, if
any, and Toucan and its designees, are entering into Amendment No. 6 (the "SIXTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

          WHEREAS, in connection with the Sixth Amendment, the Company and
Toucan desire to amend the Convertible Preferred Stock Term Sheet as provided
herein.

                                    AGREEMENT

          NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

          1. The paragraph of the Convertible Preferred Stock Term Sheet
entitled "Warrants:" is hereby amended and restated in its entirety as follows:

          "The Company shall issue $5.85 million in warrant coverage on the
          first $5.85 million Convertible Preferred Stock purchased for cash
          (the "Preferred Stock Warrants"). Preferred Stock Warrants shall not
          be issued upon conversion of notes, exercise of warrants, or other
          conversion or exercise. The number of warrants to be so issued shall
          be determined on the basis of $0.10 per share. If the total of $5.85
          million is invested in Convertible Preferred Stock, the number of
          warrants issued shall be exercisable for 58.5 million shares of
          Convertible Preferred Stock. The exercise price of such Preferred
          Stock Warrants shall be $.04 per share (subject to adjustment for
          stock splits, stock dividends and the like). The exercise period shall
          commence upon issuance of the Preferred Stock Warrants, and shall
          continue for a period of seven (7) years after their respective
          issuance dates."

          2. Unless specifically modified or changed by the terms of this
Amendment, all terms and conditions of the Convertible Preferred Stock Term
Sheet shall remain in effect and shall apply fully as described and set forth in
the Convertible Preferred Stock Term Sheet.

          3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]



          The Company and Toucan have executed this FOURTH AMENDMENT TO AMENDED
AND RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By:                                     By:
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President



                 FIFTH AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

     This FIFTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of June 16, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27,
2004, January 26, 2005, April 12, 2005 and May 13, 2005 (the "CONVERTIBLE
PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 7 (the "SEVENTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Seventh Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $5.35 million in warrant coverage on the first
     $5.35 million Convertible Preferred Stock purchased for cash (the
     "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued
     upon conversion of notes, exercise of warrants, or other conversion or
     exercise. The number of warrants to be so issued shall be determined on the
     basis of $0.10 per share. If the total of $5.35 million is invested in
     Convertible Preferred Stock, the number of warrants issued shall be
     exercisable for 53.5 million shares of Convertible Preferred Stock. The
     exercise price of such Preferred Stock Warrants shall be $.04 per share
     (subject to adjustment for stock splits, stock dividends and the like). The
     exercise period shall commence upon issuance of the Preferred Stock
     Warrants, and shall continue for a period of seven (7) years after their
     respective



     issuance dates."

     2. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       2.



     The Company and Toucan have executed this FIFTH AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By:                                     By:
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                       3.



                 SIXTH AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

          This SIXTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of July 26, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27,
2004, January 26, 2005, April 12, 2005, May 13, 2005 and June 16, 2005 (the
"CONVERTIBLE PREFERRED STOCK TERM SHEET").


                                        1



     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 8 (the "EIGHTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Eighth Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Subsequent Closings:" is hereby amended by replacing the phrase "12 months
after the First Closing" with "December 31, 2006 (or such later date as is
mutually agreed by the parties hereto)" in the first sentence thereof.

     2. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $4.85 million in warrant coverage on the first
     $4.85 million Convertible Preferred Stock purchased for cash (the
     "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued
     upon conversion of notes, exercise of warrants, or other conversion or
     exercise. The number of warrants to be so issued shall be determined on the
     basis of $0.10 per share. If the total of $4.85 million is invested in
     Convertible Preferred Stock, the number of warrants issued shall be
     exercisable for 48.5 million shares of Convertible Preferred Stock. The
     exercise price of such Preferred Stock Warrants shall be $.04 per share
     (subject to adjustment for stock splits, stock dividends and the like). The
     exercise period shall commence upon issuance of the Preferred Stock
     Warrants, and shall continue for a period of seven (7) years after their
     respective issuance dates."

     3. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

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                                        2



     The Company and Toucan have executed this SIXTH AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By:                                     By:
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                        3



                SEVENTH AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

          This SEVENTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET
(this "AMENDMENT") is made effective as of September 7, 2005 by and between
NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and
TOUCAN CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27,
2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005 and July 26,
2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 9 (the "NINTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Ninth Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $4.35 million in warrant coverage on the first
     $4.35 million Convertible Preferred Stock purchased for cash (the
     "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued
     upon conversion of notes, exercise of warrants, or other conversion or
     exercise. The number of warrants to be so issued shall be determined on the
     basis of $0.10 per share. If the total of $4.35 million is invested in
     Convertible Preferred Stock, the number of warrants issued shall be
     exercisable for 43.5 million shares of Convertible Preferred Stock. The
     exercise price of such Preferred Stock Warrants shall be $.04 per share
     (subject to adjustment for stock splits, stock dividends and the like). The
     exercise period shall commence upon issuance of the Preferred Stock
     Warrants, and shall continue for a period of seven (7) years after their
     respective issuance dates."

     2. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        1



     The Company and Toucan have executed this SEVENTH AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By:                                     By:
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President


                                        2



                EIGHTH AMENDMENT TO AMENDED AND RESTATED BINDING
                                   TERM SHEET

     This EIGHTH AMENDMENT TO AMENDED AND RESTATED BINDING TERM SHEET (this
"AMENDMENT") is made effective as of November 14, 2005 by and between NORTHWEST
BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and TOUCAN
CAPITAL FUND II, L.P., a Delaware limited partnership ("TOUCAN").

                                    RECITALS

     WHEREAS, the Company and Toucan are party to that certain Binding
Convertible Preferred Stock Term Sheet originally dated April 26, 2004 and
amended and restated on October 22, 2004 as further amended on December 27,
2004, January 26, 2005, April 12, 2005, May 13, 2005, June 16, 2005, July 26,
2005 and September 7, 2005 (the "CONVERTIBLE PREFERRED STOCK TERM SHEET").

     WHEREAS, concurrently herewith, the Company and its affiliates, if any, and
Toucan and its designees, are entering into Amendment No. 10 (the "TENTH
AMENDMENT") to that certain Amended and Restated Recapitalization Agreement by
and between the parties thereto; and

     WHEREAS, in connection with the Tenth Amendment, the Company and Toucan
desire to amend the Convertible Preferred Stock Term Sheet as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Toucan agree as follows:

     1. The paragraph of the Convertible Preferred Stock Term Sheet entitled
"Warrants:" is hereby amended and restated in its entirety as follows:

     "The Company shall issue $3.95 million in warrant coverage on the first
     $3.95 million Convertible Preferred Stock purchased for cash (the
     "Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued
     upon conversion of notes, exercise of warrants, or other conversion or
     exercise. The number of warrants to be so issued shall be determined on the
     basis of $0.10 per share. If the total of $3.95 million is invested in
     Convertible Preferred Stock, the number of warrants issued shall be
     exercisable for 3.95 million shares of Convertible Preferred Stock. The
     exercise price of such Preferred Stock Warrants shall be $.04 per share
     (subject to adjustment for stock splits, stock dividends and the like). The
     exercise period shall commence upon issuance of the Preferred Stock
     Warrants, and shall continue for a period of seven (7) years after their
     respective issuance dates."

     2. Unless specifically modified or changed by the terms of this Amendment,
all terms and conditions of the Convertible Preferred Stock Term Sheet shall
remain in effect and shall apply fully as described and set forth in the
Convertible Preferred Stock Term Sheet.

     3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                        1



     The Company and Toucan have executed this EIGHTH AMENDMENT TO AMENDED AND
RESTATED BINDING TERM SHEET as of the day and year first written above.

TOUCAN CAPITAL FUND II, L.P.            NORTHWEST BIOTHERAPEUTICS, INC.


By: /s/ Linda Powers                    By: /s/ Alton L. Boynton
    ---------------------------------       ------------------------------------
Name: Linda Powers                      Name: Alton L. Boynton
Title: Managing Director                Title: President

EX-10.27

                                                                   EXHIBIT 10.27

     NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS.

     THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON NOVEMBER ___,
2008 (the "EXPIRATION DATE").

No. __________

                         NORTHWEST BIOTHERAPEUTICS, INC.

                        WARRANT TO PURCHASE COMMON SHARES

     For VALUE RECEIVED, ____________________ ("Warrantholder"), is entitled to
purchase, subject to the provisions of this Warrant, from Northwest
Biotherapeutics, Inc., a Delaware corporation ("Company"), at any time not later
than 5:00 P.M., Seattle time, on the Expiration Date (as defined above), at an
exercise price per share equal to $0.__ [Insert closing price on date of
closing] (the exercise price in effect being herein called the "Warrant Price"),
______ shares ("Warrant Shares") of the Company's Common Stock, par value $0.001
per share ("Common Stock"). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as described herein.

     Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of this Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.

     Section 2. Transfers. As provided herein, this Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act"), or an exemption from such registration.
Subject to such restrictions, the Company shall transfer this Warrant from time
to time upon the books to be maintained by the Company for that purpose, upon
surrender thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer and such other documents as may be reasonably required
by the Company, including, if required by the Company, an opinion of its counsel
to the effect that such transfer is exempt from the registration requirements of
the Securities Act, to establish that such transfer is being made in accordance
with the terms hereof, and a new Warrant shall be issued to the transferee and
the surrendered Warrant shall be canceled by the Company.



     Section 3. Exercise.

          (a) Manner of Exercise. This Warrant may be exercised at any time or
from time to time, on any business day, for all or part of the full number of
Warrant Shares during the period of time described above, by surrendering it at
the principal office of the Company at 22322 20th Avenue SE, Suite 150, Bothell,
Washington 98021, with the subscription form in the form attached hereto duly
executed, together with payment for the Warrant Shares to be purchased, payable
in cash, cashier's check and/or wire transfer of immediately available funds.
Subject to Section 3(b) below, no other form of consideration shall be
acceptable for the exercise of this Warrant. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise together with delivery of payment therefor as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the record holder of
such shares as of the close of business on such date. As soon as practicable on
or after such date, and in any event within 20 days thereof, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of shares of Common Stock issuable
upon such exercise. Upon any partial exercise, the Company will issue and
deliver to Holder a new Warrant with respect to the Warrant Shares not
previously purchased. No fractional shares of Common Stock shall be issued upon
exercise of a Warrant. In lieu of any fractional share to which Holder would be
entitled upon exercise, the Company shall pay cash equal to the product of such
fraction multiplied by the then current fair market value of one share of Common
Stock, as determined in good faith by the Company.

          (b) Net Exercise. In lieu of cash exercising this Warrant, Holder may
elect to receive Common Stock equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder hereof a number of shares of Common Stock computed
using the following formula:

                                     Y (A - B)
                                 X = ---------
                                         A

     Where:

     X = The number of shares of Common Stock to be issued to the Holder.

     Y = The number of shares of Common Stock purchasable under this Warrant.

     A = The then current Market Price of one share of the Company's Common
         Stock at the time of exercise.

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

          For purposes of this Section 3(b), the Market Price shall be
determined in accordance with the provisions of Section 8(b)


                                       -2-



     Section 4. Compliance with the Securities Act of 1933. The Company may
cause the legend set forth on the first page of this Warrant to be set forth on
each Warrant or similar legend on any security issued or issuable upon exercise
of this Warrant, unless counsel for the Company is of the opinion as to any such
security that such legend is unnecessary.

     Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's reasonable satisfaction that such tax
has been paid. The holder shall be responsible for income taxes due under
federal, state or other law, if any such tax is due.

     Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.

     Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this Section
7, out of the authorized and unissued shares of Common Stock, sufficient shares
to provide for the exercise of the rights of purchase represented by this
Warrant. The Company agrees that all Warrant Shares issued upon due exercise of
the Warrant shall be, at the time of delivery of the certificates for such
Warrant Shares, duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock of the Company.

     Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

          (a) If the Company shall, at any time or from time to time while this
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares or issue by reclassification of its
outstanding shares of Common Stock any shares of its capital stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then the number of Warrant Shares
purchasable upon


                                       -3-



exercise of the Warrant and the Warrant Price in effect immediately prior to the
date upon which such change shall become effective, shall be adjusted by the
Company so that the Warrantholder thereafter exercising the Warrant shall be
entitled to receive the number of shares of Common Stock or other capital stock
which the Warrantholder would have received if the Warrant had been exercised
immediately prior to such event upon payment of a Warrant Price that has been
adjusted to reflect a fair allocation of the economics of such event to the
Warrantholder. Such adjustments shall be made successively whenever any event
listed above shall occur.

          (b) In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price (as defined below) per share of Common Stock immediately prior
to such payment date, less the fair market value (as determined by the Company's
Board of Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock immediately prior to such payment
date. "Market Price" as of a particular date (the "Valuation Date") shall mean
the following: (a) if the Common Stock is then listed on a national stock
exchange, the closing sale price of one share of Common Stock on such exchange
on the last trading day prior to the Valuation Date; (b) if the Common Stock is
then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the closing sale price
of one share of Common Stock on Nasdaq on the last trading day prior to the
Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low asked price quoted on Nasdaq on the last trading day
prior to the Valuation Date; (c) if the Common Stock is not then listed on a
national stock exchange or quoted on Nasdaq, the average of the high bid and the
low ask price quoted on the OTC Bulletin Board on the last trading day prior to
the Valuation Date; or (d) if the Common Stock is not then listed on a national
stock exchange or quoted on Nasdaq or the OTC Bulletin Board, the fair market
value of one share of Common Stock as of the Valuation Date, shall be determined
in good faith by the Board of Directors of the Company. Such adjustment shall be
made successively whenever such a payment date is fixed.

          (c) In the event that, as a result of an adjustment made pursuant to
this Section 8, the holder of this Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.

          (d) Except as provided in subsection (e) of this Section 8, if and
whenever the Company shall issue or sell, or is, in accordance with any of
subsections (d)(l) through (d)(6)


                                       -4-



hereof, deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Warrant Price in
effect immediately prior to the time of such issue or sale, then and in each
such case (a "Trigger Issuance") the then-existing Warrant Price, shall be
reduced, as of the close of business on the effective date of the Trigger
Issuance, to the lowest price per share at which any share of Common Stock was
issued or sold or deemed to be issued or sold.

          For purposes of this subsection (d), "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this subsection (d), other than Excluded Issuances (as
defined in subsection (e) hereof).

          For purposes of this subsection (d), the following subsections (d)(l)
to (d)(6) shall also be applicable:

               (d)(1) Issuance of Rights or Options. In case at any time during
          the term of this Warrant the Company shall in any manner grant
          (directly and not by assumption in a merger or otherwise) any warrants
          or other rights to subscribe for or to purchase, or any options for
          the purchase of, Common Stock or any stock or security convertible
          into or exchangeable for Common Stock (such warrants, rights or
          options being called "Options" and such convertible or exchangeable
          stock or securities being called "Convertible Securities") whether or
          not such Options or the right to convert or exchange any such
          Convertible Securities are immediately exercisable, and the price per
          share for which Common Stock is issuable upon the exercise of such
          Options or upon the conversion or exchange of such Convertible
          Securities (determined by dividing (i) the sum (which sum shall
          constitute the applicable consideration) of (x) the total amount, if
          any, received or receivable by the Company as consideration for the
          granting of such Options, plus (y) the aggregate amount of additional
          consideration payable to the Company upon the exercise of all such
          Options, plus (z), in the case of such Options which relate to
          Convertible Securities, the aggregate amount of additional
          consideration, if any, payable upon the issue or sale of such
          Convertible Securities and upon the conversion or exchange thereof, by
          (ii) the total maximum number of shares of Common Stock issuable upon
          the exercise of such Options or upon the conversion or exchange of all
          such Convertible Securities issuable upon the exercise of such
          Options) shall be less than the Warrant Price in effect immediately
          prior to the time of the granting of such Options, then the total
          number of shares of Common Stock issuable upon the exercise of such
          Options or upon conversion or exchange of the total amount of such
          Convertible Securities issuable upon the exercise of such Options
          shall be deemed to have been issued for such price per share as of the
          date of granting of such Options or the issuance of such Convertible
          Securities and thereafter shall be deemed to be outstanding for
          purposes of adjusting the Warrant Price. Except as otherwise provided
          in subsection 8(d)(3), no adjustment of the Warrant Price shall be
          made upon the actual issue of such Common Stock or of such Convertible
          Securities upon exercise of such Options or upon the actual


                                       -5-



          issue of such Common Stock upon conversion or exchange of such
          Convertible Securities.

               (d)(2) Issuance of Convertible Securities. In case the Company
          shall during the term of this Warrant in any manner issue (directly
          and not by assumption in a merger or otherwise) or sell any securities
          convertible into Common Stock, whether or not the rights to exchange
          or convert any such Convertible Securities are immediately
          exercisable, and the price per share for which Common Stock is
          issuable upon such conversion or exchange (determined by dividing (i)
          the sum (which sum shall constitute the applicable consideration) of
          (x) the total amount received or receivable by the Company as
          consideration for the issue or sale of such Convertible Securities,
          plus (y) the aggregate amount of additional consideration, if any,
          payable to the Company upon the conversion or exchange thereof, by
          (ii) the total number of shares of Common Stock issuable upon the
          conversion or exchange of all such Convertible Securities) shall be
          less than the Warrant Price in effect immediately prior to the time of
          such issue or sale, then the total maximum number of shares of Common
          Stock issuable upon conversion or exchange of all such Convertible
          Securities shall be deemed to have been issued for such price per
          share as of the date of the issue or sale of such Convertible
          Securities and thereafter shall be deemed to be outstanding for
          purposes of adjusting the Warrant Price, provided that (a) except as
          otherwise provided in subsection 8(d)(3), no adjustment of the Warrant
          Price shall be made upon the actual issuance of such Common Stock upon
          conversion or exchange of such Convertible Securities and (b) no
          further adjustment of the Warrant Price shall be made by reason of the
          issue or sale of Convertible Securities upon exercise of any Options
          to purchase any such Convertible Securities for which adjustments of
          the Warrant Price have been made pursuant to the other provisions of
          subsection 8(d).

               (d)(3) Change in Option Price or Conversion Rate. Upon the
          happening of any of the following events, namely, if the purchase
          price provided for in any Option referred to in subsection 8(d)(l)
          hereof, the additional consideration, if any, payable upon the
          conversion or exchange of any Convertible Securities referred to in
          subsections 8(d)(l) or 8(d)(2), or the rate at which Convertible
          Securities referred to in subsections 8(d)(l) or 8(d)(2) are
          convertible into or exchangeable for Common Stock shall change at any
          time (including, but not limited to, changes under or by reason of
          provisions designed to protect against dilution), the Warrant Price in
          effect at the time of such event shall forthwith be readjusted to the
          Warrant Price which would have been in effect at such time had such
          Options or Convertible Securities still outstanding provided for such
          changed purchase price, additional consideration or conversion rate,
          as the case may be, at the time initially granted, issued or sold. On
          the termination of any Option for which any adjustment was made
          pursuant to this subsection 8(d) or any right to convert or exchange
          Convertible Securities for which any adjustment was made pursuant to
          this subsection 8(d) (including without limitation upon the redemption
          or purchase for consideration of such Convertible Securities by the


                                       -6-



          Company), the Warrant Price then in effect hereunder shall forthwith
          be changed to the Warrant Price which would have been in effect at the
          time of such termination had such Option or Convertible Securities, to
          the extent outstanding immediately prior to such termination, never
          been issued.

               (d)(4) Stock Dividends. Subject to the provisions of this Section
          8(d), in case the Company shall during the term of this Warrant
          declare a dividend or make any other distribution upon any stock of
          the Company (other than the Common Stock) payable in Common Stock,
          Options or Convertible Securities, then any Common Stock, Options or
          Convertible Securities, as the case may be, issuable in payment of
          such dividend or distribution shall be deemed to have been issued or
          sold without consideration.

               (d)(5) Record Date. In case the Company shall take a record of
          the holders of its Common Stock for the purpose of entitling them (i)
          to receive a dividend or other distribution payable in Common Stock,
          Options or Convertible Securities or (ii) to subscribe for or purchase
          Common Stock, Options or Convertible Securities, then such record date
          shall be deemed to be the date of the issue or sale of the shares of
          Common Stock deemed to have been issued or sold upon the declaration
          of such dividend or the making of such other distribution or the date
          of the granting of such right of subscription or purchase, as the case
          may be.

               (d)(6) Treasury Shares. The number of shares of Common Stock
          outstanding at any given time shall not include shares owned or held
          by or for the account of the Company or any of its wholly-owned
          subsidiaries, and the disposition of any such shares (other than the
          cancellation or retirement thereof) shall be considered an issue or
          sale of Common Stock for the purpose of this subsection (d).

          (e) Anything herein to the contrary notwithstanding, the Company shall
not be required to make any adjustment of the Warrant Price in the case of the
issuance of (A) capital stock, Options or Convertible Securities issued to
directors, officers, employees or consultants of the Company in connection with
their service as directors of the Company, their employment by the Company or
their retention as consultants by the Company pursuant to an equity compensation
program approved by the Board of Directors of the Company or the compensation
committee of the Board of Directors of the Company, (B) shares of Common Stock
issued upon the conversion or exercise of Options or Convertible Securities
issued prior to the date hereof, (C) shares of Common Stock issued upon the
conversion of the secured promissory notes, dated as of the date of the initial
issuance of this Warrant, in an aggregate principal amount of $_______________
(the "Notes"), (D) shares of Common Stock issued upon the exercise of this
Warrant and the other warrants issued in connection with the issuance of the
Notes and initially covering an aggregate of ___________ shares of Common Stock
(collectively, the "Company Warrants"), and (E) shares of Common Stock issued or
issuable by reason of a dividend, stock split or other distribution on shares of
Common Stock (but only to the extent that such a


                                      -7-



dividend, split or distribution results in an adjustment in the Warrant Price
pursuant to the other provisions of this Warrant) (collectively, "Excluded
Issuances").

          (f) Upon any adjustment to the Warrant Price pursuant to Section 8(d)
above, the number of Warrant Shares purchasable hereunder shall be adjusted by
multiplying such number by a fraction, the numerator of which shall be the
Warrant Price in effect immediately prior to such adjustment and the denominator
of which shall be the Warrant Price in effect immediately thereafter.

     Section 9. Conversion. The Company shall deliver to the Holder notice of
any merger, consolidation, acquisition of all or substantially all of the
property or stock, reorganization or liquidation of the Company (collectively a
"Reorganization"), as a result of which the stockholders of the Company are to
receive cash, stock or other property in exchange for Common Stock, no less than
twenty (20) business days before the date scheduled for the Reorganization.
Unless the Holder exercises this Warrant as provided in Section 3(a) prior to
the date of the Reorganization, this Warrant shall be automatically converted as
provided in Section 3(b) upon the effective date of the Reorganization.

     Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of this Warrant. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this Section 10, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising holder of this
Warrant an amount in cash equal to the Market Price of such fractional share of
Common Stock on the date of exercise.

     Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

     Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.

     Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Mellon Investor Services LLC. Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will mail to the Warrantholder a statement setting forth
the name and address of such transfer agent.


                                       -8-



     Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed as follows: if to the
Warrantholder, at its address as set forth in the Company's books and records
and, if to the Company, at the address as follows, or at such other address as
the Warrantholder or the Company may designate by ten days' advance written
notice to the other:

                                   If to the Company:

                                        Northwest Biotherapeutics, Inc.
                                        22322 20th Avenue S.E., Suite 150
                                        Bothell, Washington 98021
                                        Attention: Alton L. Boynton
                                        Fax: _____ ________

                                   With a copy to:

                                        Lane Powell Spears Lubersky LLP
                                        1420 Fifth Avenue, Suite 4100
                                        Seattle, Washington 98101-2338
                                        Attention: Thomas F. Grohman
                                        Fax: (206) 223-7107

     Section 15. Successors. All the covenants and provisions hereof by or for
the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

     Section 16. Applicable Law; Dispute Resolution; Exclusive Procedure.

          (a) Governing Law.

     This Subscription Agreement and all rights hereunder shall be governed by,
and interpreted in accordance with, the laws of the State of Washington.

          (b) Dispute Resolution; Exclusive Procedure.

               (1) Exclusive Procedure. Every controversy, claim, dispute or
disagreement arising with respect to the formation, interpretation, performance,
or breach of this Agreement, or any amendment hereto, (any "Dispute") will be
resolved in accordance with this


                                      -9-



Section 16(b), which sets forth the sole and exclusive procedure for the
resolution of any Dispute.

               (2) Injunctive Relief. Notwithstanding anything herein to the
contrary, the Company or the Warrantholder may, prior to invoking the procedure
called for in this Section 16(b), seek a temporary restraining order or a
preliminary injunction (an "Injunctive Action") pursuant to this paragraph. The
Superior Court of the State of Washington in King County shall be the exclusive
venue and have exclusive jurisdiction for all such Injunctive Actions. The
Warrantholder and the Company stipulate and agree for the purposes of any
Injunctive Action that all real and personal property of the Company and the
Warrantholder relevant to such Injunctive Action will be deemed to be within the
jurisdiction of the Superior Court of the State of Washington in King County.
Other than the foregoing stipulation regarding matters and property subject to
Injunctive Action, any party bringing an Injunctive Action pursuant to this
agreement must make a showing of the requisites for such Injunctive Action in
such court. This provision for Injunctive Actions is the sole and exclusive
process by which any party shall maintain any Injunctive Action, and shall be
limited to those cases in which emergency access to the court is necessary to
prevent immediate and irreparable harm in the interim period until the agreed
upon dispute resolution provisions of this Section 16(b) can be carried out.

               (3) Negotiation. The Warrantholder or the Company, seeking
resolution of a Dispute, must request in writing that a good faith negotiation
("Negotiation Effort") be carried on following any request for a Negotiation
Effort, the Company and the Warrantholder shall negotiate in good faith for a
period of thirty (30) days (the "Negotiation Period"). The Negotiation Effort
may be conducted in person, by telephone, or by such other means as the
Designated Representatives agree will tend to lead toward an amicable resolution
of the Dispute. Should a Negotiation Effort fail to produce a resolution within
the Negotiation Period, the parties may agree to extend the Negotiation Period
for a fixed time if each agrees that such an extension could reasonably lead to
an amicable resolution.

               (4) Mediation. Should a Negotiation Effort fail to produce a
resolution within the Negotiation Period and any extension thereof, then either
the Warrantholder or the Company, if wishing to further pursue resolution of the
Dispute, must initiate mediation by providing to Judicial Arbitration Mediation
Services ("JAMS"), or its successor, in Seattle, Washington and to the other
party a written request for mediation pursuant to this Section, setting forth
the subject of the Dispute and the relief requested within fifteen (15) days of
the end of the Negotiation Period and any extension thereof. A mediation (the
"Mediation") shall be conducted pursuant to the mediation procedures contained
in the then published Commercial Arbitration Rules and Mediation Procedures of
the American Arbitration Association ("AAA"). The Designated Representatives
shall cooperate with JAMS and with one another in selecting a mediator from
JAMS' panel of neutrals, but if the parties cannot agree on a mediator within
seven (7) days from the date of the request for mediation then the parties shall
each select a designee from among the JAMS panel of neutrals, and those
designees shall in turn select, from among the JAMS panel of neutrals, the
single mediator who shall conduct the mediation (the "Mediator"). The Mediator
shall have experience with corporate law. The Mediation will be conducted within
forty-five (45) days of the expiration of the Negotiation Period and any


                                      -10-



extension thereof unless otherwise agreed by the parties (the "Mediation
Period"). The Mediator may conduct meetings or hearings in Seattle, Washington,
or by telephone or teleconference, and request information from the parties as
he or she deems necessary, and shall, if the matter remains unresolved through
such mediation, issue written recommendations to the parties within fifteen (15)
days of the end of the Mediation Period. The parties shall then confer and
determine, within seven (7) days of the issuance of the mediator's written
recommendations, whether the mediator's recommendations are agreeable to the
Company and the Warrantholder. Each party shall bear its own costs of the
Mediation, and the mediator's fee shall be divided evenly between the
Warrantholder and the Company. The parties agree that Federal and State Evidence
Rule 408 shall apply to all statements, information and documents exchanged or
discussed as part of the negotiation or mediation processes herein in any
arbitration or litigation proceeding involving the parties, provided that
evidence that is otherwise admissible or discoverable will not be rendered
inadmissible or non-discoverable as a result of its use in the Negotiation
Effort or Mediation.

               (5) Binding Arbitration.

                    (i) If after the mediation procedures called for in this
Section 16(b), the Dispute remains unresolved, either party, if wishing to
further pursue a resolution of the Dispute, must initiate binding arbitration,
before a single arbitrator, by providing to JAMS, or its successor, in Seattle,
Washington and to the other party a written request for binding arbitration
pursuant to this Section, setting forth the subject of the Dispute and the
relief requested within thirty (30) days of the expiration of the seven day
period following the issuance of the Mediator's written recommendations.

                    (ii) The parties shall then cooperate with JAMS and with one
another in selecting an arbitrator from JAMS' panel of neutrals, but if the
parties cannot agree on an arbitrator within seven (7) days, then each party
shall select a designee from among the JAMS panel of neutrals, and those
designees shall in turn select, from among the JAMS panel of neutrals, the
single arbitrator who shall hear the matter in arbitration (the "Arbitrator").
The Arbitrator shall have experience with corporate law.

                    (iii) The arbitration shall be conducted in Seattle,
Washington under the arbitration rules contained in the then published
Commercial Arbitration Rules and Mediation Procedures of the AAA, except as such
are inconsistent with the explicit provisions herein (the "Arbitration"). The
arbitration hearing shall be conducted within thirty (30) days of the
appointment of the Arbitrator unless otherwise agreed by the parties (the
"Arbitration Period").

                    (iv) The Arbitrator shall have full discretion to regulate
discovery so as to provide for prompt, efficient, and fair resolution of the
claims, disputes and matters in question; consistent with this and the timelines
above, discovery may be had by either party pursuant to the provisions of the
Federal Rules of Civil Procedure. During the conduct of the arbitration
proceedings, the Arbitrator shall have full discretion concerning the
admissibility and relevance of evidence, being guided in exercising such
discretion by the principles set out in


                                      -11-



the Federal Rules of Evidence rather than any other body of evidentiary law as
defined by state common law, codes or rules of evidence.

                    (v) The Arbitrator shall, within thirty (30) days following
the close of the Arbitration Period, issue an award that shall be binding upon
the parties and judgment on the award may be entered in any court of appropriate
jurisdiction. The arbitration award must be in writing and must explain the
reasons for the decision. The Arbitrator may, but will not be bound to, make
findings of fact or conclusions of law. Each party shall bear its own costs in
such arbitration, and the Arbitrator's fee shall be divided evenly between the
Company and the Warrantholder.

               (6) Interim Payment of Fees and Expenses. The Company and the
Warrantholder agree and understand that during any mediation or arbitration
conducted pursuant to this Section 16(b), JAMS may, from time to time, assess
each party for its share of JAMS' fees and expenses and the fees and expenses of
the Mediator or Arbitrator; it is also understood that JAMS will likely make
such requests for payment in advance of the various stages of the proceedings
conducted by the Mediator or Arbitrator. If any such request for fees and
expenses is not honored promptly by a party (a "Default"), and such Default
results in the delay or postponement of any scheduled activities (e.g.,
discovery, pre-hearing conferences, hearings, etc.), then (i) if during
mediation, at the written election of any party not in Default the Mediation
Period may be deemed to be terminated immediately, and (ii) if during
arbitration the Arbitrator may receive submissions from the parties and factual
information from JAMS about amounts due and owing by the parties. Upon
consideration thereof, the Arbitrator is authorized to issue written conclusions
that the Default constitutes a breach by the defaulting party of its obligation
to arbitrate in good faith and to issue an award of sanctions (up to and
including entry of a default judgment) against such party based on that
conclusion (a "Default Award"). Any Default Award shall be binding upon the
parties as an independent final arbitration award on the issue of that Default
and judgment on the award may be entered in any court of appropriate
jurisdiction. In the case of an arbitration proceeding, the non-defaulting party
may elect to proceed with arbitration under the relevant procedures contained in
the then published Commercial Arbitration Rules and Mediation Procedures of the
AAA for conducting arbitration in the absence of a party or representative.

               (7) Confidentiality. The negotiation, mediation and arbitration
proceedings will be private and confidential. The parties shall not disclose the
pleading, discovery materials, transcripts, testimony, documents or other
information created, produced or presented in the negotiation, mediation or
arbitration to the press, the public or to any third person, except to legal
counsel and their employees, experts and others who need to know such
information in order to assist in the presentation of or participation in
negotiation, mediation or arbitration, without written consent of the other
parties or order of the Arbitrator. Nothing in this provision shall be deemed to
restrict a party's use or disclosure of documents (i) which are its own, (ii)
which are or have been lawfully obtained independent of discovery in the
negotiations, mediation, or arbitration, (iii) which are or become generally
available to the public through no act of the receiving party, (iv) which have
been lawfully obtained from a source other than the other party, (v) which are
reasonably necessary to be disclosed in connection with a proceeding


                                      -12-



or lawsuit contemplated by this Section 16(b), or (vi) which are required to be
disclosed by law, court order or subpoena. The Arbitrator may impose such
sanctions as are deemed by the Arbitrator to be appropriate for violation of
this provision.

     Section 17. Call Provision. Notwithstanding any other provision contained
herein to the contrary, in the event that (i) the closing bid price of a share
of Common Stock as traded on Nasdaq (or such other exchange, stock market or
quotation service on which the Common Stock may then be primarily listed or
quoted) equals or exceeds $1.25 (appropriately adjusted for any stock split,
reverse stock split, stock dividend or other reclassification or combination of
the Common Stock occurring after the date hereof) for twenty (20) consecutive
trading days; or (ii) holders of at least 50% of the aggregate Warrant shares of
this series elect to voluntarily exercise or convert such Warrant share to
common stock pursuant to the procedures set forth in Section 3, the Company,
upon thirty (30) days prior written notice (the "Notice Period") given to the
Warrantholder immediately following such twenty (20) trading day period, may
demand that the Warrantholder exercise its rights hereunder, and the
Warrantholder must exercise its rights prior to the expiration of the Notice
Period or if such exercise is not made or if only a partial exercise is made,
any and all rights to further exercise rights hereunder shall cease upon the
expiration of the Notice Period; provided, however, that the Company
simultaneously calls all Warrants of this series on the same terms.

     Section 18. Registration Rights. In the event that the Company, during the
term of this Warrant, engages in a Qualifying Financing, as such term is defined
in the secured convertible promissory note dated of even date herewith, and
investors purchasing such Qualifying Financing receive registration rights with
respect to securities purchased in that financing, then the Warrantholder shall
be entitled to registration rights with respect to the shares receivable under
this Warrant, such rights to be not less favorable to the Warrantholder than
those afforded to investors in the Qualifying Financing.

     Section 19. No Rights as Stockholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant.

     Section 20. Amendment; Waiver. Any term of this Warrant may be amended or
waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Warrants of this series (the "Majority Holders");
provided, that (x) any such amendment or waiver must apply to all Company
Warrants; and (y) the number of Warrant Shares subject to this Warrant, the
Warrant Price and the Expiration Date may not be amended, and the right to
exercise this Warrant may not be altered or waived, without the written consent
of the Warrantholder.

     Section 21. Section Headings. The section headings in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.


                                      -13-



     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, as of the ______ day of November 2003.

                                        NORTHWEST BIOTHERAPEUTICS, INC.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                      -14-



                                   APPENDIX A
                         NORTHWEST BIOTHERAPEUTICS, INC.
                              WARRANT EXERCISE FORM

To: Northwest Biotherapeutics, Inc.:

     The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant ("Warrant") for, and to purchase thereunder by
the payment of the Warrant Price and surrender of the Warrant, _______________
shares of Common Stock ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:

_____________________________________
Name
_____________________________________
Address
_____________________________________
_____________________________________
Federal Tax ID or Social Security No.

and delivered by (certified mail to the above address, or (electronically
(provide DWAC instructions:___________________), or (other (specify):
______________________________), and, if the number of Warrant Shares shall not
be all the Warrant Shares purchasable upon exercise of the Warrant, that a new
Warrant for the balance of the Warrant Shares purchasable upon exercise of this
Warrant be registered in the name of the undersigned Warrantholder or the
undersigned's Assignee as below indicated and delivered to the address stated
below.

Dated: ___________________, ____


Note: The signature must correspond     Signature:
with the name of the registered                    -----------------------------
holder as written on the first page
of the Warrant in every particular,     ----------------------------------------
without alteration or enlargement or    Name (please print)
any change whatever, unless the
Warrant has been assigned.              ----------------------------------------

                                        ----------------------------------------
                                        Address

                                        ----------------------------------------
                                        Federal Identification or
                                        Social Security No.


                                        Assignee:

                                        ----------------------------------------

                                        ----------------------------------------

                                        ----------------------------------------



                               FIRST AMENDMENT TO
                       WARRANTS TO PURCHASE COMMON SHARES

     THIS FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES (the
"AMENDMENT") is made and entered into as of April 25, 2004, by and among
NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and the
undersigned holders of Warrants (as defined below) to acquire shares of the
Company's common stock (each a "WARRANTHOLDER" and, collectively, the
"WARRANTHOLDERS"). When signed by the holders of at least 50% of the common
stock subject to Warrants (as defined below) this Amendment will amend each of
the Warrants.

                                    RECITALS

     WHEREAS, the Company and the undersigned Warrantholder(s) desire to amend
all of the Company Warrants to Purchase Common Shares, of series Nos. BR-1
through BR-5, each dated as of November 13, 2003 (each, a "WARRANT" and,
collectively, the "WARRANTS"), as provided herein.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

1.   Section 8(a) of each Warrant is hereby amended and restated in its entirety
     as follows:

          "(a) 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, the number and class of Warrant Shares available under this Warrant
     in the aggregate and the Warrant Price shall be correspondingly adjusted to
     give the Warrantholder, on exercise for the same Aggregate Warrant Price,
     the total number, class, and kind of shares as the Warrantholder would have
     owned had this Warrant been exercised prior to the event and had the
     Warrantolder continued to hold such shares until after the event requiring
     adjustment. Notwithstanding the foregoing, no adjustment to the number of
     Warrant Shares or the Warrant Price shall be made in the event of an
     issuance or deemed issuance of securities for consideration below the then
     current Warrant Price pursuant to this Section 8(a). For purposes of this
     Section 8(a), the "AGGREGATE WARRANT PRICE" shall mean the aggregate
     Warrant Price payable in connection with the exercise in full of this
     Warrant. The form of this Warrant need not be changed because of any
     adjustment in the number of Warrant Shares subject to this Warrant."

2.   The first paragraph of Section 8(d) of each Warrant is hereby amended and
     restated in its entirety to read as follows:

          "Except as provided in subsections (e) and (f) of this Section 8, if
     and whenever the Company shall issue or sell, or is, in accordance with any
     of subsections (d)(l) through (d)(6) hereof, deemed to have issued or sold,
     any shares of Common Stock for no consideration or for a consideration per
     share less than the Warrant Price in effect immediately prior to the time
     of such issue or sale, then and in each such case (a "Trigger Issuance")
     the then-existing Warrant Price, shall be reduced, as of the close of
     business on the effective date of the Trigger Issuance, to the lowest price
     per share at which any share of Common Stock was issued or sold or deemed
     to be issued or sold, but in no event shall the Warrant Price be reduced to
     less than the lesser of $0.10 per share (subject to adjustment as provided
     in Section 8(a)) or 35% discount to the average closing price during the
     twenty trading days prior to the first closing of the sale by the Company
     of Convertible Preferred Stock, par value $0.001 per share as contemplated
     by that certain Recapitalization Agreement dated as of April 26, 2004
     between the Company and Toucan Capital Fund II, L.P.; provided, however,
     that in no event will the Warrant Price be less than $.04 per share
     (subject to adjustment as provided in Section 8(a))"

3.   Section 8(f) of each Warrant is hereby amended and restated in its entirety
     to read as follows:

          "Anything to the contrary herein notwithstanding, in no event shall



     the then existing Warrant Price be reduced to less than the lesser of $0.10
     per share (subject to adjustment as provided in Section 8(a)) or 35%
     discount to the average closing price during the twenty trading days prior
     to the first closing of the sale by the Company of Convertible Preferred
     Stock, par value $0.001 per share as contemplated by that certain
     Recapitalization Agreement dated as of April 26, 2004 between the Company
     and Toucan Capital Fund II, L.P.; provided, however, that in no event will
     the Warrant Price be less than $.04 per share (subject to adjustment as
     provided in Section 8(a)) pursuant to the adjustments provided for in
     Section 8(d)."



4.   Sections 8(b) and 8(c) of each Warrant are hereby deleted in their
     entirety.

5.   Section 18 of each Warrant is hereby deleted in its entirety.

6.   All other terms and conditions of the Warrants shall be unaffected hereby
     and remain in full force and effect.

7.   This Amendment shall be governed by and construed under the laws of the
     State of Washington as applied to agreements among Washington residents
     entered into and to be performed entirely within the State of Washington.

8.   This Amendment may be executed in one or more counterparts, each of which
     will be deemed an original but all of which together shall constitute one
     and the same agreement.

                            [SIGNATURE PAGE FOLLOWS]


                                       2.



     IN WITNESS WHEREOF, the parties hereto have executed this FIRST AMENDMENT
TO WARRANT TO PURCHASE COMMON SHARES as of the date first above written.

                                        COMPANY:

                                        NORTHWEST BIOTHERAPEUTICS, INC.,
                                        a Delaware corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        WARRANTHOLDERS:


                                        /s/ Alton L. Boynton
                                        ----------------------------------------
                                        Alton L. Boynton


                                        /s/ Marnix L. Bosch
                                        ----------------------------------------
                                        Marnix L. Bosch


                                        /s/ Eric H. Holmes
                                        ----------------------------------------
                                        Eric H. Holmes


                                        /S/ Larry L. Richards
                                        ----------------------------------------
                                        Larry Richards

              FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON SHARES

EX-10.34

                                                                   EXHIBIT 10.34

                                 LEASE AGREEMENT

                                                          Date: November 4, 2005

THIS LEASE AGREEMENT (the "Lease") is entered into this 4th day of November
2005. Between The International Union of Operating Engineers Local 302
("Landlord"), and NW Biotherapeutics, a Delaware Corporation ("Tenant").
Landlord and Tenant agree as follows:

1.   LEASE SUMMARY.

     A.   LEASE PREMISES. The leased commercial real estate (the "Premises")
          consist of an agreed area of 2,325 rentable square feet and are
          outlined on the floor plan attached as Exhibit A, located on the land
          legally described on attached Exhibit B, and is commonly known as the
          IUOE Building. The Premises do not include, and Landlord reserves, the
          exterior walls and roof of the Premises, the land beneath the
          Premises, the pipes and ducts, conduits, wires, fixtures, and
          equipment above the suspended ceiling or structural elements of the
          building in which the Premises are located (the "Building"). The
          Building, the land upon which it is situated, all other improvements
          located on such land, and all common areas appurtenant to the Building
          are referred to as the "Property".

     B.   LEASE COMMENCEMENT DATE. The Lease shall commence on January 1, 2006,
          or such earlier or later date as provided in Section 3 (the
          "Commencement Date").

     C.   LEASE TERMINATION DATE. The Lease shall terminate on December 31,
          2006, or such earlier or later date as provided in Section 3 (the
          "Termination Date").

     D.   MONTHLY RENT. The monthly rent shall be (check one): [X] $3,100.00, or
          [ ] according to the Rent Rider attached hereto. Rent shall be payable
          at Landlord's address shown in Section 1(h) below, or such other place
          designated in writing by Landlord.

     E.   PREPAID RENT. Upon execution of this Lease, Tenant shall deliver to
          Landlord the sum of $3,100 as prepaid rent, to be applied to the Rent
          due for the first month(s) of the Lease.

     F.   SECURITY DEPOSIT. The amount of the security deposit is $3,100.00

     G.   PERMITTED USE. The Premises shall be used only for general office use
          and for no other purpose without prior written consent of the
          Landlord.

     H.   NOTICE AND PAYMENT OF ADDRESSES:

Landlord:                                              Tenant:
Attention: Beverly Colesgrove                          Attention: Alton Boynton
International Union of Operating Engineers Local 302   NW Biotherapeutics
18701 120th Ave NE                                     18701 120th Ave NE
Bothell, WA 98011-9514                                 Bothell, WA 98011

2.   PREMISES. Landlord leases to Tenant, and Tenant leases from landlord the
     Premises upon the terms specified in this Lease.

3.   TERM.

     A.   COMMENCEMENT DATE. The Lease shall commence on the date specified in
          Section 1(b), or on such earlier or later date as may be specified by
          written notice delivered by Landlord to Tenant advising Tenant that
          the premises are ready for possession and specifying the Commencement
          Date, which shall not be less than 30 days following the date of such
          notice. If Tenant occupies the Premises before the Commencement Date
          specified in Section 1(b), then the Commencement Date shall be the
          date of occupancy. If Landlord acts diligently to make the Premises
          available to Tenant, neither Landlord nor any agent or employee of
          Landlord shall be liable for any damage or loss due to Landlord's
          inability or failure to deliver possession of the Premises to Tenant
          as provided in this Lease. The Termination Date shall be modified upon
          any change in the Commencement Date so that the length of the Lease
          term is not changed. If Landlord does not deliver possession of the
          Premises to Tenant within 60 days after the date specified in Section
          1(b), Tenant may elect to cancel this Lease by giving written notice
          to Landlord within ten (10) days after such time period ends. If
          Tenant gives such notice, the Lease shall be cancelled, all prepaid
          rent and security deposits shall be refunded to Tenant, and neither
          Landlord nor Tenant shall have any further obligations to the other.
          The first "Lease Year" shall commence on the Commencement Date and
          shall end on the date which is twelve (12) months from the end of the
          month in which the Commencement Date occurs. Each successive Lease
          Year during the initial term and any extension terms shall be twelve
          (12) months, commencing on the first day following the end of the
          preceding Lease Year, except that the Lease Year shall end on the
          Termination Date.

     B.   TENANT OBLIGATIONS. To the extent Tenant's tenant improvements are not
          complete in time for the Tenant to occupy or take possession of the
          Premises on the Commencement Date due to the failure of Tenant to
          fulfill any of its obligations under this Lease, the Lease shall
          nevertheless commence on the Commencement Date.

          Except as specified elsewhere in this Lease, Landlord makes no
          representations or warranties to Tenant regarding the Premises,
          including the structural condition of the Premises and the condition
          of all mechanical, electrical, and other systems on the Premises.
          Except for any tenant improvements described on attached Exhibit C to
          be completed by Landlord (defined therein as "Landlord's Work"),
          Tenant shall be responsible for performing any work necessary to bring
          the Premises into condition satisfactory to Tenant. By signing this
          Lease, Tenant acknowledges that it has had adequate opportunity to
          investigate the Premises, acknowledges responsibility for making any
          corrections, alterations and repairs to the Premises (other than the
          Landlord's Work), and acknowledges that the time needed to complete
          any such items shall not delay the Commencement Date.


                                        1



                                 LEASE AGREEMENT
                                   (CONTINUED)

          Attached Exhibit C sets forth all Landlord's Work, if any, and all
          tenant improvements to be completed by Tenant ("Tenant's Work"), which
          is to be performed on the Premises. Responsibilities for design,
          payment and performance of all such work shall be as set forth on
          attached Exhibit C. If Tenant fails to notify Landlord of any defects
          in the Landlord's Work within ten (10) days of delivery of possession
          to Tenant, Tenant shall be deemed to have accepted the Premises in
          their then condition. If Tenant discovers any major defects in the
          Landlord's Work during this 10-day period that would prevent Tenant
          from using the premises for its intended purpose, Tenant shall so
          notify Landlord in writing and the Commencement Date shall be delayed
          until after Landlord has corrected the major defects and Tenant has
          had five (5) days to inspect and approve the Premises after Landlord's
          correction of such defects. The Commencement Date shall not by delayed
          if Tenant's inspection reveals minor defects in the Landlord's Work
          that will not prevent Tenant from using the Premises for their
          intended purpose. Tenant shall prepare a punch list of all minor
          defects and provide the punch list to Landlord. Landlord shall
          promptly correct all punch list items.

4.   RENT. Tenant shall pay Landlord without demand, deduction or offset, in
     lawful money of the United States, the monthly rental stated in Section
     1(d) in advance on or before the first day of each month during the Lease
     Term beginning on (check one): [X] the Commencement Date, or [ ]
     ___________________________ (specify, but if no date specified, then on the
     Commencement Date), and any other additional payments due to Landlord,
     including Operating Costs (collectively the "Rent") when required under
     this Lease. Payments for any partial month at the beginning or end of the
     Lease term shall be prorated.

     If any sums payable by Tenant to Landlord under this Lease are not received
     by the fifth (5th) day of each month, Tenant shall pay Landlord in addition
     to the amount due, for the cost of collecting and handling such late
     payment, an amount equal to the greater of $100 or five percent (5%) of the
     delinquent amount. In addition, all delinquent sums payable by Tenant to
     Landlord and not paid within five (5) days of the due date shall, at
     Landlord's option, bear interest at the rate of twelve percent (12%) per
     annum, or the highest rate of interest allowable by law, whichever is less.
     Interest on all delinquent amounts shall be calculated from the original
     due date to the date of payment.

     Landlord's acceptance of less than the full amount of any payment due from
     Tenant shall not be deemed an accord and satisfaction or compromise of such
     payment unless Landlord specifically consents in writing to payment of such
     lesser sum as an accord and satisfaction or compromise of the amount which
     Landlord claims.

5.   SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deliver to
     Landlord the security deposit specified in Section 1(f) above. Landlord may
     commingle the security deposit with its other funds. If Tenant breaches any
     covenant or condition of this Lease, including but not limited to the
     payment of Rent, Landlord may apply all or any part of the security deposit
     to the payment of any sum in default and any damage suffered by Landlord as
     a result of Tenant's breach. In such event, Tenant shall, within five (5)
     days after written demand therefor by Landlord, deposit with Landlord the
     amount so applied. Any payment to Landlord from the security deposit shall
     not be construed as a payment of liquidated damages for any default. If
     Tenant complies with all of the covenants and conditions of this Lease
     throughout Lease term, the security deposit shall be repaid to Tenant
     without interest within thirty (30) days after the vacation of the Premises
     by Tenant.

6.   USES. The Premises shall be used only for the uses(s) specified in Section
     1(g) above (the "Permitted Use"), and for no other business or purpose
     without the prior written consent of Landlord. No act shall be done on or
     around the Premises that is unlawful or that will increase the existing
     rate of insurance on the Premises or the Building, or cause the
     cancellation of any insurance on the Premises or the Building. Tenant shall
     not commit or allow to be committed any waste upon the Premises, or any
     public or private nuisance. Tenant shall not do or permit anything to be
     done in the Premises or on the Property which will obstruct or interfere
     with the rights of other tenants or occupants of the Property, or their
     customers, clients and visitors, or to injure or annoy such persons.

7.   COMPLIANCE WITH LAWS. Tenant shall not cause or permit the Premises to be
     used in any way which violates any law, ordinance, or governmental
     regulation or order. Landlord represents to Tenant, to the best of
     Landlord's knowledge, that with the exception of any Tenant's Work, as of
     the Commencement Date, the Premises comply with all applicable laws, rules,
     regulations, or orders, including without limitation, the Americans with
     Disabilities Act, if applicable, and Landlord shall be responsible to
     promptly cure any non-compliance which existed on the Commencement Date.
     Tenant shall be responsible for complying with all laws applicable to the
     Premises as a result of Tenant opening the Premises to the public as a
     place of public accommodation. If the enactment or enforcement of any law,
     ordinance, regulation or code during the Lease term requires any changes to
     the Premises during the Lease term, the Tenant shall perform all such
     changes at its expense if the changes are required due to the nature of
     Tenant's activities at the Premises, or to alterations that Tenant seeks to
     make the Premises; otherwise, Landlord shall perform all such changes at
     its expense.

8.   OPERATING COSTS.

     A.   DEFINITION. As used herein, "Operating Costs" shall mean all costs of
          operating, maintaining and repairing the Premises, the Building, and
          the Property, determined in accordance with generally accepted
          accounting principles, and including without limitation the following:
          all taxes and assessments (including, but not limited to, real and
          personal property taxes and assessments, local improvement district
          assessments and other special purpose assessments, and taxes on rent
          or gross receipts); insurance premiums paid by Landlord and (to the
          extent used) deductibles; water, sewer and all other utility charges
          (other than utilities separately metered and paid directly by Tenant
          or other tenants) janitorial and all other cleaning services, refuse
          and trash removal; refurbishing and repainting; carpet replacement;
          air conditioning, heating, ventilation and elevator service; pest
          control; lighting systems, fire detection and security services;
          landscape maintenance; management (fees and/or personnel costs);
          parking lot, road, sidewalk and driveway patching, resurfacing and
          maintenance; snow and ice removal; amortization (in accordance with
          generally accepted accounting principles) of capital improvements as
          Landlord may in the future install to comply with governmental
          regulations and rules or undertaken in good faith with a reasonable
          expectation of reducing operating costs (the useful life of which
          shall be a reasonable period of time as determined by Landlord); and
          costs of legal services (except those incurred directly relating to a
          particular occupant of the Building); accounting services, labor,
          supplies, materials and tools. Operating Costs shall not include:
          Landlord's income tax or general corporate overhead, depreciation on
          the Building or equipment therein; loan payments; real estate broker's
          commission, capital improvements to or major repairs of the Building
          shell (i.e., the Building structure, exterior walls and roof) not
          described in this paragraph; or any costs regarding the operation,
          maintenance and repair of the Premises, the Building, or the Property
          paid directly by Tenant or other tenants in the Building. If Tenant is
          renting a pad separate from any other structures on the Property for
          which Landlord separately furnishes the services described in this


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                                 LEASE AGREEMENT
                                   (CONTINUED)

          paragraph, then the term "Operating Costs" shall not include those
          costs of operating, repairing, and maintaining the enclosed mall which
          can be separately allocated to the tenants of the other structures.
          Operating Costs which can not be separately allocated to the tenants
          of the other structures may include but are not limited to: insurance
          premiums; taxes and assessments; management (fees and/or personnel
          costs); exterior lighting; parking lot, road, sidewalk and driveway
          patching, resurfacing and maintenance; snow and ice removal; and costs
          of legal services and accounting services.

     B.   TYPE OF PAYMENT. Options one and two below address the manner in which
          Operating Costs are paid under this Lease. To select the pure triple
          net option, check option 1. To select the base year option, check
          option 2.

     [ ]  OPTION ONE: TRIPLE NET. As additional Rent, Tenant shall pay to
          Landlord on the first of each month with payment of Tenant's base Rent
          one-twelfth of Tenant's Pro Rata Share of Operating Costs.

     [X]  OPTION TWO: BASE YEAR. The base Rent paid by Tenant under this Lease
          includes Tenant's Pro Rata Share of Operating Costs for the calendar
          year in which the Commencement Date occurs (the "Base Year"). As
          additional Rent, Tenant shall pay to Landlord on the first day of each
          month commencing on the first day of the first year after the
          Commencement Date, with Tenant's payment of base Rent, one-twelfth of
          the amount, if any, by which Tenant's Pro Rata Share of Operating
          Costs exceeds Tenant's annualized Pro Rata Share of Operating Costs
          for the Base Year.

     C.   METHOD OF PAYMENT. Tenant shall pay to Landlord Operating Costs as
          provided above pursuant to the following procedure:

          i) Landlord shall provide to Tenant, at or before the Commencement
          Date, a good faith estimate of annual Operating Costs for the calendar
          year in which the Commencement Date occurs. Landlord shall also
          provide to Tenant, as soon as possible following the first day of each
          succeeding calendar year, a good faith estimate of Tenant's annual pro
          Rata Share of Operating Costs for the then-current year;

          ii) Each estimate of Tenant's annual Pro Rata Share of Operating Costs
          determined by Landlord as described above, shall be divided into
          twelve (12) equal monthly installments. If Tenant pays Operating Costs
          under Option One, Tenant shall pay to Landlord such monthly
          installment of Operating Costs with monthly payment of base Rent. If
          Tenant pays Operating Costs under Option Two, Tenant shall pay to
          Landlord with each monthly payment of base Rent the amount, if any, by
          which such monthly installments of Operating Costs exceed one-twelfth
          of Tenant's annualized Pro Rata Share of Operating Costs for the Base
          Year. In the event the estimated amount of Tenant's Pro Rata Share of
          Operating Costs has not yet been determined for any calendar year,
          Tenant shall pay the monthly installment in the estimated amount
          determined for the preceding calendar year until the estimate for the
          current calendar year has been provided to Tenant. At such time as the
          estimate for the current calendar year is received, Tenant shall then
          pay any shortfall or receive a credit for any surplus for the
          preceding months of the current calendar year and shall, thereafter,
          make the monthly installment payment in accordance with the current
          estimate; and

          iii) As soon as reasonably possible following the end of each calendar
          year of the Lease term, Landlord shall determine and provide to Tenant
          a statement (the "Operating Costs Statement") setting forth the amount
          of Operating Costs actually incurred and the amount of Tenant's Pro
          Rata Share of Operating Costs actually payable by Tenant with respect
          to such calendar year. In the event the amount of Tenant's Pro Rata
          Share of Operating Costs exceeds the sum of the monthly installments
          actually paid by Tenant for such calendar year, Tenant shall pay to
          Landlord the difference within thirty (30) days following receipt of
          the Operating Costs Statement. In the event the sum of such
          installments exceeds the amount of Tenant's Pro Rata Share of
          Operating Costs actually due and owing, the difference shall be
          applied as a credit to Tenant's future Pro Rata Share of Operating
          Costs payable by Tenant pursuant to this Section.

9.   UTILITIES AND SERVICES. Landlord shall provide the Premises the following
     services, the costs of which shall be included in the Operating Costs:
     water and electricity for the Premises seven (7) days per week, twenty-four
     (24) hours per day, and heating, ventilation and air conditioning from 9
     a.m. to 5 p.m. Monday through Friday, and 9 a.m. to 12 p.m. on Saturday.
     Tenant shall provide their own janitorial service to the Premises. Heating,
     ventilation and air conditioning services will also be provided by Landlord
     to the Premises during additional hours on reasonable notice to Landlord,
     at Tenant's sole costs and expense, at an hourly rate reasonably
     established by Landlord from time to time and payable by Tenant, as billed,
     as additional Rent.

     Tenant shall furnish and pay, at Tenant's sole expense, all other utilities
     (including, but not limited to, telephone and cable service if available)
     and other services which Tenant requires with respect to the Premises,
     except those to be provided by Landlord as described above. Notwithstanding
     the foregoing, if Tenant's use of the Premises incurs utility service
     charges which are above ordinary usage, Landlord reserves the right to
     require Tenant to pay a reasonable additional charge for such usage. For
     example, where Tenant installs and uses a number of electronic devices
     which is greater than normal, the increased usage may result in higher
     electrical charges and increased charges for cooling since overheating of
     rooms may result.

10.  TAXES. Tenant shall pay all taxes, assessments, liens and license fees
     ("Taxes") levied, assessed or imposed by any authority having the direct or
     indirect power to tax or assess any such liens, by reason of Tenant's use
     of the Premises, and all Taxes on Tenant's personal property located on the
     Premises. Landlord shall pay all Taxes with respect to the Building and the
     Project, including any Taxes resulting from a reassessment of the Building
     or the Project due to a change of ownership or otherwise, which shall be
     included in Operating Costs.

11.  COMMONS AREAS.

     A.   DEFINITION. The term "Common Areas" means all areas and facilities
          that are provided and designated from time to time by Landlord for the
          general non-exclusive use and convenience of Tenant with other tenants
          and which are not leased or held for the exclusive use of a particular
          tenant. Common Areas may, but do not necessarily include, hallways,
          entryways, stairs, elevators, driveways, walkways, terraces, docks,
          loading areas, restrooms, trash facilities, parking areas and garages,
          roadways, pedestrian sidewalks, landscaped areas, security areas and
          lobby or mall areas. Tenant shall comply with reasonable rules and
          regulations concerning the use of the Common Areas adopted by Landlord
          from time to time. Without advance notice to Tenant and without any
          liability to Tenant, Landlord may change the size, use, or nature of
          any Common Areas, erect improvements on the Common Areas or convert
          any portion of the


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                                 LEASE AGREEMENT
                                   (CONTINUED)

          Common Areas to the exclusive use of Landlord or selected tenants, so
          long as Tenant is not thereby deprived of the substantial benefit of
          the Premises. Landlord reserves the use of exterior walls and the
          roof, and the right to install, maintain, use, repair and replace
          pipes, ducts, conduits, and wires leading through the Premises in
          areas which will not materially interfere with Tenant's use thereof.

     B.   USE OF THE COMMON AREAS. Tenant shall have the non-exclusive right in
          common with such other tenants to whom Landlord has granted or may
          grant such rights to use the Common Areas. Tenant shall abide by rules
          and regulations adopted by Landlord from time to time and shall use
          its best efforts to cause its employees, contractors, and invitees to
          comply with those rules and regulations, and not interfere with the
          use of Common Areas by others.

     C.   MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common Areas
          in good order, condition and repair. This maintenance cost shall be an
          Operating Costs chargeable to Tenant pursuant to Section 8.

12.  ALTERATIONS. Tenant may make alterations, additions, or improvements to the
     Premises, including any Tenant's Work identified on attached Exhibit C
     ("Alterations"), with the prior written consent of Landlord. The term
     "Alterations" shall not include the installation of shelves, movable
     partitions, Tenant's equipment, and trade fixtures which may be performed
     without damaging existing improvements or the structural integrity of the
     Premises, and Landlord's consent shall not be required for Tenant's
     installation of those items. Tenant shall complete all Alterations at
     Tenant's expense in compliance with all applicable laws in accordance with
     plans and specifications approved by Landlord, using contractors approved
     by Landlord, and in a manner so as to not unreasonably interfere with other
     tenants. Landlord shall be deemed the owner of all Alterations except for
     those which Landlord requires to be removed at the end of the Lease term.
     Tenant shall remove all Alterations at the end of the Lease term unless
     Landlord conditioned its consent upon Tenant leaving a specified Alteration
     at the Premises, in which case Tenant shall not remove such Alteration.
     Tenant shall immediately repair any damage to the Premises caused by the
     removal of the Alterations.

13.  REPAIRS AND MAINTENANCE. Tenant shall, at its sole expense, maintain the
     Premises in good condition and promptly make all repairs and replacements,
     whether structural or non-structural necessary to keep the Premises safe
     and in good condition, including all utilities and other systems serving
     the Premises. Landlord shall maintain and repair the Building structure,
     foundation, exterior walls, and roof, and the Common Areas, the cost of
     which shall be included as an Operating Cost. Tenant shall not damage any
     demising wall or disturb the structural integrity of the Premises and shall
     promptly repair any damage or injury done to any such demising walls or
     structural elements caused by Tenant or its employees, agents, contractors
     or invitees. If Tenant fails to maintain or repair the Premises, Landlord
     may enter the Premises and perform such repair or maintenance on behalf of
     Tenant. In such case, Tenant shall be obligated to pay to Landlord
     immediately upon receipt of demand for payment, as additional Rent, all
     costs incurred by Landlord. Notwithstanding anything in this Section to the
     contrary, Tenant shall not be responsible for any repairs to the Premises
     made necessary by the acts of Landlord or its agents, employees,
     contractors or invitees therein.

     Upon expiration of the Lease term, whether by lapse of time or otherwise,
     Tenant shall promptly and peacefully surrender the Premises, together with
     all keys, to Landlord in as good condition as when received by Tenant from
     Landlord or as thereafter improved, reasonable wear and tear and insured
     and casualty excepted.

14.  ACCESS AND RIGHT OF ENTRY. After reasonable notice from Landlord (except in
     cases of emergency, where no notice is required), Tenant shall permit
     Landlord and its agents, employees and contractors to enter the Premises at
     all reasonable times to make repairs, alterations, improvements or
     inspections. This Section shall not impose any repair or other obligation
     upon Landlord not expressly stated elsewhere in this Lease. After
     reasonable notice to Tenant, Landlord shall have the right to enter the
     Premises for the purpose of showing the Premises to prospective purchasers
     or lenders at any time, and to prospective tenants within 180 days prior to
     the expiration or sooner termination of the Lease term.

15.  DESTRUCTION OR CONDEMNATION.

     A.   DAMAGE AND REPAIR. If the Premises or the portion of the Property
          necessary for Tenant's occupancy are partially damaged but not
          rendered untenantable, by fire or other insured casualty, then
          Landlord shall diligently restore the Premises and the portion of the
          Property necessary for Tenant's occupancy and this Lease shall not
          terminate; provided, however, Tenant may terminate the Lease if
          Landlord is unable to restore the Premises within six (6) months of
          the casualty event. The Premises or the portion of the Property
          necessary for Tenant's occupancy shall not be deemed untenantable if
          less than twenty-five percent (25%) of each of those areas are
          damaged. Notwithstanding the foregoing, Landlord shall have no
          obligation to restore the Premises or the portion of the Property
          necessary for Tenant's occupancy if insurance proceeds are not
          available to pay the entire costs of such restoration. If insurance
          proceeds are available to Landlord but are not sufficient to pay the
          entire costs of restoration, then Landlord may elect to terminate this
          Lease and keep the insurance proceeds, by notifying Tenant within
          sixty (60) days of the date of such casualty.

          If the Premises, the portion of the Property necessary for Tenant's
          occupancy, or 50% or more of the rentable area of the Property are
          entirely destroyed, or partially damaged and rendered untenantable, by
          fire or other casualty, Landlord may, at its option: (a) terminate
          this Lease as provided herein, or (b) restore the Premises and the
          portion of the Property necessary for Tenant's occupancy to their
          previous condition; provided, however, if such casualty event occurs
          during the last six (6) months of the Lease term (after considering
          any option to extend the term timely exercised by Tenant) then either
          Tenant or Landlord may elect to terminate the Lease. If, within sixty
          (60) days after receipt by Landlord from Tenant of written notice that
          Tenant deems the Premises or the portion of the Property necessary for
          Tenant's occupancy untenantable, Landlord fails to notify Tenant of
          its election to restore those areas, or if Landlord is unable to
          restore those areas within six (6) months of the date of the casualty
          event, then Tenant may elect to terminate the Lease.

          If Landlord restores the Premises or the Property under this Section
          15(a), Landlord shall proceed with reasonable diligence to complete
          the work, and the base Rent shall be abated in the same proportion as
          the untenantable portion of the Premises bears to the whole Premises,
          provided that there shall be a rent abatement only if the damage or
          destruction of the Premises or the Property did not result from, or
          was not contributed to directly or indirectly by the act, fault or
          neglect of Tenant, or Tenant's officers, contractors, licensees,
          agents, servants, employees, guests, invitees or visitors. Provided,
          Landlord complies with its obligations under this Section, no damages,
          compensation or claim shall be payable by Landlord for inconvenience,
          loss of business or annoyance directly, incidentally or


                                        4



                                 LEASE AGREEMENT
                                   (CONTINUED)

          consequentially arising from any repair or restoration of any portion
          of the Premises or the Property. Landlord will not carry insurance of
          any kind for the protection of Tenant or any improvements paid for by
          Tenant or as provided in Exhibit C or on Tenant's furniture or on any
          fixtures, equipment, improvements or appurtenances of Tenant under
          this Lease, and Landlord shall not be obligated to repair any damage
          thereto or replace the same unless the damage is caused by landlord's
          negligence.

     B.   CONDEMNATION. If the Premises, the portion of the property necessary
          for Tenant's occupancy, or fifty percent (50%) or more of the rentable
          area of the Property are made untenantable by eminent domain, or
          conveyed under a threat of condemnation, this Lease shall terminate at
          the option of either Landlord or Tenant as of the earlier of the date
          title vests in the condemning authority or the condemning authority
          first has possession of the Premises or the portion of the Property
          and all Rents and other payments shall be paid to that date. In case
          of taking of a part of the Premises or the Property necessary for
          Tenant's occupancy that does not render those areas untenantable, then
          this Lease shall continue in full force and effect and the base Rent
          shall be equitably reduced based on the proportion by which the floor
          area of any structures is reduced, such reduction in Rent to be
          effective as of the earlier of the date the condemning authority first
          has possession of such portion or title vests in the condemning
          authority. The Premises or the portion of the Property necessary for
          Tenant's occupancy shall not be deemed untenantable if less than
          twenty-five percent (25%) of each of those areas are condemned.
          Landlord shall be entitled to the entire award from the condemning
          authority attributable to the value of the Premises or the Property
          and Tenant shall make no claim for the value of its leasehold. Tenant
          shall be permitted to make a separate claim against the condemning
          authority for moving expenses or damages resulting from interruption
          in its business, provided that in no event shall Tenant's claim reduce
          Landlord's award.

16.  INSURANCE.

     A.   LIABILITY INSURANCE. During the Lease term, Tenant shall pay for and
          maintain commercial general liability insurance with broad form
          property damage and contractual liability endorsements. This policy
          shall name Landlord as an additional insured, and shall insure
          Tenant's activities and those of Tenant's employees, officers,
          contractors, licensees, agents, servants, employees, guests, invitees
          or visitors with respect to the Premises against loss, damage or
          liability for personal injury or death or loss or damage to property
          with a combined single limit of not less than $1,000,000, and a
          deductible of not more than $5,000. The insurance will be
          non-contributory with any liability insurance carried by Landlord.

     B.   TENANT'S INSURANCE. During the Lease term, Tenant shall pay for and
          maintain replacement cost fire and extended coverage insurance, with
          vandalism and malicious mischief, sprinkler leakage and earthquake
          endorsements, in an amount sufficient to cover not less than 100% of
          the full replacement costs, as the same may exist from time to time,
          of all Tenant's personal property, fixtures, equipment and tenant
          improvements.

     C.   MISCELLANEOUS. Insurance required under this Section shall be with
          companies rated A-V or better in Best's Insurance Guide, and which are
          authorized to transact business in the State of Washington. No
          insurance policy shall be cancelled or reduced in coverage and each
          such policy shall provide that it is not subject to cancellation or a
          reduction in coverage except after thirty (30) days' prior written
          notice to Landlord. Tenant shall deliver to Landlord upon commencement
          of the Lease and from time to time thereafter, copies or certificates
          of the insurance policies required by this Section. In no event shall
          the limit of such policies be considered as limiting the liability of
          Tenant under this Lease.

     D.   LANDLORD INSURANCE. Landlord shall carry standard form extended
          coverage fire insurance on the building shell and core in the amount
          of their full replacement value, and such other insurance of such
          types and amounts as Landlord, in its discretion, shall deem
          reasonably appropriate. The costs of any such insurance may be
          included in the Operating Costs by a "blanket policy" insuring other
          parties and/or locations in addition to the Building, in which case
          the portion of the premiums therefor allocable to the Building and
          Project shall be included in the Operating Costs. In addition to the
          foregoing, in the event Tenant fails to provide or keep in force any
          of the insurance required above, Landlord, in its discretion, may
          provide such insurance, in which event, the costs thereof shall be
          payable by Tenant to Landlord as additional rent on the first day of
          the calendar month immediately following demand therefor from
          Landlord.

     E.   WAIVER OF SUBROGATION. Landlord and Tenant hereby release each other
          and any other tenant, their agents or employees, from responsibility
          for, and waive their entire claim of recovery for any loss or damage
          arising from any cause covered by insurance required to be carried by
          each of them. Each party shall provide notice to the insurance carrier
          or carriers of this mutual waiver of subrogation, and shall cause its
          respective insurance carriers to waive all rights of subrogation
          against the other. This waiver shall not apply to the extent of the
          deductible amounts to any such policies or to the extent of
          liabilities exceeding the limits of such policies.

17.  INDEMNIFICATION. Tenant shall defend, indemnify, and hold Landlord harmless
     against all liabilities, damages, costs, and expenses, including attorneys'
     fees, arising from any negligent or wrongful act or omission of Tenant or
     Tenant's officers, contractors, licensees, agents, servants, employees,
     guests, invitees, or visitors on or around the Premises, or arising from
     any breach of this Lease by Tenant. Tenant shall use legal counsel
     acceptable to Landlord in defense of any action within Tenant's defense
     obligation. Landlord shall defend, indemnify and hold Tenant harmless
     against all liabilities, damages, costs, and expenses, including attorneys'
     fees, arising from any negligent or wrongful act or omission of Landlord or
     Landlord's officers, contractors, licensees, agents, servants, employees,
     guests, invitees, or visitors on or around the Premises or arising from any
     breach of this Lease by Landlord. Landlord shall use legal counsel
     acceptable to Tenant in defense of any action within Landlord's defense
     obligation. The provisions of this section 17 shall survive expiration or
     termination of this Lease.

18.  ASSIGNMENT AND SUBLETTING. Tenant shall not assign, sublet, mortgage,
     encumber or otherwise transfer any interest in this Lease (collectively
     referred to as a "Transfer") or any part of the Premises without first
     obtaining Landlord's written consent, which shall not be unreasonably
     withheld or delayed. No Transfer shall relieve Tenant of any liability
     under this Lease notwithstanding Landlord's consent to such Transfer.
     Consent to any Transfer shall not operate as a waiver of the necessity for
     Landlord's consent to any subsequent Transfer.

     If Tenant is a partnership, limited liability company, corporation, or
     other entity, transfer of this Lease by merger, consolidation, redemption
     or liquidation, or any change(s) in the ownership of, or power to vote,
     which singularly or collectively represents a majority of the beneficial
     interest in Tenant, shall constitute a Transfer under this Section.


                                        5



                                 LEASE AGREEMENT
                                   (CONTINUED)

     As a condition of Landlord's approval, if given, any potential assignee or
     sublessee otherwise approved by Landlord shall assume all obligations of
     Tenant under this Lease and shall be jointly and severally liable with
     Tenant and any guarantor, if required, for the payment of Rent and
     performance of all terms of this Lease. In connection with any Transfer,
     Tenant shall provide Landlord with copies of all assignments, subleases and
     assumption instruments.

19.  LIENS. Tenant shall keep the Premises free from any liens created by or
     through Tenant. Tenant shall indemnify and hold Landlord harmless from
     liability from any such liens including, without limitation, liens arising
     from any Alterations. If a lien is filed against the Premises by any person
     claiming by, through or under Tenant, Tenant shall, upon request of
     Landlord, at Tenant's expense, immediately furnish to Landlord a bond in
     form and amount and issued by a surety satisfactory to Landlord,
     indemnifying Landlord and Premises against all liabilities, costs and
     expenses, including attorneys' fees, which Landlord could reasonably incur
     as a result of such liens(s).

20.  DEFAULT. The following occurrences shall be deemed an Event of Default by
     Tenant:

     A.   FAILURE TO PAY. Tenant fails to pay and sum, including Rent, due under
          this Lease following five (5) days written notice from Landlord of the
          failure to pay.

     B.   VACATION/ABANDONMENT. Tenant vacates the Premises (defined as an
          absence for at least fifteen (15) consecutive days without prior
          notice to Landlord), or Tenant abandons the Premises (defined as an
          absence of five (5) days or more while Tenant is in breach of some
          other term of this Lease). Tenant's vacation or abandonment of the
          Premises shall not be subject to any notice or right to cure.

     C.   INSOLVENCY. Tenant becomes insolvent, voluntarily or involuntarily
          bankrupt, or a receiver, assignee or other liquidating officer is
          appointed for Tenant's business, provided that in the event of any
          involuntary bankruptcy or other insolvency proceeding, the existence
          of such proceeding shall constitute an Event of Default only if such
          proceeding is not dismissed or vacated within sixty (60) days after
          its institution or commencement.

     D.   LEVY OR EXECUTION. Tenant's interest in this Lease or the Premises, or
          any part thereof, is taken by execution or other process of law
          directed against Tenant, or is taken or subjected to any attachment by
          any creditor of Tenant, if such attachment is not discharged within
          fifteen (15) days after being levied.

     E.   OTHER NON-MONETARY DEFAULTS. Tenant breaches any agreement, term or
          covenant of this Lease other than one requiring the payment of money
          and not otherwise enumerated in this Section, and the breach continues
          for a period of thirty (30) days after notice by Landlord to Tenant of
          the breach.

     F.   FAILURE TO TAKE POSSESSION. Tenant fails to take possession of the
          Premises on the Commencement Date.

21.  REMEDIES. Landlord shall have the following remedies upon an Event of
     Default. Landlord's rights and remedies under this Lease shall be
     cumulative, and none shall exclude any other right or remedy allowed by
     law.

     A.   TERMINATION OF LEASE. Landlord may terminate Tenant's interest under
          the Lease, but no act by Landlord other than written notice from
          Landlord to Tenant of termination shall terminate this Lease. The
          Lease shall terminate on the date specified in the notice of
          termination. Upon termination of this Lease, Tenant will remain liable
          to Landlord for damages in an amount equal to the rent and other sums
          that would have been owing by Tenant under this Lease for the balance
          of the Lease term, less the net proceeds, if any, of any reletting of
          the premises by Landlord subsequent to the termination, after
          deducting all Landlord's Reletting Expenses (as defined below).
          Landlord shall be entitled to either collect damages from Tenant
          monthly on the days on which rent or other amounts would have been
          payable under the Lease, or alternatively, Landlord may accelerate
          Tenant's obligations under the Lease and recover from Tenant: (i)
          unpaid rent which had been earned at the time of termination; (ii) the
          amount by which the unpaid rent which would have been earned after
          termination until the time of award exceeds the amount of rent loss
          that Tenant proves could reasonably have been avoided; (iii) the
          amount by which the unpaid rent for the balance of the term of the
          Lease after the time of award exceeds the amount of rent loss that
          Tenant proves could reasonably be avoided (discounting such amount by
          the discount rate of the Federal Reserve Bank of San Francisco at the
          time of the award, plus 1%); and (iv) any other amount necessary to
          compensate Landlord for all the detriment proximately caused by
          Tenant's failure to perform its obligations under the Lease, or which
          in the ordinary course would be likely to result from the Event of
          Default, including without limitation Reletting Expenses described in
          Section 21b.

     B.   RE-ENTRY AND RELETTING. Landlord may continue this Lease in full force
          and effect, and without demand or notice, re-enter and take possession
          of the Premises or any part thereof, expel the Tenant from the
          Premises and anyone claiming through or under the Tenant, and remove
          the personal property of either. Landlord may relet the Premises, or
          any part of them, in Landlord's or Tenant's name for the account of
          Tenant, for such period of time and at such other terms and
          conditions, as Landlord, in its discretion, may determine. Landlord
          may collect and receive the rents for the Premises. Re-entry or taking
          possession of the Premises by Landlord under this Section shall not be
          construed as an election on Landlord's part to terminate this Lease,
          unless a written notice of termination is given to Tenant. Landlord
          reserves the right following any re-entry or reletting, or both, under
          this Section to exercise its right to terminate the Lease. During the
          Event of Default, Tenant will pay Landlord the rent and other sums
          which would be payable under this Lease if repossession had not
          occurred, plus the net proceeds, if any, after reletting the Premises,
          after deducting Landlord's Reletting Expenses. "Reletting Expenses" is
          defined to include all expenses incurred by Landlord in connection
          with reletting the Premises, including without limitation, all
          repossession costs, brokerage commissions, attorneys' fees, remodeling
          and repair costs, costs for removing and storing Tenant's property and
          equipment, and rent concessions granted by Landlord to any new Tenant,
          prorated over the life of the new lease.

     C.   WAIVER OF REDEMPTION RIGHTS. Tenant, for itself, and on behalf of any
          and all persons claiming through or under Tenant, including creditors
          of all kinds, hereby waives and surrenders all rights and privileges
          which they may have under any present or future law, to redeem the
          Premises or to have a continuance of this Lease for the Lease term, as
          it may have been extended.


                                        6



                                 LEASE AGREEMENT
                                   (CONTINUED)

     D.   NONPAYMENT OF ADDITIONAL RENT. All costs which Tenant agrees to pay to
          Landlord pursuant to this Lease shall in the event of nonpayment be
          treated as if they were payments of Rent, and Landlord shall have all
          the rights herein provided for in case of nonpayment of Rent.

     E.   FAILURE TO REMOVE PROPERTY. If Tenant fails to remove any of its
          property from the Premises at Landlord's request following an uncured
          Event of Default, Landlord may, at its option, remove and store the
          property at Tenant's expense and risk. If Tenant does not pay the
          storage cost within five (5) days of Landlord's request, Landlord may,
          at its option, have any or all of such property sold at public or
          private sale (and Landlord may become a purchaser at such sale), in
          such manner as Landlord deems proper, without notice to Tenant.
          Landlord shall apply the proceeds of such sale: (i) to the expense of
          such sale, including reasonable attorneys' fees actually incurred;
          (ii) to the payment of the costs or charges for storing such property;
          (iii) to the payment of any other sums of money which may then be or
          thereafter become due Landlord from Tenant under any of the terms
          hereof; and (iv) the balance, if any, to Tenant. Nothing in this
          Section shall limit Landlord's right to sell Tenant's personal
          property as permitted by law to foreclose Landlord's lien for unpaid
          rent.

22.  MORTGAGE SUBORDINATION AND ATTORNMENT. This Lease shall automatically be
     subordinate to any mortgage or deed of trust created by Landlord which is
     now existing or hereafter placed upon the Premises including any advances,
     interest, modifications, renewals, replacements or extensions ("Landlord's
     Mortgage"), provided the holder of any Landlord's Mortgage or any person(s)
     acquiring the Premises at any sale or other proceeding under any such
     Landlord's Mortgage shall elect to continue this Lease in full force and
     effect. Tenant shall attorn to the holder of any Landlord's Mortgage or any
     person(s) acquiring the Premises at any sale or other proceeding under any
     Landlord's Mortgage provided such person(s) assume the obligations of
     Landlord under this Lease. Tenant shall promptly and in no event later than
     fifteen (15) days execute, acknowledge and deliver documents which the
     holder of any Landlord's Mortgage may reasonably require as further
     evidence of this subordination and attornment. Notwithstanding the
     foregoing, Tenant's obligations under this Section are conditioned on the
     holder of each of Landlord's Mortgage and each person acquiring the
     Premises at any sale or other proceeding under any such Landlord's Mortgage
     not disturbing Tenant's occupancy and other rights under this Lease, so
     long as no uncured Event of Default exists.

23.  NON-WAIVER. Landlord's waiver of any breach of any term contained in this
     Lease shall not be deemed to be a waiver of the same term for subsequent
     acts of Tenant. The acceptance by Landlord of Rent or other amounts due by
     Tenant hereunder shall not be deemed to be a waiver of any breach by Tenant
     preceding such acceptance.

24.  HOLDOVER. If Tenant shall, without the written consent of Landlord, hold
     over after the expiration or termination of the Term, such tenancy shall be
     deemed to be on a month-to-month basis and may be terminated according to
     Washington law. During such tenancy, Tenant agrees to pay to Landlord one
     hundred twenty-five percent (125%) the rate of rental last payable under
     this Lease, unless a different rate is agreed upon by Landlord. All other
     terms of the Lease shall remain in effect.

25.  NOTICES. All notices under this Lease shall be in writing and effective (i)
     when delivered in person, (ii) three (3) days after being sent by
     registered or certified mail to Landlord or Tenant, as the case may be, at
     the Notice Addresses set forth in Section 1(h); or (iii) upon confirmed
     transmission by facsimile to such persons at the facsimile numbers set
     forth in Section 1(h) or such other addresses/facsimile numbers as may from
     time to time be designated by such parties in writing.

26.  COSTS AND ATTORNEYS' FEES. If Tenant or Landlord engage the services of an
     attorney to collect monies due or to bring any action for any relief
     against the other, declaratory or otherwise, arising out of this Lease,
     including any suit by Landlord for the recovery of Rent or other payments,
     or possession of the Premises, the losing party shall pay the prevailing
     party a reasonable sum for attorneys' fees in such suit, at trial and on
     appeal.

27.  ESTOPPEL CERTIFICATES. Tenant shall, from time to time, upon written
     request of Landlord, execute, acknowledge and deliver to Landlord or its
     designee a written statement specifying the following, subject to any
     modifications necessary to make such statements true and complete: (i) the
     date the Lease term commenced and the date it expires; (ii) the amount of
     minimum monthly Rent and the date to which such Rent has been paid; (iii)
     that this Lease is in full force and effect and has not been assigned,
     modified, supplemented or amended in any way; (iv) that this Lease
     represents the entire agreement between the parties; (v) that all
     conditions under this Lease to be performed by Landlord have been
     satisfied; (vi) that there are no existing claims, defenses or offsets
     which the Tenant has against the enforcement of this Lease by Landlord;
     (vii) that no Rent has been paid more than one month in advance; and (viii)
     that no security has been deposited with Landlord (or, if so, the amount
     thereof). Any such statement delivered pursuant to this Section may be
     relied upon by a prospective purchaser of Landlord's interest or assignee
     of any mortgage or new mortgagee of Landlord's interest in the Premises. If
     Tenant shall fail to respond within ten (10) days of receipt by Tenant of a
     written request by Landlord as herein provided, Tenant shall be deemed to
     have given such certificate as above provided without modification and
     shall be deemed to have admitted the accuracy of any information supplied
     by Landlord to a prospective purchaser or mortgagee.

28.  TRANSFER OF LANDLORD'S INTEREST. This Lease shall be assignable by Landlord
     without the consent of Tenant. In the event of any transfer or transfers of
     Landlord's interest in the Premises, other than a transfer for security
     purposes only, upon the assumption of this Lease by the transferee,
     Landlord shall be automatically relieved of obligations and liabilities
     accruing from and after the date of such transfer, except for any retained
     security deposit or prepaid rent, and Tenant shall attorn to the
     transferee.

29.  RIGHT TO PERFORM. If Tenant shall fail to timely pay any sum or perform any
     other act on its part to be performed hereunder, Landlord may make any such
     payment or perform any such other act on Tenant's part to be made or
     performed as provided in this Lease. Tenant shall, on demand, reimburse
     Landlord for its expenses incurred in making such payment or performance.
     Landlord shall (in addition to any other right or remedy of Landlord
     provided by law) have the same rights and remedies in the event of the
     nonpayment of sums due under this Section as in the case of default by
     Tenant in the payment of Rent.

30.  HAZARDOUS MATERIAL. Landlord represents and warrants to Tenant that, to the
     best of Landlord's knowledge, there is no "Hazardous Material" (as defined
     below) on, in or under the Premises as the Commencement Date except as
     otherwise disclosed to Tenant in writing before the execution of this
     Lease. If there is any Hazardous Material on, in or under the Premises as
     of the Commencement Date which has been or thereafter becomes unlawfully
     released through no fault of Tenant, then Landlord shall indemnify, defend
     and hold Tenant harmless from any and all claims, judgments, damages,
     penalties, fines, costs, liabilities or losses including without limitation
     sums paid in settlement of


                                        7



                                 LEASE AGREEMENT
                                   (CONTINUED)

     claims, attorneys' fees and expert fees, incurred or suffered by Tenant
     either during or after the Lease term as the result of such contamination.

     Tenant shall not cause or permit any Hazardous Material to be brought upon,
     kept, or used in or about, or disposed of on the Premises by Tenant, its
     agents, employees, contractors or invitees, except in strict compliance
     with all applicable federal, state and local laws, regulations, codes and
     ordinances. If Tenant breaches the obligations stated in the preceding
     sentence, then Tenant shall indemnify, defend and hold Landlord harmless
     from any and all claims, judgments, damages, penalties, fines, costs,
     liabilities or losses including, without limitation, diminution in the
     value of the Premises, damages for the loss or restriction on use of
     rentable or usable space or of any amenity of the Premises, or elsewhere,
     damages arising from any adverse impact on marketing of space at the
     Premises, and sums paid in settlement of claims, attorneys' fees,
     consultant fees and expert fees incurred or suffered by Landlord either
     during or after the Lease term. These indemnifications by Landlord and
     Tenant include, without limitation, costs incurred in connection with any
     investigation of site conditions or any clean-up, remedial, removal or
     restoration work, whether or not required by any federal, state or local
     governmental agency or political subdivision, because of Hazardous Material
     present in the Premises, or in soil or ground water on or under the
     Premises. Tenant shall immediately notify Landlord of any inquiry,
     investigation or notice that Tenant may receive form any third party
     regarding the actual suspected presence of Hazardous Material on the
     Premises.

     Without limiting the foregoing, if the presence of any Hazardous Material
     brought upon, kept or used in or about the Premises by Tenant, its agents,
     employees, contractors or invitees, results in any unlawful release of
     Hazardous Materials on the Premises or any other property, Tenant shall
     promptly take all actions, at its sole expense, as are necessary to return
     the Premises or any other property, to the condition existing prior to the
     release of any such Hazardous Material; provided that Landlord's approval
     of such actions shall first be obtained, which approval may be withheld at
     Landlord's sole discretion.

     As used herein, the term "Hazardous Material" means any hazardous,
     dangerous, toxic or harmful substance, material or waste including
     biomedical waste which is or becomes regulated by any local governmental
     authority, the State of Washington or the United States Government, due to
     its potential harm to the health, safety or welfare of humans or the
     environment. The provisions of this Section 30 shall survive expiration or
     termination of this Lease.

31.  QUIET ENJOYMENT. So long as Tenant pays the Rent and performs all of its
     obligations in this Lease, Tenant's possession of the Premises will not be
     disturbed by Landlord or anyone claiming by, through or under Landlord, or
     by the holders of any Landlord's Mortgage or any successor thereto.

32.  GENERAL.

     A.   HEIRS AND ASSIGNS. This Lease shall apply to and be binding upon
          Landlord and Tenant and their respective heirs, executors,
          administrators, successors and assigns.

     B.   ENTIRE AGREEMENT. This Lease contains all of the covenants and
          agreements between Landlord and Tenant relating to the Premises. No
          prior or contemporaneous agreements or understanding pertaining to the
          Lease shall be valid or of any force or effect and the covenants and
          agreements of this Lease shall not be altered, modified or added to
          except in writing signed by Landlord and Tenant.

     C.   SEVERABILITY. Any provision of this Lease which shall prove to be
          invalid, void or illegal shall in no way affect, impair or invalidate
          any other provision of this Lease.

     D.   FORCE MAJEURE. Time periods for either party's performance under any
          provisions of this Lease (excluding payment of Rent) shall be extended
          for periods of time during which the party's performance is prevented
          due to circumstances beyond such party's control, including without
          limitation, fires, floods, earthquakes, lockouts, strikes, embargoes,
          governmental regulations, acts of God, public enemy, war or other
          strife.

     E.   GOVERNING LAW. This Lease shall be governed by and construed in
          accordance with the laws of the state of Washington.

     F.   MEMORANDUM OF LEASE. Except for the pages containing the Commission
          Agreement, the parties signatures and attached Exhibits A and B, this
          Lease shall not be recorded. However, Landlord and Tenant shall, at
          the other's request, execute and record a memorandum of Lease in
          recordable form that identifies Landlord and Tenant, the commencement
          and expiration dates of the Lease, and the legal description of the
          Premises as set forth on attached Exhibit B.

     G.   SUBMISSION OF LEASE FORM NOT AN OFFER. One party's submission of this
          Lease to the other for review shall not constitute an offer to Lease
          the Premises. This Lease shall not become effective and binding upon
          Landlord and Tenant until it has been fully signed by both Landlord
          and Tenant.

     H.   NO LIGHT, AIR OR VIEW EASEMENT. Tenant has not been granted an
          easement or other right for light, air or view to or from the
          Premises. Any diminution or shutting off of light, air or view by any
          structure which may be erected on or adjacent to the Building shall in
          no way affect this Lease or the obligations of Tenant hereunder or
          impose any liability on Landlord.

     I.   AUTHORITY OF PARTIES. Any individual signing this Lease on behalf of
          an entity represents and warrants to the other that such individual
          has authority to do so and, upon such individual's execution, that
          this Lease shall be binding upon and enforceable against the party on
          behalf of whom such individual is signing.

33.  EXHIBITS AND RIDERS. The following exhibits and riders are made a part of
     this Lease:

     Exhibit A: Legal Description
     Exhibit B: Tenant Improvement Schedule
     Exhibit C: Renewal Option and Early Access


                                        8



                                 LEASE AGREEMENT
                                   (CONTINUED)

     CHECK THE BOX FOR ANY OF THE FOLLOWING THAT WILL APPLY. ANY RIDERS CHECKED
     SHALL BE EFFECTIVE ONLY UPON BEING INITIALED BY THE PARTIES AND ATTACHED TO
     THE LEASE. CAPITALIZED TERMS USED IN THE RIDERS SHALL HAVE THE MEANING
     GIVEN TO THEM IN THE LEASE.

     [ ]  Rent Rider

     [ ]  Retail Use Rider

     [ ]  Arbitration Rider

     [ ]  Limitation Rider

     [ ]  Guaranty of Tenant's Lease Obligations Rider

     [ ]  Parking Rider

     [ ]  Option to Extend Rider

     [ ]  Rules and Regulations

34.  AGENCY DISCLOSURE. At the signing of this Lease,

     Landlord' Agent: Daniel Seger, Pacific Real Estate Partners
     Represents The International Union of Operating Engineers Local 302

     and Tenant's Licensee Bill Neil, GVA Kidder Mathews
     represents NW Biotherapeutics, a Delaware Corporation

     If Tenant's Licensee and Landlord's Agent are different salespersons
     affiliated with the same Broker, then both Tenant and Landlord confirm
     their consent to that Broker acting as a dual agent. If Tenant's Licensee
     and Landlord's Agent are the same salesperson representing both parties,
     then both Landlord and Tenant confirm their consent to that salesperson and
     his/her Broker acting as dual agents. If Tenant's Licensee, Landlord's
     Agent, or their Broker are dual agents, Landlord and Tenant consent to
     Tenant's Licensee, Landlord's Agent and their Broker being compensated
     based on a percentage of the rent or as otherwise disclosed on an attached
     addendum. Neither Tenant's Licensee, Landlord's Agent or their Broker are
     receiving compensation form more than one party to this transaction unless
     otherwise disclosed on an attached addendum, in which case Landlord and
     Tenant consent to such compensation. Landlord and Tenant confirm receipt of
     the pamphlet entitled "The Law of Real Estate Agency."

35.  COMMISSION AGREEMENT. Landlord agrees to pay a commission to Landlord's
     Broker (identified in the Agency Disclosure paragraph above ) as follows:

     [ ]  $_____________________

     [X]  7.5% of the gross rent payable pursuant to the Lease.

     [ ]  $_____________________ per square foot of the Premises

     [ ]  Other:

     Landlord's Broker [ ] shall [X] shall not (shall not if not filled in) be
     entitled to a commission upon the extension by Tenant of the Lease term
     pursuant to any right reserved to Tenant under the Lease calculated [ ] as
     provided above or [ ] as follows ____________________ (if no box is
     checked, as provided above). Landlord's Broker [ ] shall [X] shall not
     (shall not if not filled in) be entitled to a commission upon any expansion
     of Premises pursuant to any right reserved to Tenant under the Lease,
     calculated [ ] as provided above or [ ] as follows ____________________ (if
     no box is checked, as provided above).

     Any commission shall be earned upon occupancy of the Premises by Tenant,
     and paid one-half upon execution of the Lease and one-half upon occupancy
     of the Premises by Tenant. Landlord's Broker shall pay to Tenant's Broker
     (identified in the Agency Disclosure paragraph above) the amount stated in
     a separate agreement between them or, if there is no agreement,
     $____________________/____________________% (complete only one) of any
     commission paid to Landlord's Broker, within five (5) days after receipt by
     Landlord's Broker.

     If any other lease or sale is entered into between Landlord and Tenant
     pursuant to a right reserved to Tenant under the Lease, Landlord [ ] shall
     [X] shall not (shall not if not filled in) pay an additional commission
     according to any commission agreement or, in the absence of one, according
     to the commission schedule of Landlord's Broker in effect as of the
     execution of this Lease. Landlord's successor shall be obligated to pay any
     unpaid commissions upon any transfer of this Lease and any such transfer
     not release form liability to pay such commissions.

36.  BROKER PROVISIONS.

     LANDLORD'S AGENT, TENANT'S LICENSEE AND THEIR BROKERS HAVE MADE NO
     REPRESENTATIONS OR WARRANTIES CONCERNING THE PREMISES, THE MEANING OF THE
     TERMS AND CONDITIONS OF THIS LEASE, LANDLORD'S OR TENANT'S FINANCIAL
     STANDING, ZONING, COMPLIANCE OF THE PREMISES WITH APPLICABLE LAWS, SERVICE
     OR CAPACITY OF UTILITIES, OPERATING EXPENSES, OR HAZARDOUS MATERIALS.
     LANDLORD AND TENANT ARE EACH ADVISED TO SEEK INDEPENDENT LEGAL ADVICE ON
     THESE AND OTHER MATTERS ARISING UNDER THIS LEASE.

     IN WITNESS WHEREOF this Lease has been executed the date and year first
     written above.


                                        9



                                 LEASE AGREEMENT
                                   (CONTINUED)


- -------------------------------------   ----------------------------------------
LANDLORD:                               TENANT:


- -------------------------------------   ----------------------------------------
LANDLORD:                               TENANT:



- -------------------------------------   ----------------------------------------
BY:                                     BY:


- -------------------------------------   ----------------------------------------
ITS:                                    ITS:


                                       10



                                 LEASE AGREEMENT
                                   (CONTINUED)

STATE OF WASHINGTON   )
                      )ss.
COUNTY OF _________   )

I certify that I know or have satisfactory evidence that
______________________________ is the person who appeared before me and said
person acknowledged that __________________________________ signed this
instrument, on oath stated that _____________________________________ was
authorized to execute the instrument and acknowledged it as the
_____________________________ of ________________________________ to be the free
and voluntary act of such party for the uses and purposes mentioned in the
instrument.

DATED: _________________, ___________

(Seal or stamp)                         ________________________________________

                                        Printed Name: __________________________

                                        NOTARY PUBLIC in and for the State of
                                        Washington residing at: ________________

                                        My commission expires: _________________

STATE OF WASHINGTON   )
                      )ss.
COUNTY OF _________   )

I certify that I know or have satisfactory evidence that
______________________________ is the person who appeared before me and said
person acknowledged that __________________________________ signed this
instrument, on oath stated that _____________________________________ was
authorized to execute the instrument and acknowledged it as the
_____________________________ of ________________________________ to be the free
and voluntary act of such party for the uses and purposes mentioned in the
instrument.

DATED:  ________________, ___________

(Seal or stamp)                         ________________________________________

                                        Printed Name: __________________________

                                        NOTARY PUBLIC in and for the State of
                                        Washington residing at: ________________

                                        My commission expires: _________________


                                       11



                                 LEASE AGREEMENT
                                   (CONTINUED)

                                    EXHIBIT A

                               (Legal Description)

                                    EXHIBIT A

Lot A of that certain Lot Line Adjustment, City of Bothell, No. D-86-40, as
recorded with the King County Department of Records and Elections, No.
9703020690, otherwise described as follows:

BEGINNING at the center line intersection of 120th Avenue WE and North Creek
Parkway of the plat of Quadrant Business Park - Bothell, City of Bothell,
as recorded in Volume 131 of Plats, at pages 87-91, Records of Xing County,
Washington;

THENCE North 00-02-04 East, 16.60 feet along the center line of 120th Avenue NE,

THENCE Northerly 392.06 feet along the arc of the 120th Avenue center line to
the left, having a radius of 600.00 feet to the point of tangent of the curve;

THENCE South 52-41-42 West, 40 feet to the west margin of 120th Avenue NE.

THENCE North 37-18-18 West along the west margin of 120th Avenue NE, 11.05 feet
to the TRUE POINT OF BEGINNING.

THENCE North 37-18-18 West along the west margin of 120th Avenue NE, 318-91
feet;

THENCE South 64-25-04 West, 250.00 feet;

THENCE South 22-23-55 East, 250.00 feet;

THENCE North 68-20-36 East, 332-68 feet to the TRUE POINT OF BEGINNING.


                                       12



                                 LEASE AGREEMENT
                                   (CONTINUED)

                                    EXHIBIT B

                          (Tenant Improvement Schedule)

1.   Landlord agrees to remove the half wall from the office space.

2.   Landlord agrees to clean the office space to meet a good office
     environment.

                                    EXHIBIT C

                        (Renewal Option and Early Access)

1.   Tenant shall have the ability to renew their lease for one year with three
     months prior written notice. Rates shall be at then market conditions.

2.   Upon full execution of the lease and delivery of certificate of insurance,
     Tenant shall have the right to access the space starting December 15, 2005.


                                       13

EX-10.35

exv10w35

EX-23.1

EXHIBIT 23.1

            Consent of Independent Registered Public Accounting Firm

The Board of Directors
Northwest Biotherapeutics, Inc.:

We consent to the incorporation by reference in the registration statement (No.
333-82094) on Form S-8 of Northwest Biotherapeutics, Inc. of our report dated
March 12, 2004, except as to note 2, which is as of April 26, 2004, with respect
to the statements of operations, stockholders' equity (deficit) and
comprehensive loss, and cash flows for the year ended December 31, 2003 and the
period from March 18, 1996 (inception) through December 31, 2003 of Northwest
Biotherapeutics, Inc. (a development stage company), which report appears in the
December 31, 2005 annual report on Form 10-K of Northwest Biotherapeutics, Inc.

Our report dated March 12, 2004, except as to note 2, which is as of April 26,
2004, contains an explanatory paragraph that states that Northwest
Biotherapeutics, Inc. has experienced recurring losses from operations, has a
working capital deficit and has a deficit accumulated in the development stage
which raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of that uncertainty.

/s/ KPMG LLP


Seattle, Washington
April 17, 2006

EX-23.2

                                                                    EXHIBIT 23.2


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors
Northwest Biotherapeutics, Inc.

We consent to the incorporation by reference in the registration statement (No.
333-82094) on Form S-8 of Northwest Biotherapeutics, Inc. of our report dated
January 25, 2006, except with respect to the subsequent events referred to in
Note 13, the date for which is March 30, 2006, with respect to the balance sheet
of Northwest Biotherapeutics, Inc. (a development stage company) as of December
31, 2005 and 2004, and the related statements of operations, stockholders'
equity (deficit) and comprehensive loss, and cash flows for the years then ended
and the period from March 18, 1996 (inception) through December 31, 2005, which
report appears in the December 31, 2005 annual report on Form 10-K of Northwest
Biotherapeutics, Inc. The Company's financial statements for the period from
March 18, 1996 (date of inception) through December 31, 2003, were audited by
other auditors whose report, dated March 12, 2004, except as to Notes 1 and 12,
which were as of April 26, 2004, expressed an unqualified opinion on those
statements and included an explanatory paragraph that referred to substantial
doubt about the Company's ability to continue as a going concern. The financial
statements for the period from March 18, 1996 (date of inception) through
December 31, 2003, reflect a net loss of $64,242 (in thousands) of the
accumulated deficit as of December 31, 2003. The other auditors' report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for such prior periods, is based solely on the report of such other auditors.

Our report contains an explanatory paragraph that states that Northwest
Biotherapeutics, Inc. has experienced recurring losses from operations since
inception, has a working capital deficit and has a deficit accumulated in the
development stage which raise substantial doubt about its ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty.


/s/  Peterson Sullivan PLLC


April 17, 2006
Seattle, Washington

EX-31.1

EXHIBIT 31.1

            SECTION 302 CERTIFICATION

I, Alton L. Boynton, certify that:

(1)   I have reviewed this annual report on Form 10-K of Northwest
      Biotherapeutics, Inc.;

(2)   Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

(3)   Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

(4)   I am responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the registrant and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to me by others within those entities, particularly during the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report my conclusions about the
            effectiveness of the disclosure controls and procedures, as of the
            end of the period covered by this report based on such evaluation;
            and

      (c)   Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

(5)   I have disclosed, based on my most recent evaluation of internal control
      over financial reporting, to the registrant's auditors and the audit
      committee of the registrant's board of directors (or persons performing
      the equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: April 17, 2006

By: /s/ Alton L. Boynton
    -----------------------
    Alton L. Boynton
    President (Principal Executive, Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

               CERTIFICATION PURSUANT TO
                18 U.S.C. SECTION 1350,
                AS ADOPTED PURSUANT TO
          SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Northwest Biotherapeutics, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2005, as filed with the
Securities and Exchange Commission (the "Report"), I, Alton L. Boynton, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.

Date: April 17, 2006

/s/ Alton L. Boynton
- ----------------------------------
Alton L. Boynton
President (Principal Executive, Financial and Accounting Officer)