IN THE CIRCUIT COURT OF THE 11TH  JUDICIAL CIRCUIT, IN AND FOR MIAMI-DADE COUNTY, FLORIDA
	GENERAL JURISDICTION DIVISION
	CASE NO. 12-05495 CA 06

 

SOCIUS CG II, LTD., a Bermuda

exempted company,

 

Plaintiff,

 

v.

 

BIONOVO, INC.,

a Delaware corporation,

 

Defendant.

_________________________________________/

 

STIPULATION FOR SETTLEMENT OF CLAIM

 

Plaintiff, Socius CG II, Ltd. (“Socius”), on the one hand, and Defendant, Bionovo, Inc. (“Bionovo”), on the other hand, stipulate to the entry of the Agreed Order Approving Settlement (the “Agreed Order”), attached hereto as Exhibit A, and further stipulate and agree as follows:

 

1.          Socius and Bionovo request that the Court enter an order substantially in the form of the Agreed Order attached hereto as Exhibit A.

 

2.          Bionovo is a Delaware corporation with its principal place of business in Emeryville, California 94608.

 

3.          Socius owns a bona fide claim against Bionovo in the amount of $250,000 (the “Claim”). The Claim represents a non-refundable fee owed to Socius pursuant to the Securities Purchase Agreement, dated December 31, 2012, by and between Bionovo and Socius for Soicius’s commitment to purchase a certain amount of shares of Series A preferred stock of Bionovo as set forth therein. Such fee is past due in its entirety.

 

 

CASE NO.: 12-05495 CA 06

 

4.          Bionovo has not paid, and will not be able to pay in the near term, any amount due on the Claim. As a result, on February 13, 2012, Socius filed the above-captioned action (the “Action”), which Action the parties now seek to settle by this Stipulation.

 

5.          Bionovo desires to settle the Claim in exchange for the issuance to Socius of shares of Bionovo’s common stock (the “Common Stock”). Socius is willing to accept such shares of Common Stock in accordance with the terms of this Stipulation, subject to court approval following a hearing as required by Section 3(a)(10) of the Securities Act of 1933, as amended (the “Act”). Section 3(a)(10) provides in its entirety as follows:

 

Section 3 — Classes of Securities under this Title

 

(a)

Exempted securities. Except as hereinafter expressly provided, the provisions of this title shall not apply to any of the following classes of securities:...

 

10.

Except with respect to a security exchanged in a case under title 11 of the United States Code, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval;

 

(Emphasis added.)

 

6.          Socius is the sole person to whom the shares of Common Stock are proposed to be issued, and is therefore the only person entitled to notice of hearing and an opportunity to be heard in accordance with the statute. Socius has agreed to the proposed settlement terms and conditions, and believes that they are sufficiently fair such that Socius is willing to enter into this Stipulation. In addition, Bionovo’s board of directors has considered the proposed settlement and has resolved that its terms and conditions are fair to, and in the best interests of, Bionovo and its stockholders. Accordingly, both parties shall request Court approval of the settlement provided for herein (following the hearing referred to in the next sentence) as fair, reasonable and adequate. The parties shall submit this Stipulation to the Court, on a motion seeking an expedited hearing, and shall request that the Court enter the Agreed Order approving this Stipulation at the hearing thereon.

 

 

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7.          It is the intent and effect of this Stipulation that the Agreed Order, when signed, shall end, finally and forever (i) any claims to payment or compensation of any kind or nature that Socius had, now has, or may assert in the future against Bionovo arising out of the Claim, and (ii) any claims, including, without limitation, for offset or counterclaim, that Bionovo had, now has, or may assert in the future against Socius arising out of the Claim. In this regard, and subject to full and complete compliance with the Agreed Order, effective upon the execution of the Agreed Order, each party hereby releases and forever discharges the other party, including all of the other party’s employees, officers, directors, members, partners, agents, affiliates, subsidiaries and attorneys, from any and all claims, demands, obligations (fiduciary or otherwise), and causes of action, whether known or unknown, suspected or unsuspected, arising out of, connected with, or incidental to the Claim. Each party further agrees that with respect to the matters released herein, such party expressly waives any and all rights and benefits conferred upon it by the provisions of California Civil Code Section 1542 and any similar law of any state or territory of the United States. California Civil Code Section 1542 provides, in full, as follows:

 

§ 1542 General Release-Claims Extinguished. A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

 

 

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8.          In full and final settlement of the Claim, Bionovo will issue and deliver to Socius or its designee 2,500,000 shares of Common Stock for the Claim (collectively, the “Settlement Shares”). Further, such shares will be subject to adjustment as described in paragraph 10 below to reflect the intention of the parties that the total number of shares issued be based upon an average trading price of the Common Stock for a specified period of time prior and subsequent to entry of the Agreed Order. Under no circumstance whatsoever may the number of Settlement Shares issued to Socius or its designee, aggregated with all shares of Common Stock then owned or beneficially owned or controlled by, collectively, Socius and its affiliates, at any time exceed 9.9% of the total number of shares of Common Stock then outstanding.

 

9.          No later than the first trading day following the date that the Court enters its Agreed Order approving this Stipulation, Bionovo shall: (i) immediately issue the number of shares of Common Stock required by paragraph 8 above to Socius’s or its designee’s balance account with The Depository Trust Company (DTC) through the Fast Automated Securities Transfer (FAST) Program of DTC’s Deposit/Withdrawal Agent Commission (DWAC) system, without any restriction on transfer or resale, time being of the essence, by transmitting via facsimile and overnight delivery such irrevocable and unconditional instruction to Bionovo’s stock transfer agent, and (ii) if required by Bionovo’s stock transfer agent cause its legal counsel to issue an opinion to Bionovo’s transfer agent, in form and substance acceptable to both parties and such transfer agent, that the shares may be so issued (such issuance, the “Initial DWAC Issuance,” and the date upon which such issuance is complete, the “Initial DWAC Issuance Date”).

 

 

CASE NO.: 12-05495 CA 06

 

10.          The total number of shares of Common Stock to be issued to Socius or its designee in connection with this Stipulation and the Agreed Order shall be adjusted on the 21st trading day following the Initial DWAC Issuance Date (the 20 trading day period following the Initial DWAC Issuance Date, the “ True-Up Period,” and the 21st trading day following the Initial DWAC Issuance Date, the “True-Up Date”), as follows: (i) if the number of “VWAP Shares” (as defined below) exceeds the number of Settlement Shares initially issued, then Bionovo will issue and deliver to Socius or its designee, as DWAC shares, additional shares of Common Stock equal to the difference between (x) the total number of VWAP Shares and (y) the number of Settlement Shares, and (ii) if the number of VWAP Shares is less than the number of Settlement Shares, then Socius or its designee will return to Bionovo for cancellation that number of shares equal to the difference between (x) the total number of VWAP Shares and (y) the number of Settlement Shares issued in the Initial DWAC Issuance.

 

a.       The number of VWAP Shares shall be equal to (i) $250,000 divided by 70% of the trading volume weighted average price as reported by Bloomberg LP (the “VWAP”) of the Common Stock over True-Up Period, plus (ii) Socius’s legal fees, expenses and costs incurred through the True-Up Date, with the total dollar amount divided by the VWAP of the Common Stock over the True-Up Period.

 

b.        If, at any time during the True-Up Period, the trading price of the Common Stock declines by 15% or more from the trading price on the Initial DWAC Issuance date, Socius may deliver a written notice to Bionovo by facsimile or email requesting that a specified number of additional shares of Common Stock be delivered and containing the calculation for the number of additional shares requested. Socius may in its sole discretion deliver one or more such notices during the True-Up Period. Within one trading day following delivery of each such notice, Bionovo shall deliver to Socius or its designee, in compliance with the procedure set forth in paragraph 10 above (including, without limitation, issuance of the legal opinion to the transfer agent at Bionovo’s sole cost and expense), the number of additional shares of Common Stock requested in the notice. Any additional shares of Common Stock issued or issuable pursuant to this Section 10.b. will be considered Settlement Shares for purposes of any calculation of the total number of shares to be issued by, or returned to, Bionovo pursuant to the first paragraph of this Section 10.

 

 

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c.       In no event shall the number of shares of Common Stock issued to Socius or its designee in connection with the settlement of the Claim, aggregated with all shares of Common Stock then owned or beneficially owned or controlled by, collectively, Socius and its affiliates, at any time exceed 9.9% of the total number of shares of Common Stock then outstanding.

 

11.          The Parties hereby make the following representations and warranties:

 

a.    Bionovo represents and warrants to Socius and its affiliates that the shares of Common Stock provided for above are duly authorized and, when issued pursuant to the Agreed Order, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances and preemptive and similar rights to subscribe for or purchase securities. Bionovo has reserved from its duly authorized capital stock a number of shares of Common Stock at least equal to the number of shares that could be issued pursuant to the terms of this Stipulation. Without limitation, Bionovo hereby waives any provision in any agreement related to the debt comprising the Claim (x) requiring payments to be applied in a certain order, manner, or fashion, or (y) providing for exclusive jurisdiction in any court other than this Court. Bionovo further represents that it has all necessary power and authority to execute, deliver and perform all of its obligations under this Stipulation. The execution, delivery and performance of this Stipulation by Bionovo has been duly authorized by all requisite action on the part of Bionovo and this Stipulation has been duly executed and delivered by Bionovo.

 

 

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b.     Socius represents and warrants to Bionovo that, as of the date of this Stipulation and during the 90 calendar days prior to the date of this Stipulation, neither Socius nor any affiliate thereof is or was an officer, director, or 10% or more stockholder of Bionovo.

 

12.          For so long as Socius or any of its affiliates holds any shares of Common Stock of Bionovo, neither Socius nor any of its affiliates will: (i) vote any shares of Common Stock owned or controlled by it, or solicit any proxies or seek to advise or influence any person with respect to any voting securities of Bionovo; or (ii) engage or participate in any actions, plans or proposals that relate to or would result in (a) Socius or any of its affiliates acquiring additional securities of Bionovo, alone or together with any other person, which would result in Socius and its affiliates collectively beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.9% of the total outstanding Common Stock or other voting securities of Bionovo, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Bionovo or any of its subsidiaries, (c) a sale or transfer of a material amount of assets of Bionovo or any of its subsidiaries, (d) any change in the present board of directors or management of Bionovo, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of Bionovo, (f) any other material change in Bionovo’s business or corporate structure, (g) changes in Bionovo’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of Bionovo by any person, (h) causing a class of securities of Bionovo to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) causing a class of equity securities of Bionovo to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934 (the “Exchange Act”), or (j) taking any action, intention, plan or arrangement similar to any of those enumerated above. The provisions of this paragraph may not be modified or waived without further order of the Court.

 

 

CASE NO.: 12-05495 CA 06

 

13.         The parties agree that, for the period of 180 days from True-Up Date, and regardless of whether Socius or its affiliates then hold any debt or equity securities of Bionovo, Socius and its affiliates shall have the exclusive right to enter into transactions with Bionovo whereby Bionovo directly or indirectly issues Common Stock or Common Stock equivalents to a party in exchange for outstanding securities, claims or property interests, or partly in such exchange and partly for cash, in one or more transactions carried out pursuant to Section 3(a)(9) or Section 3(a)(10) of the Act.

 

14.         On the first trading day after the date of the Agreed Order, and prior to the opening time for trading stocks on public exchanges located in New York City, Bionovo shall file a Form 8-K Report pursuant to Section 13 or Section 15(d) of the Exchange Act disclosing the issuance of shares pursuant to the Agreed Order approving this Stipulation and attaching a copy of the Agreed Order and this Stipulation as an exhibit thereto.

 

15.         Bionovo hereby agrees to indemnify, defend and hold Socius and its affiliates harmless with respect to all obligations of Bionovo arising from or incident or related to this Stipulation, including, without limitation, any claims or actions brought by shareholders of Bionovo related to this Stipulation.

 

16.         The parties to this Stipulation represent that each of them has been advised as to the terms and legal effect of this Stipulation and the Agreed Order provided for herein, and that the settlement and compromise stated herein is final and conclusive forthwith, subject to the conditions stated herein, and each attorney represents that his or her client has freely consented to and authorized this Stipulation.

 

 

CASE NO.: 12-05495 CA 06

 

17.         Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Miami-Dade County, Florida, for the adjudication of the above-captioned action and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court or that such suit, action or proceeding is improper or inconvenient venue for such proceeding.

 

18.         Upon entry of the Agreed Order approving this Stipulation, the Action shall be dismissed with prejudice. The Court shall retain jurisdiction to enforce the terms of this Stipulation.

 

19.         This Stipulation constitutes Bionovo’s answer to the Complaint in this Action. Each party hereto waives a statement of decision, and the right to appeal from the Order after its entry. Bionovo further waives any defense based on the rule against splitting causes of action. Except as expressly set forth herein, each party shall bear its own attorneys’ fees, expenses and costs.

 

20.         This Stipulation may be executed in counterparts and by facsimile, pdf or other electronic format, each of which shall constitute an original and all of which together shall be deemed together as a single document.

 

[Signature Pages to Follow]

 

 

CASE NO.: 12-05495 CA 06

 

DATED: February 15, 2012	LAPIN & LEICHTLING, LLP
	Attorneys for Plaintiff, Socius CG II, Ltd.
	255 Alhambra Circle, Suite 1250
	Coral Gables, Florida 33134
	Telephone: (305) 569-4100
	Facsimile:  (305) 569-0000
	E-mail: aleichtling@LL-lawfirm.com
	By:	/s/ Adam B. Leichtling
		ADAM B. LEICHTLING
		Florida Bar No.
DATED: February 15, 2012	SOCIUS CG II, LTD.
	By:	/s/ Terren Peizer
		Terren Peizer
		Managing Director
		Socius CG II, Ltd.
DATED: February 15, 2012	GREENBERG TRAURIG, P.A.
	Attorneys for Defendant Bionovo, Inc.
	333 Avenue of the Americas
	Miami, Florida 33131
	Telephone: (305) 579-0500
	Facsimile:  (305) 579-0717
	E-mail: salkym@gtlaw.com
	By:	/s/ Mark A. Salky
		MARK A. SALKY
		Florida Bar No. 058221
DATED: February 15, 2012	BIONOVO, INC.
	By:	/s/ David Boyle
		David Boyle
		Chief Financial Officer
		Bionovo, Inc.