AGREEMENT TO EXCHANGE AND CONSENT
This
Agreement to Exchange and Consent (the “Agreement”),
dated
as of May 1, 2007, is entered into by and among Novelos Therapeutics, Inc.,
a
Delaware corporation (the “Company”),
and
each of the signatories hereto (collectively, the “Series
A Investors”).
WHEREAS,
each of the Series A Investors is the holder of shares of Series A 8% Cumulative
Convertible Preferred Stock, $.00001 par value per share (the “Series
A Preferred Stock”)
and
warrants to purchase (“Series
A Warrants”)
shares
of its common stock, $.00001 par value per share (the “Common
Stock”),
acquired pursuant to a Subscription Agreement dated September 30, 2005 or
October 3, 2005 (the “Subscription
Agreement”);
WHEREAS,
the
Subscription Agreement requires the Company to file a Registration Statement
with the SEC to register 175% of the shares of common stock issuable upon
conversion of the Series A Preferred Stock and 100% of the shares of common
stock issuable upon exercise of the Series A Warrants (the “Registrable
Securities”)
and
Section 11.1(iv) of the Subscription Agreement provides that the Registrable
Securities shall be reserved and set aside exclusively for the benefit of the
Series A Investors and not issued, employed or reserved for anyone other than
the Series A Investors;
WHEREAS,
the Series A Preferred Stock’s Certificate of Designations (“Certificate
of Designations”)
contains certain prohibitions on amendments to the Company’s Certificate of
Incorporation which would change the relative seniority rights of the Series
A
Preferred Stock or create a series of capital stock entitled to seniority as
to
the payment of dividends or liquidation preference in relation to the Series
A
Preferred Stock;
WHEREAS,
the Company expects to issue and sell shares of a new series of its Preferred
Stock (“Series
B Preferred Stock”)
and
warrants to purchase Common Stock to one or more accredited investors (the
“Series
B Investors”)
in a
transaction, and as a condition to such transaction the Series B Investors
require this Agreement;
NOW,
THEREFORE, in consideration of the promises referred to below, each of the
undersigned Series A Investors, hereby agree with the Company, as
follows:
1. Each
of
the Series A Investors hereby consents to the issuance of the Series B Preferred
Stock and the filing of the Series B Certificate of Designations, substantially
in the form attached hereto as Exhibit
A,
setting
forth the relative rights, privileges and preferences of the Series B Preferred
Stock.
2. Each
of
the Series A Investors hereby agrees to exchange all shares of Series A
Preferred Stock owned by such Series A Investor for the number of shares of
Series C Preferred Stock set forth on Schedule I hereto having the relative
rights, privileges and preferences set forth in the Series C Certificate of
Designations (the “Exchange”),
in
the form attached hereto as Exhibit
B
(the
“Series
C Certificate of Designations”).
3. Each
of
the Series A Investors hereby waives its rights to have the full amount of
the
Registrable Securities reserved in the Registration Statement exclusively for
each Series A Investor’s benefit as required by Section 11.1(iv) of the
Subscription Agreement, and each Series A Investors agrees that after the
issuance and sale of the Series B Preferred Stock, 2,696,283 shares of Common
Stock issuable upon conversion of the Series C Preferred Stock and 969,696
shares of Common Stock issuable upon exercise
of the Series A Warrants will be reserved in the Registration Statement
exclusively for each Series A Investor’s benefit.
4. As
consideration for the consent of the Series A Investors pursuant to Section
1
hereof, the Exchange pursuant to Section 2, and the waiver of the Series A
Investors pursuant to Section 3 the Company agrees to issue warrants to purchase
an aggregate of 1,333,333 shares of Common Stock at an exercise price per share
of $1.25, such warrants to be substantially in the form attached hereto as
Exhibit
C
(the
“Warrants”)
and
$40,000 as an allowance to defray costs and expenses associated with the
execution and delivery of this Agreement (the “Allowance”).
The
allocation of Warrants and the Allowance among the undersigned Series A
Investors will be as set forth on Schedule
I
attached
hereto. In addition, at the time of the Exchange each Series A Investor shall
receive in cash the dividend accrued on each share of Series A Preferred Stock
from April 1, 2007 through the day immediately preceding the date of the
Exchange.
5. The
Company represents and warrants to and agrees with each Series A Investor
that:
(a) After
the
Exchange, the holding period of the Series C Preferred Stock, the Common Stock
issuable upon conversion of the Series C Preferred Stock (the “Conversion
Shares”)
and
the Series A Warrants for purposes of Rule 144 under the Securities Act of
1933
(the “1933 Act”) shall have commenced on the same date as the holding period of
the Series A Preferred Stock.
(b) The
Registration Statement filed with the SEC under Registration Nos.: 333-133043
and 333-129744, as amended, will be supplemented (the “Supplement”)
by the
Company on or prior to the 4th
business
day following the Exchange, to reflect the transactions described in this
Agreement, the issuance of the Series B Preferred Stock and all other matters
so
that upon the filing of the Supplement with the SEC, the Registration Statement
will be current and effective with regard to the public resale of the
Registrable Securities, which term excludes the Warrants or the shares of Common
Stock issuable upon exercise of the Warrants (the “Warrant
Shares”).
(c) This
Agreement, the Warrants and any other agreements delivered together with this
Agreement (collectively, “Exchange
Documents”)
and
the Series C Certificate of Designations have been duly authorized, executed
and
delivered by the Company and the Exchange Documents are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability relating to or affecting creditors’ rights generally,
principles of equity and principles of public policy. The Company has full
corporate power and authority necessary to enter into and deliver the Exchange
Documents and the Series C Certificate of Designations and to perform its
obligations thereunder.
2
(d) No
consent, approval, authorization or order of any court or governmental authority
having jurisdiction over the Company nor the Company's shareholders is required
for the execution by the Company of the Exchange Documents and Series C
Certificate of Designations and compliance and performance by the Company of
its
obligations under the Exchange Documents, including, without limitation, the
issuance of the Series C Preferred Stock, the Conversion Shares, the Warrants
and the Warrant Shares (the Series C Preferred Stock, the Conversion Shares,
the
Warrants and the Warrant Shares are collectively referred to herein as the
“Securities”).
(e) Assuming
the representations and warranties of the Series A Investors in Section 6 are
true and correct, neither the issuance of the Securities nor the performance
of
the Company's obligations under this Agreement and the other Exchange Documents
by the Company will:
(i)
violate, conflict with, result in a breach of, or constitute a default of a
material nature under (A) the certificate of incorporation or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule or regulation applicable to the Company of any court or
governmental authority having jurisdiction over the Company or over the
properties or assets of the Company, (C) the terms of any bond, debenture,
note
or any other evidence of indebtedness for borrowed money, or any material
agreement, stock option or other similar plan, indenture, lease, mortgage,
deed
of trust or other instrument to which the Company is a party, or by which it
is
bound, or to which any of the material properties of the Company is subject;
or
(ii)
result in the creation or imposition of any lien, charge or encumbrance upon
the
Securities or any of the assets of the Company; or
(iii)
result in the activation of any anti-dilution rights or a reset or repricing
of
any debt or security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any obligation of
the
Company.
(f) Upon
issuance, the Series C Preferred Stock, the Conversion Shares and the Warrant
Shares:
(i)
are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii)
have
been, or will be, duly and validly authorized and on the date of issuance of
the
Conversion Shares and issuance of the Warrant Shares upon exercise of the
Warrants will be duly and validly issued, fully paid and
nonassessable;
(iii)
will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company; and
(iv)
will
not result in a violation of Section 5 under the 1933 Act.
3
(g) Upon
the
issuance and sale of the Series B Preferred Stock the exercise price of the
Series A Warrants shall be adjusted to $1.00 per share.
(h) The
Company will not reissue any shares of Series B Preferred Stock after such
shares of Series B Preferred Stock have been converted or redeemed.
6. Each
Series A Investor hereby represents and warrants to and agrees with the Company
only as to each Series A Investor that:
(a)
The
Series A Investor is, and will be at the time of the Exchange and exercise
of
the Warrants, an "accredited investor", as such term is defined in Regulation
D
promulgated by the SEC under the 1933 Act, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements
in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Series A Investor
to
utilize the information made available by the Company to evaluate the merits
and
risks of and to make an informed investment decision with respect to the
proposed transaction, which represents a speculative investment.
(b) The
Series A Investor owns the Series A Preferred Stock free and clear of any liens
and encumbrances of third parties.
(c) The
Series A Investor understands and agrees that the shares of Series C Preferred
Stock, the Warrants and Warrant Shares have not been registered under the 1933
Act or any applicable state securities laws, by reason of their issuance in
a
transaction that does not require registration under the 1933 Act (based in
part
on the accuracy of the representations and warranties of Series A Investors
contained herein), and that such Securities must be held indefinitely unless
a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.
(d)
The
shares of Series C Preferred Stock, the Warrants and the Warrant Shares shall
bear the following or similar legend:
“THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO
IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAWS.”
7. This
Agreement shall be effective immediately. The Company shall deliver the
consideration described in Section 4 concurrently with the filing of the Series
C Certificate of Designations. Immediately upon the filing of the Series C
Certificate of Designations (with no further action required by the Company
or
the Series A Investors), each share of Series A Preferred Stock will
automatically convert into 1/12 of a share of Series C Preferred Stock.
Following the Exchange, at the request of any Series A Investor, the Company
will issue new Series C Preferred Stock certificates in replacement of the
existing Series A Preferred Stock certificates. If for any reason the Series
C
Certificate of Designations is not filed on or before May 30, 2007, this
Agreement shall terminate and the transactions contemplated hereby will be
deemed for all purposes to have been abandoned.
4
8. Upon
the
Exchange, the Company will deliver an opinion of counsel to the Company with
regard to the matters set forth in Section 5(a), in a form satisfactory to
the
Series A Investors.
9. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to conflicts of laws principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the civil or state
courts of New York or in the federal courts located in New York County. THE
PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH ON BEHALF OF THE COMPANY
AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
10. The
following sections of the Subscription Agreement are hereby incorporated by
reference for the benefit of the holders of Series C Preferred Stock, except
to
the extent the same are modified pursuant to this Agreement and the Series
C
Certificate of Designations: Section 6, Section 7.1, Section 7.2, Xxxxxxx 0.0,
Xxxxxxxx 0(x), (x), (x), (x)-(x), (x) and (s), Section 10, Section 11, Sections
12(b)-(e) and Section 13(f).
11. The
Series A Investors hereby expressly agree that upon the Exchange, the Series
A
Investors will no longer have the right to nominate one person to the Company’s
board of directors.
5
12. Unless
otherwise provided, any notice required or permitted under this Agreement 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 telecopier, 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 (3) Business Days
after such notice is deposited in first class mail, postage prepaid, and (iv)
if
given by a nationally recognized overnight air courier, then such notice shall
be deemed given one (1) Business Day after delivery to such carrier. All notices
shall be addressed to the party to be notified at the address as follows, or
at
such other address as such party may designate by ten (10) days’ advance written
notice to the other party:
If
to the
Company:
Xxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Chief Executive Officer
Fax:
(000) 000-0000
With
a
copy to:
Xxxxx
Xxxx LLP
Seaport
World Trade Center West
000
Xxxxxxx Xxxxxxxxx
Xxxxxx,
XX 00000
Attn:
Xxxx Xxxx
Fax:
(000) 000-0000
If
to any
of the Series A Investors:
to
the
addresses set forth on Schedule I affixed hereto.
With
a
copy to:
Grushko
& Xxxxxxx, P.C.
000
Xxxxx
Xxxxxx, Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx, Esq.
Fax:
(000) 000-0000
13. This
Agreement may be executed in any number of counterparts, each such counterpart
shall be deemed to be an original instrument, and all such counterparts together
shall constitute but one agreement. Facsimile transmission of execution copies
or signature pages for this Waiver shall be legal, valid and binding execution
and delivery for all purposes.
6
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
|
|
LONGVIEW
FUND, LP
|
|||
| By: | /s/ Xxxxx X. Xxxxxx | By: | /s/ S. Xxxxxxx Xxxxxxx | |
|
Name: Xxxxx X. Xxxxxx |
Name: S. Xxxxxxx Xxxxxxx |
|||
| Title: President and CEO | Title: CFO - Investment Advisor | |||
|
SUNRISE
EQUITY PARTNERS, LP
|
LONGVIEW EQUITY FUND, LP | |||
| By: | /s/ Xxxxxxx X. Xxxxx | By: | /s/ S. Xxxxxxx Xxxxxxx | |
|
Name: Xxxxxxx X. Xxxxx |
Name: S. Xxxxxxx Xxxxxxx |
|||
|
Title:
Manager,
Level Counter, LLC the
General
Partner of Sunrise Equity Partners, LP
|
Title: CFO - Investment Advisor | |||
| LONGVIEW INTERNATIONAL EQUITY FUND, LP | ||
| |
|
|
| By: | /s/ S. Xxxxxxx Xxxxxxx | |
|
Name: S. Xxxxxxx Xxxxxxx |
||
| Title: CFO - Investment Advisor | ||
[SIGNATURE
PAGE MAY BE EXECUTED IN COUNTERPARTS]
7
Schedule
I
Allocation
of Warrants, Allowance and Shares of Series C Preferred Stock
|
Series
A Investors
|
Address
|
Warrants
|
Allowance
|
Shares
of Series C Preferred Stock
|
||||
|
Longview
Fund, L.P
|
000
Xxxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
|
833,334
|
$
26,667.00
|
170
|
||||
|
Longview
Equity Fund, L.P.
|
000
Xxxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
|
270,833
|
8,667.00
|
55.25
|
||||
|
Longview
International Equity Fund, L.P.
|
000
Xxxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
|
145,833
|
4,666.00
|
29.75
|
||||
|
Sunrise
Equity Partners, L.P.
|
000
Xxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, XX 00000
|
83,333
|
-
|
17
|
||||
|
Total
|
1,333,333
|
$
40,000.00
|
272
|
8
Exhibit
A
Series
B Certificate of Designations
[See
Exhibit 3.2 to this filing]
9
Exhibit
B
Series
C Certificate of Designations
[See
Exhibit 3.3 to this filing]
10
Exhibit
C
Form
of Warrant
[See
Exhibit 4.2 to this filing]
11
