EXCHANGE AGREEMENT
THIS
EXCHANGE AGREEMENT, dated as of August 21, 2009 (this “Agreement”) is
entered into by and between Novelos Therapeutics, Inc., a Delaware corporation
(the “Company”)
and the holder (the “Warrant Holder”) of
that certain Warrant (the “Warrant”) issued by
the Company to the Warrant Holder on March 7, 2006 by, for the purchase of up to
________ shares (the “Warrant Shares”) of
the Common Stock, $0.0001 par value per share, of the Company (the “Common
Stock”).
WHEREAS,
the Company issued certain Common Stock Purchase Warrants, including the
Warrant, on March 7, 2006 (collectively, the “2006 Warrants”) in
connection with a private placement of shares of Common Stock, and the 2006
Warrants were initially exercisable for an aggregate of 8,365,542 shares of
Common Stock at an exercise price of $2.50 per share;
WHEREAS,
the 2006 Warrants provide for weighted-average anti-dilution protection,
subsequent issuances of equity securities by the Company have triggered such
adjustments, and as a result, the 2006 Warrants are now exercisable for an
aggregate of 12,379,848 shares of Common Stock at an exercise price of $1.82 per
share;
WHEREAS,
the holders of the 2006 Warrants were entitled to registration rights with
respect to the shares of Common Stock underlying such warrants, and the Company
registered the resale of such shares under a Registration Statement on Form SB-2
(File No. 333-133043) file with the Securities and Exchange Commission on April
7, 2006, which Registration Statement was declared effective on April 19,
2006;
WHEREAS,
the Company is no longer under the obligation to maintain the effectiveness of
such registration, and accordingly, on May 22, 2008, the Company deregistered
the shares of Common Stock underlying the 2006 Warrants;
WHEREAS,
the Company has invited the holders of the 2006 Warrants, including the Warrant
Holder, to tender such warrants to the Company in exchange for a number of
shares of Common Stock equal to 30% (the “Exchange Ratio”) of
the number of shares issuable upon exercise of such warrants (the “Exchange”), such
Exchange to occur at 6:00 p.m. Eastern time on August 21, 2009 (the “Exchange Effective
Time”); and
WHEREAS,
in connection with the Exchange, the Company is entering into this Agreement
with the Warrant Holder, and a series of other agreements of like tenor with
other holders of 2006 Warrants;
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Exchange.
(a)
The Warrant Holder has tendered an executed copy of this Agreement, together
with the Warrant, to the Company. Pursuant to the terms and
conditions of the invitation to tender 2006 Warrants set forth in the Company’s
Invitation to Tender Warrants dated July 13, 2009 to holders of 2006 Warrants
(the “Invitation to Tender”).
(b) On
or before 9:00 a.m. on the first business day following the Exchange Effective
Time, the Company shall notify the Warrant Holder of the Company’s acceptance of
the tender of the Warrant and of a number of shares of Common Stock equal to the
number of Warrant Shares multiplied by the Exchange Percentage, rounded down to
the nearest whole share (the “Exchange Shares”) to
be issued to the Warrant Holder in the Exchange. Upon the Exchange
Effective Time, and without any further action on the part of the Company or the
Warrant Holder, the right to acquire the Common Stock issuable upon exercise of
the Warrant, and all other rights, including rights to notice, granted to the
Warrant Holder under the terms of such Warrant, shall be deemed surrendered and
terminated in all respects. The Company shall deliver the Exchange
Shares to the Warrant Holder at the address provided on the signature page
hereto on the fifth business day following the Exchange Effective
Time.
2. Representations of the
Company. The Company represents and warrants to the Warrant
Holder as follows:
(a) Organization. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware, with the requisite power and authority to
own and use its properties and assets and to carry on its business as currently
conducted.
(b) Authority. The
Company has the corporate power and authority to enter into and perform this
Agreement, and all corporate action necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby by the Company has been duly and validly
taken. This Agreement has been duly and validly executed and
delivered by the Company. This Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights of creditors, to principles of
public policy and to general principles of equity.
(c) Issuance of
Securities. The Exchange Shares have been duly authorized and,
when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable. Attached as Exhibit A hereto is a
table setting forth the capitalization of the Company on a pro forma basis
giving effect to an Exchange of all of the 2006 Warrants.
3. Representations of the
Warrant Holder. The Warrant Holder represents and warrants to
the Company as follows:
(a) Organization. If
the Warrant Holder is not a natural person, the Warrant Holder is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted.
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(b) Authority. The
Warrant Holder has the requisite power and authority to enter into and perform
this Agreement, and all action necessary to authorize the execution, delivery
and performance of this Agreement by the Warrant Holder and the consummation of
the transactions contemplated hereby by the Warrant Holder has been duly and
validly taken. This Agreement has been duly and validly executed and
delivered by the Warrant Holder. This Agreement constitutes a valid
and binding agreement of the Warrant Holder, enforceable against the Warrant
Holder in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors, to principles of public policy and to general principles of
equity. Upon the transfer of the Warrant to the Company in accordance
herewith, the Company will acquire good, marketable and unencumbered title to
the Warrant, free and clear of all liens, restrictions, charges and encumbrances
and the same will not be subject to any adverse claims.
(c) Own
Account. The Warrant Holder understands that the Exchange
Shares have not been registered under the Securities Act of 1933, as amended
(the “Securities
Act”) or any applicable state securities law and is acquiring the
Exchange Shares for its own account and not with a view to distributing or
reselling such Exchange Shares or any part thereof, has no present intention of
distributing any of such Exchange Shares and has no arrangement or understanding
with any other persons regarding the distribution of such Exchange Shares (this
representation and warranty not limiting the Warrant Holder’s right to sell the
Exchange Shares in compliance with applicable federal and state securities
laws). The Warrant Holder is acquiring the Exchange Shares hereunder
in the ordinary course of its business. The Warrant Holder does not have any
agreement or understanding, directly or indirectly, with any person or entity to
distribute any of the Exchange Shares.
(d) Warrant Holder
Status. At the time of receipt of the Invitation to Tender,
the Warrant Holder was, and at the date hereof it is, either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.
(e) Experience of the Warrant
Holder. The Warrant Holder, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Exchange Shares and has so evaluated the
merits and risks of such investment. The Warrant Holder is able to
bear the economic risk of an investment in the Exchange Shares and, at the
present time, is able to afford a complete loss of such investment.
(f) General
Solicitation. The Warrant Holder is not purchasing the
Exchange Shares as a result of any advertisement, article, notice or other
communication regarding the Exchange Shares published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
4. Lock-Up. To
induce the Company to enter into this Agreement, the Warrant Holder agrees that,
without the prior written consent of the Company, it will not, during the period
commencing at the Exchange Effective Time and ending 180 days thereafter (the
“Lock-Up
Period”), (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any Exchange Shares, or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Exchange Shares, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Exchange
Shares or other securities, in cash or otherwise. The Warrant Holder
also agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the Exchange
Shares during the Lock-Up Period..
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5. Legends. The
Warrant Holder acknowledges that the certificates representing the Shares will
be stamped or otherwise imprinted with a legend substantially in the following
form:
The
securities represented hereby have not been registered under the Securities Act
of 1933, as amended, or any state securities laws and neither the securities nor
any interest therein may be offered, sold, transferred, pledged or otherwise
disposed of except pursuant to an effective registration under such act or an
exemption from registration, which, in the opinion of counsel reasonably
satisfactory to this corporation, is available.
The
securities represented hereby are subject to a lock-up agreement, containing
restrictions on transfer which expire on February 8, 2010. A complete
and correct copy of such agreement is available for inspection at the principal
office of this corporation and will be furnished upon written request and
without charge.
6. Miscellaneous.
(a) Assignment. This
Agreement and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
of the Warrant Holder.
(b) Headings. The
headings used in this Agreement are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Agreement.
(c) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
(d) Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 6:00 p.m., Eastern time, on a
business day, (b) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a business day
or later than 6:00 p.m., Eastern time, on any business day, (c) the second
business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such
notices and communications shall be as follows:
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If to the
Company:
Xxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attn: 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, Esq.
Fax: (000)
000-0000
If to the
Warrant Holder, at the address specified on the signature page
hereto.
(e) Amendment. This
Agreement may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Warrant Holder.
(f)
Severability. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
* * * * *
* * * * * * * * * *
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
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By:
|
|
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Name:
|
Xxxxx
X. Xxxxxx
|
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Title:
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President
and Chief Executive
Officer
|
WARRANT
HOLDER:
By:
Name:_______________________________
Title:________________________________
Address:_____________________________
______________________________
______________________________
Fax:_________________________________
Federal
Tax ID Number:_________________
(or
Social Security Number)
Warrant
No.:__________________________
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Exhibit
A
Pro Forma
Capitalization
The
following table sets forth the shares of the Company’s common stock and common
stock purchase warrants outstanding 1) as of June 30, 2009; 2) on a pro forma
basis giving effect to the Exchange of 50% of the 2006 Warrants; and 3) on a pro
forma basis giving effect to the Exchange of 100% of the 2006
Warrants:
|
As of June 30,
2009
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Pro forma -
Tender of 50% of
2006 Warrants
|
Pro forma -
Tender of 100%
of 2006 Warrants
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Common
stock
|
44,743,611 | 46,600,588 | 48,457,565 | |||||||||
|
Outstanding
warrants to purchase Novelos common stock
|
38,424,340 | 32,234,416 | 26,044,492 | |||||||||
Note that
the above table does not include 56,593,882 shares of common stock that are
issuable upon the conversion of preferred stock and accumulated dividends as of
June 30, 2009 or 7,279,825 shares of common stock that are issuable upon the
exercise of stock options as of June 30, 2009. The number of shares
of common stock issuable upon the conversion of preferred stock or the exercise
of stock options will not be impacted by the Exchange.
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