SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement, dated on and as of the date set forth on the
signature page hereto (this “Agreement”),
is
made among Novelos Therapeutics, Inc., a Delaware corporation (the “Company”),
the
undersigned purchaser(s) (each a “Purchaser”
and
collectively, the “Purchasers”)
and
each assignee of a Purchaser who becomes a party hereto.
WHEREAS,
subject
to the terms and conditions set forth in this Agreement and pursuant to Section
4(2) of the Securities Act of 1933, as amended (the “Securities
Act”)
and
Rule 506 of Regulation D promulgated thereunder, the Company desires to offer,
issue and sell to the Purchasers (the “Offering”),
and
the Purchasers, severally and not jointly, desire to purchase from the Company,
shares (the “Shares”)
of the
Company’s common stock, par value $0.00001 per share (the “Common
Stock”).
The
Shares are collectively referred to herein as the “Securities.”
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which is hereby acknowledged, the Company and each of the Purchasers
agree as follows:
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A.
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Subscription.
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1. Subject
to the conditions to closing set forth herein, each Purchaser hereby irrevocably
subscribes for and agrees to purchase Securities for the aggregate purchase
price set forth on the signature page of such Purchaser hereto (the
“Subscription
Amount”).
The
Securities to be issued to a Purchaser hereunder shall consist of (i) Shares
in
an amount equal to the quotient of (x) the Subscription Amount, divided by
(y)
the Offering Price, rounded down to the nearest whole number.
2. For
purposes of this Agreement, the “Offering
Price”
shall
be $0.65, which shall be
the
price per Share to be paid by the Purchasers.
3. As
soon
as possible after acceptance of this Agreement by the Company but no later
than
5:00 p.m. Eastern time on August 20, 2008, the Company shall hold the closing
of
the Offering (the “Closing”
and
the
date of the Closing, the “Closing
Date”).
Prior
to the Closing, and following the delivery to the Purchaser(s) of a photocopy
of
the stock certificates representing the “Securities”, each Purchaser shall
deliver the applicable Subscription Amount, by wire transfer to the Company’s
bank account in accordance with the wire transfer instructions set forth on
Schedule
A,
and
such amount shall be held in the manner described in Paragraph (4) below. The
total Subscription Amount to be received at Closing is $2,999,999.60.
4. All
payments for Securities made by the Purchasers will be deposited as soon as
practicable for the undersigned’s benefit in the Company’s bank account.
Payments for Securities made by the Purchasers will be returned promptly,
prior
to an applicable Closing, without interest or deduction, if, or to the extent,
the undersigned’s subscription is rejected or the Offering is terminated for any
reason.
5. Upon
receipt by the Company of the requisite payment for all Securities to be
purchased by the Purchasers whose subscriptions are accepted, the Company shall,
at the Closing: (i) issue to each Purchaser original stock certificates
representing the shares of Common Stock purchased at such Closing under this
Agreement; (ii) deliver to the Purchasers a certificate stating that the
representations and warranties made by the Company in Section C of this
Agreement were true and correct in all respects when made and are true and
correct in all respects on the date of each such Closing relating to the
Securities subscribed for pursuant to this Agreement as though made on and
as of
such Closing date (provided, however, that representations and warranties that
speak as of a specific date shall continue to be true and correct as of the
Closing with respect to such date); and (iii) cause to be delivered to the
Purchasers an opinion of Xxxxx Xxxx LLP covering the matters described in
Exhibit
A
hereto.
6. Each
Purchaser acknowledges and agrees that the purchase of Shares by such Purchaser
pursuant to the Offering is subject to all the terms and conditions set forth
in
this Agreement.
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B.
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Representations
and Warranties of the
Purchasers.
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Each
Purchaser,
severally and not jointly, hereby represents and warrants to the Company and
agrees with the Company as follows:
1. The
Purchaser has carefully read this Agreement and the related exhibits and
schedules attached hereto (collectively the “Offering
Documents”),
and
is familiar with and understands the terms of the Offering. Specifically, and
without limiting in any way the foregoing representation, the Purchaser has
carefully read and considered (a) the Company’s annual report on Form 10-KSB for
the year ended December 31, 2007, the Company’s quarterly reports on Form 10-Q
for the quarters ended March 31, 2008 and June 30, 2008, reports on Form 8-K
filed by the Company from January 1, 2008 through the date of the Agreement
and
(b) the additional risk factors set forth on Schedule
B.
The
Purchaser fully understands all of the risks related to the purchase of the
Securities. The Purchaser has carefully considered and has discussed with the
Purchaser’s professional legal, tax, accounting and financial advisors, to the
extent the Purchaser has deemed necessary, the suitability of an investment
in
the Securities for the Purchaser’s particular tax and financial situation and
has determined that the Securities being subscribed for by the Purchaser are
a
suitable investment for the Purchaser. The Purchaser recognizes that an
investment in the Securities involves substantial risks, including the possible
loss of the entire amount of such investment. The Purchaser further recognizes
that the Company has broad discretion concerning the use and application of
the
proceeds from the Offering.
2. The
Purchaser acknowledges that (i) the Purchaser has had the opportunity to request
copies of any documents, records, and books pertaining to this investment and
(ii) any such documents, records and books that the Purchaser requested have
been made available for inspection by the Purchaser, the Purchaser’s attorney,
accountant or advisor(s).
3. The
Purchaser, and the Purchaser’s advisor(s), have had a reasonable opportunity to
ask questions of and receive answers from representatives of the Company or
persons acting on behalf of the Company concerning the Offering and all such
questions have been answered to the full satisfaction of the Purchaser.
Notwithstanding the foregoing, the Purchaser may rely on the representations
and
warranties of the Company contained in Section C.
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4. The
Purchaser is not subscribing for Securities as a result of or subsequent to
any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar, meeting or conference whose attendees have been
invited by any general solicitation or general advertising.
5. The
Purchaser is a corporation, partnership or trust with total assets in excess
of
$5,000,000 and was not organized for the purpose of acquiring the
Securities.
6. The
Purchaser has sufficient knowledge and experience in financial, tax and business
matters to enable the Purchaser to utilize the information made available to
the
Purchaser in connection with the Offering, to evaluate the merits and risks
of
an investment in the Securities and to make an informed investment decision
with
respect to an investment in the Securities on the terms described in the
Offering Documents.
7. The
Purchaser understands that nothing in this Agreement or any other materials
presented to the Purchaser in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. The Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Securities.
8. The
Purchaser will not sell or otherwise transfer the Securities without
registration under the Securities Act and applicable state securities laws
or an
applicable exemption therefrom. The Purchaser acknowledges that neither the
offer nor sale of the Securities has been registered under the Securities Act
or
under the securities laws of any state. The Purchaser represents and warrants
that the Purchaser is acquiring the Securities for the Purchaser’s own account,
for investment and not with a view toward resale or distribution within the
meaning of the Securities Act. The Purchaser has not offered or sold the
Securities being acquired nor does the Purchaser have any present intention
of
selling, distributing or otherwise disposing of such Securities either currently
or after the passage of a fixed or determinable period of time or upon the
occurrence or non-occurrence of any predetermined event in circumstances in
violation of the Securities Act. The Purchaser is aware that (i) the Securities
are not currently eligible for sale in reliance upon Rule 144 promulgated under
the Securities Act and (ii) the Company has no obligation to register the
Securities subscribed for hereunder,
except
as described in Section F.2 of this Agreement. By making these representations
herein, Purchaser is not making any representation or agreement to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an available exemption to the registration
requirements of the Securities Act.
9. The
Purchaser 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.
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10. The
Purchaser has full right, power, authority and capacity (corporate, statutory
or
otherwise) to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. This Agreement
constitutes a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms, except (i) to the extent rights
to
indemnity and contribution may be limited by state or federal securities laws
or
the public policy underlying such laws, (ii) enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally and (iii) enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
11. The
execution and delivery by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby will not result in the violation of
any
law, statute, rule, regulation, order, writ, injunction, judgment or decree
of
any court or governmental authority to or by which the Purchaser is bound,
or of
any provision of the organizational documents of the Purchaser, and will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Purchaser is a party
or
by which it is bound or to which any of its properties or assets is subject,
nor
result in the creation or imposition of any lien upon any of the properties
or
assets of the Purchaser.
12. No
consent, approval, authorization or other order of any governmental authority
or
other third-party is required to be obtained by the Purchaser in order for
Purchaser to execute, deliver and perform this Agreement and to consummate
the
transactions contemplated hereby.
13. If
the
Purchaser is a retirement plan or is investing on behalf of a retirement plan,
the Purchaser acknowledges that an investment in the Securities poses additional
risks, including the inability to use losses generated by an investment in
the
Securities to offset taxable income.
14. The
information contained in the purchaser questionnaire in the form of Exhibit
C
attached
hereto (the “Purchaser
Questionnaire”)
delivered by the Purchaser in connection with this Agreement is complete and
accurate in all respects as of the date of this Agreement.
15. The
Purchaser acknowledges that the Company will have the authority to issue shares
of Common Stock, in excess of those being issued in connection with the
Offering, and that the Company may issue additional shares of Common Stock
from
time to time. The issuance of additional shares of Common Stock may cause
dilution of the existing shares of Common Stock and a decrease in the market
price of such existing shares.
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C.
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Representations
and Warranties of the Company.
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The
Company hereby makes the following representations and warranties to the
Purchaser, which shall survive the Closing and the purchase and sale of the
Securities.
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 full corporate power and
authority to conduct its business as currently conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary, except
where the failure to be so qualified would not have a material adverse effect
on
the business, properties, prospects, financial condition or results of
operations of the Company (a “Material
Adverse Effect”).
2. Schedule
C sets forth (i) the authorized capital stock of the Company on the date hereof,
(ii) the number of shares of capital stock issued and outstanding, (iii) the
number of shares of capital stock issuable pursuant to the Company’s stock
plans, and (iv) the number of shares of capital stock issuable and reserved
for
issuance pursuant to, exercisable for, or convertible into or exchangeable
for
any shares of capital stock of the Company. All of the issued and outstanding
shares of the Company’s capital stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of pre-emptive rights and
were
issued in full compliance with applicable law and any rights of third parties.
No Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on C, there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company may be
obligated to issue any equity securities of any kind and, except as contemplated
by this Agreement. Except as described on Schedule C and, there are no voting
agreements, buy-sell agreements, option or right of first purchase agreements
or
other agreements of any kind among the Company and any of its security holders
relating to the securities of the Company. Except as described on C, the Company
has not granted any Person the right to require the Company to register any
of
its securities under the 1933 Act, whether on a demand basis or in connection
with the registration of securities of the Company for its own account or for
the account of any other Person.
Schedule
C sets forth a true and complete table setting forth the pro forma
capitalization of the Company on a fully diluted basis giving effect to the
issuance of the Securities the exercise or conversion of all outstanding
securities. Except as described on C, the issuance and sale of the Securities
hereunder will not obligate the Company to issue shares of Common Stock or
other
securities to any other Person (other than the Investors) and will not result
in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.
Except
as
set forth on Schedule C, the Company does not have outstanding stockholder
purchase rights or any similar arrangement in effect giving any Person the
right
to purchase any equity interest in the Company upon the occurrence of certain
events.
3. Issuance;
Reservation of Shares.
The
issuance of the Shares has been duly and validly authorized by all necessary
corporate and stockholder action, and the Shares, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable shares of Common Stock of the Company.
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4. Authorization;
Enforceability.
The
Company has all corporate right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and stockholders necessary
for
the authorization, execution, delivery and performance of this Agreement by
the
Company, the authorization, sale, issuance and delivery of the Securities
contemplated herein and the performance of the Company’s obligations hereunder
has been taken. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms and subject to
laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief
or
other equitable remedies, and to limitations of public policy. The issuance
and
sale of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
5. No
Conflict; Governmental and Other Consents.
(a) The
execution and delivery by the Company of this Agreement and the consummation
of
the transactions contemplated hereby will not result in the violation of any
law, statute, rule, regulation, order, writ, injunction, judgment or decree
of
any court or governmental authority to or by which the Company is bound, or
of
any provision of the Certificate of Incorporation or Bylaws of the Company,
and
will not conflict with, or result in a breach or violation of, any of the terms
or provisions of, or constitute (with due notice or lapse of time or both)
a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Company is a party
or by
which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties
or
assets of the Company except to the extent that any such violation, conflict
or
breach would not be reasonably likely to have a Material Adverse Effect.
(b) No
consent, approval, authorization or other order of any governmental authority
or
other third-party is required to be obtained by the Company in connection with
the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Securities, except such post-Closing
filings as may be required to be made with the Securities and Exchange
Commission (the “SEC”)
and
with any state or foreign blue sky or securities regulatory
authority.
6. Litigation.
There
are no pending or, to the Company’s knowledge, threatened legal or governmental
proceedings against the Company, which, if adversely determined, would be
reasonably likely to have a Material Adverse Effect on the Company. There is
no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body (including, without limitation, the SEC) pending or, to
the
knowledge of the Company, threatened against or affecting the Company or any
of
its Subsidiaries wherein an unfavorable decision, ruling or finding could
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under the Agreements.
6
7. Accuracy
of Reports.
All
reports required to be filed by the Company within the two years prior to the
date of this Agreement (the “SEC
Reports”)
under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
have
been filed with the SEC, complied at the time of filing in all material respects
with the requirements of their respective forms and, except to the extent
updated or superseded by any subsequently filed report, were complete and
correct in all material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statements of a material
fact nor omitted to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
8. Financial
Information.
The
Company’s financial statements that appear in the SEC Reports have been prepared
in accordance with United States generally accepted accounting principles
(“GAAP”),
except in the case of unaudited statements, as permitted by Form 10-Q of the
SEC
or as may be indicated therein or in the notes thereto, applied on a consistent
basis throughout the periods indicated and such financial statements fairly
present in all material respects the financial condition and results of
operations of the Company as of the dates and for the periods indicated
therein.
9. Accounting
Controls.
The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
10. Absence
of Certain Changes.
Since
the date of the Company’s financial statements in the latest of the SEC Reports,
there has not occurred any undisclosed event that has caused a Material Adverse
Effect or any occurrence, circumstance or combination thereof that reasonably
would be likely to result in such Material Adverse Effect.
11. Investment
Company.
The
Company is not an “investment company” within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations of
the
SEC thereunder.
12. Subsidiaries.
The
Company has no subsidiaries. For the purposes of this Agreement, “subsidiary”
shall mean any company or other entity of which at least 50% of the securities
or other ownership interest having ordinary voting power for the election of
directors or other persons performing similar functions are at the time owned
directly or indirectly by the Company or any of its other
subsidiaries.
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13. Indebtedness.
The
financial statements in the SEC Reports reflect, to the extent required, as
of
the date thereof all outstanding secured and unsecured Indebtedness (as defined
below) of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments due under leases required to be capitalized in accordance
with GAAP. The Company is not in default with respect to any
Indebtedness.
14. Certain
Fees.
No
brokers’, finders’ or financial advisory fees or commissions will be payable by
the Company with respect to the transactions contemplated by this
Agreement.
15. Material
Agreements.
Except
as set forth in the SEC Reports, the Company is not a party to any written
or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the SEC as
an
exhibit to a Form 10-KSB or a Form 8-K (each, a “Material
Agreement”).
The
Company and each of its subsidiaries has in all material respects performed
all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default by the Company or the subsidiary
that is a party thereto, as the case may be, and, to the Company’s knowledge,
are not in default under any Material Agreement now in effect, the result of
which would be reasonably likely to have a Material Adverse Effect.
16. Transactions
with Affiliates.
Except
as set forth in the SEC Reports, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company or any of its customers or
suppliers on the one hand, and (b) on the other hand, any person who would
be
covered by Item 404(d) of Regulation S-K or any company or other entity
controlled by such person.
17. Taxes.
The
Company has prepared and filed all federal, state, local, foreign and other
tax
returns for income, gross receipts, sales, use and other taxes and custom duties
(“Taxes”)
required by law to be filed by it, except for tax returns, the failure to file
which, individually or in the aggregate, do not and would not have a Material
Adverse Effect on the Company. Such filed tax returns are complete and accurate,
except for such omissions and inaccuracies which, individually or in the
aggregate, do not and would not have a Material Adverse Effect on the Company.
The Company has paid or made provisions for the payment of all Taxes shown
to be
due on such tax returns and all additional assessments, and adequate provisions
have been and are reflected in the financial statements of the Company and
the
subsidiaries for all current Taxes to which the Company or any subsidiary is
subject and which are not currently due and payable, except for such Taxes
which, if unpaid, individually or in the aggregate, do not and would not have
a
Material Adverse Effect on the Company. None of the federal income tax returns
of the Company for the past five years has been audited by the Internal Revenue
Service. The Company has not received written notice of any assessments,
adjustments or contingent liability (whether federal, state, local or foreign)
in respect of any Taxes pending or threatened against the Company or any
subsidiary for any period which, if unpaid, would have a Material Adverse Effect
on the Company.
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18. Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as the Company believes are prudent
and customary in the businesses in which the Company is engaged. The Company
has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without an
increase in cost significantly greater than general increases in cost
experienced for similar companies in similar industries with respect to similar
coverage.
19. Environmental
Matters.
Except
as disclosed in the SEC Reports, all real property owned, leased or otherwise
operated by the Company is free of contamination from any substance, waste
or
material currently identified to be toxic or hazardous pursuant to, within
the
definition of a substance which is toxic or hazardous under, or which may result
in liability under, any Environmental Law (as defined below), including, without
limitation, any asbestos, polychlorinated biphenyls, radioactive substance,
methane, volatile hydrocarbons, industrial solvents, oil or petroleum or
chemical liquids or solids, liquid or gaseous products, or any other material
or
substance (“Hazardous
Substance”)
which
has caused or would reasonably be expected to cause or constitute a threat
to
human health or safety, or an environmental hazard in violation of Environmental
Law or to result in any environmental liabilities that would be reasonably
likely to have a Material Adverse Effect. The Company has not caused or suffered
to occur any release, spill, migration, leakage, discharge, disposal,
uncontrolled loss, seepage, or filtration of Hazardous Substances that would
reasonably be expected to result in environmental liabilities that would be
reasonably likely to have a Material Adverse Effect. The Company has generated,
treated, stored and disposed of any Hazardous Substances in compliance with
applicable Environmental Laws, except for such non-compliances that would not
be
reasonably likely to have a Material Adverse Effect. The Company has obtained,
or has applied for, and is in compliance with and in good standing under all
permits required under Environmental Laws (except for such failures that would
not be reasonably likely to have a Material Adverse Effect) and the Company
has
no knowledge of any proceedings to substantially modify or to revoke any such
permit. There are no investigations, proceedings or litigation pending or,
to
the Company's knowledge, threatened against the Company or any of the Company’s
facilities relating to Environmental Laws or Hazardous Substances. “Environmental
Laws”
shall
mean all federal, national, state, regional and local laws, statutes, ordinances
and regulations, in each case as amended or supplemented from time to time,
and
any judicial or administrative interpretation thereof, including orders, consent
decrees or judgments relating to the regulation and protection of human health,
safety, the environment and natural resources.
20. Intellectual
Property Rights and Licenses.
The
Company owns or has the right to use any and all information, know-how, trade
secrets, patents, copyrights, trademarks, trade names, software, formulae,
methods, processes and other intangible properties that are of a such nature
and
significance to the business that the failure to own or have the right to use
such items would have a Material Adverse Effect (“Intangible
Rights”).
The
Company has not received any notice that it is in conflict with or infringing
upon the asserted intellectual property rights of others in connection with
the
Intangible Rights, and, to the Company’s knowledge, neither the use of the
Intangible Rights nor the operation of the Company’s businesses is infringing or
has infringed upon any intellectual property rights of others. All payments
have
been duly made that are necessary to maintain the Intangible Rights in force.
No
claims have been made, and to the Company’s knowledge, no claims are threatened,
that challenge the validity or scope of any material Intangible Right of the
Company. The Company has taken reasonable steps to obtain and maintain in force
all licenses and other permissions under Intangible Rights of third parties
necessary to conduct their businesses as heretofore conducted by them, and
now
being conducted by them, and as expected to be conducted, and the Company is
not
or has not been in material breach of any such license or other
permission.
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21. Labor,
Employment and Benefit Matters.
(a) There
are
no existing, or to the best of the Company’s knowledge, threatened strikes or
other labor disputes against the Company that would be reasonably likely to
have
a Material Adverse Effect. Except as set forth in the SEC Reports, there is
no
organizing activity involving employees of the Company pending or, to the
Company’s or its subsidiaries’ knowledge, threatened by any labor union or group
of employees. There are no representation proceedings pending or, to the
Company’s knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of employees of the Company or its subsidiaries
has
made a pending demand for recognition.
(b) Except
as
set forth in the SEC Reports, the Company is not, or during the five years
preceding the date of this Agreement was not, a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company.
(c) Each
employee benefit plan is in compliance with all applicable law, except for
such
noncompliance that would not be reasonably likely to have a Material Adverse
Effect.
(d) The
Company does not have any liabilities, contingent or otherwise, including
without limitation, liabilities for retiree health, retiree life, severance
or
retirement benefits, which are not fully reflected, to the extent required
by
GAAP, on the Balance Sheet or fully funded. The term “liabilities” used in the
preceding sentence shall be calculated in accordance with reasonable actuarial
assumptions.
(e) The
Company has not (i) terminated any “employee pension benefit plan” as defined in
Section 3(2) of ERISA (as defined below) under circumstances that present a
material risk of the Company or any of its subsidiaries incurring any liability
or obligation that would be reasonably likely to have a Material Adverse Effect,
or (ii) incurred or expects to incur any outstanding liability under Title
IV of
the Employee Retirement Income Security Act of 1974, as amended and all rules
and regulations promulgated thereunder (“ERISA”).
22. Compliance
with Law.
The
Company is in compliance in all material respects with all applicable laws,
except for such noncompliance that would not reasonably be likely to have a
Material Adverse Effect. The Company has not received any notice of, nor does
the Company have any knowledge of, any violation (or of any investigation,
inspection, audit or other proceeding by any governmental entity involving
allegations of any violation) of any applicable law involving or related to
the
Company which has not been dismissed or otherwise disposed of that would be
reasonably likely to have a Material Adverse Effect. The Company has not
received notice or otherwise has any knowledge that the Company is charged
with,
threatened with or under investigation with respect to, any violation of any
applicable law that would reasonably be likely to have a Material Adverse
Effect.
Neither
the Company nor any of its subsidiaries nor any employee or agent of the Company
or any subsidiary has made any contribution or other payment to any official
of,
or candidate for, any federal, state or foreign office in violation of any
law.
The Company and its directors, officers, employees and agents have complied
in
all material respects with the Foreign Corrupt Practices Act of 1977, as
amended, and any related rules and regulations.
10
23. Ownership
of Property.
Except
as set forth in the Company’s financial statements included in the SEC Reports,
the Company has (i) good and marketable fee simple title to its owned real
property, if any, free and clear of all liens, except for liens which do not
individually or in the aggregate have a Material Adverse Effect; (ii) a valid
leasehold interest in all leased real property, and each of such leases is
valid
and enforceable in accordance with its terms (subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy) and is in full force
and effect, and (iii) good title to, or valid leasehold interests in, all of
its
other properties and assets free and clear of all liens, except for liens
disclosed in the SEC Reports or which otherwise do not individually or in the
aggregate have a Material Adverse Effect.
24. No
Integrated Offering.
Assuming the accuracy of each Purchaser’s representations and warranties set
forth in Section B hereof, neither the Company, nor any of its affiliates or
other person acting on the Company’s behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the Offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act, when integration would cause the Offering not to be exempt from the
requirements of Section 5 of the Securities Act.
25. General
Solicitation.
Neither
the Company nor, to its knowledge, any person acting on behalf of the Company,
has offered or sold any of the Securities by any form of “general solicitation”
within the meaning of Rule 502 under the Securities Act. To the knowledge of
the
Company, no person acting on its behalf has offered the Securities for sale
other than to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
26. No
Manipulation of Stock.
The
Company has not taken and will not, in violation of applicable law, take, any
action designed to or that might reasonably be expected to cause or result
in
stabilization or manipulation of the price of the Common Stock to facilitate
the
sale or resale of the Securities.
27. No
Registration.
Assuming the accuracy of the representations and warranties made by, and
compliance with the covenants of, the Purchasers in Section B hereof, no
registration of the Securities under the Securities Act is required in
connection with the offer and sale of the Securities by the Company to the
Purchasers as contemplated by this Agreement.
28. Form
D.
The
Company agrees to file one or more Forms D with respect to the Securities on
a
timely basis as required under Regulation D under the Securities Act to claim
the exemption provided by Rule 506 of Regulation D and to provide a copy thereof
to the Purchasers and their counsel promptly after such filing.
11
29. Certain
Future Financings and Related Actions.
The
Company will not sell, offer to sell, solicit offers to buy or otherwise
negotiate in respect of any “security” (as defined in the Securities Act) that
is or could be integrated with the sale of the Securities in a manner that
would
require the registration of the Securities under the Securities
Act.
30. Use
of
Proceeds.
The
Company intends that the net proceeds from the Offering will be used to fund
the
continued development of its product candidates (including, without
limitation, expenses relating to conducting clinical trials and milestones
payments that may be triggered under the license agreements relating to such
product candidates), for working capital and for other general corporate
purposes.
31. Disclosure.
The
Company understands and confirms that each of the Purchasers will rely on the
foregoing representations in effecting transactions in securities of the
Company. All disclosure provided by the Company to the Purchasers regarding
the
Company, its business and the transactions contemplated hereby furnished by
or
on the behalf of the Company are true and correct in all material respects
and
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
Company’s knowledge, no material event or circumstance has occurred or
information exists with respect to the Company or its business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
|
D.
|
Understandings.
|
Each
of
the Purchasers understands, acknowledges and agrees with the Company as
follows:
1. The
execution of this Agreement by the Purchaser or solicitation of the investment
contemplated hereby shall create no obligation on the part of the Company to
accept any subscription or complete the Offering. If the Company accepts a
subscription for Securities made by a Purchaser, it shall countersign this
Agreement.
2. No
federal or state agency or authority has made any finding or determination
as to
the accuracy or adequacy of the Offering Documents or as to the fairness of
the
terms of the Offering nor any recommendation or endorsement of the Securities.
Any representation to the contrary is a criminal offense. In making an
investment decision, Purchaser must rely on its own examination of the Company
and the terms of the Offering, including the merits and risks
involved.
3. The
Offering is intended to be exempt from registration under the Securities Act
by
virtue of Section 4(2) of the Securities Act and the provisions of Rule 506
of
Regulation D thereunder, which is in part dependent upon the truth, completeness
and accuracy of the statements made by the Purchaser herein. The Purchaser
acknowledges that the Company has relied on the representations made by the
Purchaser in Section B and the information provided in the Purchaser
Questionnaire for purposes of determining that the Purchaser is an “accredited
investor” as defined in Rule 501 of Regulation D under the Securities Act.
12
4. There
can
be no assurance that the Purchaser will be able to sell or dispose of the
Securities. It is understood that in order not to jeopardize the Offering’s
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
5. The
Purchaser acknowledges that the Offering is confidential and non-public and
agrees that all information about the Offering shall be kept in confidence
by
the Purchaser until the public announcement of the Offering by the Company.
The
Purchaser acknowledges that the foregoing restrictions on the Purchaser’s use
and disclosure of any such confidential, non-public information contained in
the
above-described documents restricts the Purchaser from trading in the Company’s
securities to the extent such trading is on the basis of material, non-public
information of which the Purchaser is aware. Except for the terms of the
transaction documents and the fact that the Company is considering consummating
the transactions contemplated therein, the Company confirms that neither the
Company nor, to its knowledge, any other person acting on its behalf, has
provided any of the Purchasers or their agents or counsel with any information
that constitutes material, non-public information.
6. The
Purchaser agrees that beginning on the date hereof until the Offering is
publicly announced by the Company (which the Company has agreed to undertake
in
accordance with the provisions of Section F.2. hereof), the Purchaser will
not
enter into any Short Sales. For purposes of the foregoing sentence, a “Short
Sale” by a Purchaser means a sale of Common Stock that is marked as a short sale
and that is executed at a time when such Purchaser has no equivalent offsetting
long position in the Common Stock, exclusive of the Shares. For purposes of
determining whether a Purchaser has an equivalent offsetting long position
in
the Common Stock, all Common Stock that would be issuable upon exercise in
full
of all options then held by such Purchaser (assuming that such options were
then
fully exercisable, notwithstanding any provisions to the contrary, and giving
effect to any exercise price adjustments scheduled to take effect in the future)
shall be deemed to be held long by such Purchaser.
|
E.
|
Compliance
with Rule 144.
|
For
a
period of one year following the date of the Closing, the Company agrees with
each Purchaser of Securities to:
(a) comply
with the requirements of Rule 144 under the Securities Act with respect to
current public information about the Company;
(b) use
its
best efforts to file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act
(at any time it is subject to such reporting requirements); and
(c) furnish
to any holder of Securities upon request (i) a written statement by the Company
as to its compliance with the requirements of said Rule 144 and the reporting
requirements of the Securities Act and the Exchange Act (at any time it is
subject to such reporting requirements), (ii) a copy of the most recent annual
or quarterly report of the Company, and (iii) such other reports and documents
of the Company as such holder may reasonably request to avail itself of any
similar rule or regulation of the SEC allowing it to sell any such
securities.
13
|
F.
|
Covenants
of the Company.
|
1.
Press
Release; Form 8-K.
On
or
prior to 4:00 p.m. (New York City time) on the first business day following
the
Closing Date, the Company shall file a Form 8-K (the "Announcing Form 8-K")
with
the SEC. The Announcing Form 8-K, (x) shall describe the terms of the
transactions contemplated by this Agreement, (y) shall include as exhibits
to
such Form 8-K this Agreement, and (z) shall include any other information
required to be disclosed therein pursuant to any securities laws or other laws.
The Company represents and warrants that none of the information contained
in
any of the schedules hereto constitutes material non-public information
regarding the Company. Unless required by law, the Company shall not make any
public announcement regarding the transactions contemplated hereby prior to
the
Closing. The Company shall not issue any press releases or any other public
statements with respect to the transactions contemplated hereby or disclosing
the name of the Purchaser; provided, however, that the Company shall be
entitled, without the prior approval of the Purchaser, to make any press release
or other public disclosure with respect to such transactions (A) in substantial
conformity with the Announcing Form 8-K and contemporaneously therewith and
(B)
as is required by applicable law (provided; however, that the Purchaser shall
be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
2. Registration
of Securities for Resale.
On and
after the date which is six months after the Closing Date, if there is not
an
available exemption from Rule 144 to permit the sale of shares of Common Stock
acquired by Purchaser on the Closing Date, the Company agrees to use its best
efforts to file a registration statement under the Securities Act (the
“Registration Statement”) with the SEC covering the resale of such Securities by
the Purchaser and to use its best efforts to maintain the effectiveness of
the
Registration Statement until the first anniversary of the Closing Date or until
all the Securities have been sold or transferred; whichever occurs first.
3.
Subsequent
Communications.
On and
after the filing of the Announcing Form 8-K, notwithstanding any provision
herein to the contrary, the Company shall not, and shall cause each of its
officers, directors, employees and agents not to, provide the Purchaser with
any
material nonpublic information regarding the Company, without the express
written consent of the Purchaser. In the event that the Purchaser believes
that
the Company or any of its officers, directors, employees or agents has breached
the foregoing covenant, the Purchaser shall so notify the Company in the manner
provided below. In the event that the Company believes that a notice or
communication to the Purchaser contains material, nonpublic information relating
to the Company, the Company so shall indicate to the Purchaser contemporaneously
with delivery of such notice or communication, and such indication shall provide
the Purchaser the means to refuse to receive such notice or communication;
and
in the absence of any such indication, the holders of the Securities shall
be
allowed to presume that all matters relating to such notice or communication
do
not constitute material, nonpublic information relating to the Company. Upon
receipt or delivery by the Company of any notice in accordance with the terms
of
this Agreement, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information
relating to the Company, the Company shall within four business days after
any
such receipt or delivery publicly disclose such material, nonpublic information.
14
| G. |
Equitable
Adjustment in Certain
Circumstances.
|
1. If,
prior
to the Announcement Date as hereinafter defined, the Company completes a sale
of
shares of its Common Stock, securities of the Company convertible into or
exchangeable for shares of its Common Stock or rights to acquire shares of
its
Common Stock or other securities convertible into or exchangeable for shares
of
its Common Stock (a “Subsequent Equity Financing”), and the holders of shares of
Series D Preferred Stock of the Company (“the Series D Shares”), in connection
with the giving of any consent to such Subsequent Equity Financing, receive
consideration therefor in the form of a reduction in the effective conversion
price of the Series D Shares, a reduction in the effective exercise price of
Common Stock purchase warrants issued in connection with the issuance of the
Series D shares or the issuance of additional shares of Common Stock, then
each
Purchaser shall be entitled to receive substantially equivalent consideration
in
the form of additional shares of Common Stock (“Additional Shares”) equal to the
difference between (x) the product obtained by multiplying the number of shares
of Common Stock purchased by such Purchaser at the Closing by a fraction, the
numerator of which is the lesser of $0.65 or the Effective Purchase Price as
defined below and the denominator of which is the reduced conversion price
of
the Series D Share, the reduced exercise price of the related Common Stock
purchase warrants or the closing price per share of Common Stock reported in
its
principal trading market on the day shares Common Stock are issued to the
holders Series D Shares, as the case may be, and (y) the number of shares of
Common Stock purchased by such Purchasers at the Closing. For purposes of this
Section G.1, the Effective Purchase Price is calculated as the Subscription
Amount divided by the sum of the Shares issued in the Offering plus Additional
Shares issued to the Purchasers as a result of a Subsequent Equity Financing.
2. The
Company has no obligation to deliver additional shares of Common Stock to the
Purchasers pursuant to this Section G upon the closing of a Subsequent Equity
Financing for which no consent of the holders of Series D Shares is required
or
if no consideration is received by the holders of Series D Shares in connection
with the giving of any such consent. For purposes of this Section G, the term
Series D Shares includes any shares of another series of Preferred Stock of
the
Company for which the Series D Shares are exchanged. For purposes of this
Section G the term Announcement Date means the public announcement by the
Company of the conclusion of the Company’s NOV-002 Phase III clinical trial in
non-small cell lung cancer. On and after the Announcement Date the Company
has
no further obligation under this Section.
| H. |
Miscellaneous.
|
1. All
pronouns and any variations thereof used herein shall be deemed to refer to
the
masculine, feminine, singular or plural, as identity of the person or persons
may require.
15
2. Any
notice or other document required or permitted to be given or delivered to
the
Purchasers shall be in writing and sent (a) by fax or (b) by an internationally
recognized overnight delivery service (with charges prepaid):
if
to the
Company, at
Xxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Fax
No.:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxx, President and Chief Executive Officer
or
such
other address as it shall have specified to the Purchaser in writing, with
a
copy (which shall not constitute notice) to:
Xxxxx
Xxxx LLP
000
Xxxxxxx Xxxxxxxxx
Xxxxxx,
XX 00000
Fax
No.:
(000) 000-0000
Attention:
Xxxx Xxxx, Esq.
if
to the
Purchaser, at its address set forth on the signature page to this Agreement,
or
such other address as it shall have specified to the Company in
writing.
3. Except
as
otherwise provided herein, this Agreement may be amended, and compliance with
any provision of this Agreement may be omitted or waived, only by the written
agreement of the Company and the Purchasers (or their permitted transferees)
holding at least a majority of the number of outstanding Shares in the aggregate
sold to the Purchasers in this Offering.
4. Failure
of the Company to exercise any right or remedy under this Agreement or any
other
agreement between the Company and the Purchaser, or otherwise, or delay by
the
Company in exercising such right or remedy, will not operate as a waiver
thereof. No waiver by the Company will be effective unless and until it is
in
writing and signed by the Company.
5. This
Agreement shall be enforced, governed and construed in all respects in
accordance with the laws of the Commonwealth of Massachusetts, as such laws
are
applied by the Massachusetts courts to agreements entered into and to be
performed in Massachusetts by and between residents of Massachusetts, and shall
be binding upon the Purchaser, the Purchaser’s heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns.
6. If
any
provision of this Agreement is held to be invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed modified
to conform with such statute or rule of law. Any provision hereof that may
prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provisions hereof.
16
7. The
parties understand and agree that, unless provided otherwise herein, money
damages would not be a sufficient remedy for any breach of the Agreement by
the
Company or the Purchaser and that the party against which such breach is
committed shall be entitled to equitable relief, including injunction and
specific performance, as a remedy for any such breach. Such remedies shall
not,
unless provided otherwise herein, be deemed to be the exclusive remedies for
a
breach by either party of the Agreement but shall be in addition to all other
remedies available at law or equity to the party against which such breach
is
committed.
8. The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder, except as may result from the actions of any such Purchaser
other than through the execution hereof. Nothing contained herein solely by
virtue of being contained herein shall be deemed to constitute the Purchasers
as
a partnership, an association, a joint venture or any similar entity, or create
a presumption that the Purchasers are in any way acting in concert or as a
group
with respect to such obligations or the transactions contemplated
hereby.
9. This
Agreement, together with the agreements and documents executed and delivered
in
connection with this Agreement, constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof. Nothing in this
Agreement shall create or be deemed to create any rights in any person or entity
not a party to this Agreement, except for the Placement Agent.
10. 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 Agreement shall be legal, valid and binding
execution and delivery for all purposes.
| I. |
Signature.
|
The
signature page of this Agreement is contained as part of the applicable
subscription package, entitled “Signature Page.”
*
* * * *
* *
17
SIGNATURE
PAGE
The
Purchaser hereby subscribes for such number of Shares as shall equal the
Subscription Amount as set forth below, divided by the Offering Price, and
agrees to be bound by the terms and conditions of this Agreement.
Dated:
August 14, 2008
PURCHASER:
CRE
Fiduciary Services, Inc., as trustee of the CRE Trust
Total
Subscription Amount: $1,499,999.80
Signature
of Subscriber: /s/
Xxxxxx Xxxxx
Title
of
Authorized Signer: Vice
President; Secretary
Address
of principal place of business: 0000
Xxxxx Xxx; Suite 300; Cheyenne, Wyoming 82001
Country
of Formation or Incorporation: USA;
Wyoming
Type
of
Entity: U.S.
Trust
PURCHASER:
CRE
Capital LLC
Total
Subscription Amount: $1,499,999.80
Signature
of Subscriber: /s/
Xxxxxx Xxxxx
Title
of
Authorized Signer: Attorney-in-fact
Address
of principal place of business: 000
Xxx Xxx Xxxx Xxxx; Xxxxxxxxx, Xxx Xxxx 00000
Country
of Formation or Incorporation: USA;
Delaware
Type
of
Entity: Limited
Liability Company
|
ACCEPTED
BY:
|
|
|
By:
|
/s/
Xxxxx X. Xxxxxx
|
|
Name:
Xxxxx Xxxxxx
|
|
|
Title:
President and Chief Executive Officer
|
|
|
Dated:
August 14, 2008
|
|
Schedule
A
WIRING
INSTRUCTIONS
|
Bank:
|
Citizens
Bank RI
|
|
Bank
Address:
|
0
Xxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000, XXX
|
|
000-000-0000
|
|
|
Account
Name:
|
|
|
Account
Address:
|
Xxx
Xxxxxxx Xxxxxx, Xxxxx 000
|
|
Xxxxxx,
XX 00000, XXX
|
|
|
ABA
(Routing) #:
|
000000000
|
|
Swift
Code:
|
XXXXXX00
|
|
Account
#:
|
1132895348
|
Schedule
B
Additional
Risk Factors for the Offering
The
Offering involves a high degree of risk. You should carefully consider the
following information about some of these risks, as well as the other
information contained or incorporated by reference into our SEC Reports, before
you decide to invest in Securities. The following risks and uncertainties are
not the only ones facing the Company. Additional risks and uncertainties of
which the Company is unaware or which it currently believes are immaterial
could
also materially adversely affect its business, financial condition or results
of
operations. In any case, the value of the Securities could decline, and you
could lose all or part of your investment.
Purchasers
will experience immediate and substantial dilution.
Purchasers
of the Securities will incur immediate and substantial dilution of the net
tangible book value of their purchased Securities. Subscribers may also
experience additional dilution as a result of the exercise of outstanding stock
options and warrants, or the issuance by the Company of any additional equity
securities.
The
Securities to be issued in the Offering are restricted
securities.
The
offer
and sale of the Securities has not been registered under the Securities Act
or
the securities laws of any state. Accordingly, the Securities may not be sold
or
otherwise transferred unless such sale or transfer is exempt from registration
under the Securities Act of 1933. Investors may be required to hold the
Securities for an indefinite period of time. All investors who purchase the
Securities are required to make representations that it will not sell, transfer,
pledge or otherwise dispose of any of the Securities in the absence of an
effective registration statement covering such transaction under the Securities
Act and applicable state securities laws, or the receipt by the Company of
an
opinion of counsel to the effect that registration is not required.
Sales
of a substantial number of shares of our common stock in the public market,
including the shares offered under registration statements, could lower our
stock price and impair our ability to raise funds in new stock
offerings.
Future
sales of a substantial number of shares of our common stock in the public
market, including the shares to be offered under registration statements and
shares available for resale under Rule 144 under the Securities Act, or the
perception that such sales could occur, could adversely affect the prevailing
market price of our common stock and could make it more difficult for us to
raise additional capital through the sale of equity securities.
In
the time that our common stock has traded, our stock price has experienced
price
fluctuations.
There
can
be no assurance that the market price for our common stock will remain at its
current level and a decrease in the market price could result in substantial
losses for investors. The market price of our common stock may be significantly
affected by one or more of the following factors:
|
·
|
announcements
or press releases relating to the bio-pharmaceutical sector or to
our own
business or prospects;
|
|
·
|
regulatory,
legislative, or other developments affecting us or the healthcare
industry
generally;
|
|
·
|
the
dilutive effect of conversion of our Series D or Series C preferred
stock
into common stock at conversion rates or the exercise of options
and
warrants at below-current-market
prices;
|
|
·
|
sales
by those financing our company through convertible securities and
warrants
of the underlying common stock, when it is registered with the SEC
and may
be sold into the public market, immediately upon conversion or exercise;
and
|
|
·
|
market
conditions specific to biopharmaceutical companies, the healthcare
industry and the stock market
generally.
|
There
may be a limited public market for our securities; we may fail to qualify for
listing on certain national securities exchanges.
Our
stock
trades on the NASD’s electronic bulletin board in the over-the-counter. As a
result, our common stock may be less attractive for margin loans, for investment
by financial institutions, as consideration in future capital raising
transactions or other purposes.
Trading
of our common stock may be subject to xxxxx-stock rules under the Securities
Exchange Act of 1934. Unless exempt, for any transaction involving a
xxxxx-stock, the regulations require broker-dealers making a market in our
common stock to provide risk disclosure to their customers including regarding
the risks associated with our common stock, the suitability for the customer
of
an investment in our common stock, the duties of the broker-dealer to the
customer, information regarding prices for our common stock and any compensation
the broker-dealer would receive. The application of these rules may result
in
fewer market makers in our common stock. Our common stock is presently subject
to the rules on xxxxx-stocks, and the liquidity of our common stock could be
materially adversely affected so long as we remain subject to such
rule.
Our
common stock could be further diluted as the result of the issuance of
additional shares of common stock, convertible securities, warrants or
options.
In
the
past, we have issued common stock, convertible securities, such as convertible
preferred stock, and warrants in order to raise money. We have also issued
options and warrants as compensation for services and incentive compensation
for
our employees and directors. We have shares of common stock reserved for
issuance upon the conversion and exercise of these securities and may increase
the shares reserved for these purposes in the future. Our issuance of additional
common stock, convertible securities, options and warrants could affect the
rights of our stockholders, and could reduce the market price of our common
stock.
Schedule
C
Capitalization
At
the
date hereof authorized capital stock of the Company consists of 150,000,000
shares of $.00001 par value common stock and 7,000 shares of preferred stock.
At
the
date hereof there are 39,360,272 shares of common stock outstanding and 685.5
shares of preferred stock outstanding.
At
the
date hereof, the following table sets forth the shares of common stock
outstanding, including those that will become outstanding upon Closing, the
shares of common stock that may become issuable pursuant to the Company’s stock
plans, exercise of warrants or conversion of preferred stock.
|
Pro Forma for $3m Common Issuance
|
|||||||||||||
|
Common stock
|
Exer./Conv.
|
Warrant
|
|||||||||||
|
equival.
|
Price
|
Total cash
|
Expiration
|
||||||||||
|
Cash,
cash equivalents1
|
$ | 5,524,114 | |||||||||||
|
Common
stock outstanding
|
39,360
,272
|
||||||||||||
|
New
Investment2
|
4,615,384
|
$
|
3,000,000
|
||||||||||
|
Preferred
stock
|
|||||||||||||
|
Series
C
|
5,021,537
|
$
|
0.65
|
||||||||||
|
Series
D (includes exchanged B)
|
31,807,655
|
$
|
0.65
|
||||||||||
|
Warrants
|
|||||||||||||
|
Series
D
|
12,765,381
|
$
|
0.65
|
$
|
8,297,498
|
callable > $2.50
|
|||||||
|
2005
PIPE Placement Agent
|
1,046,143
|
$
|
0.65
|
$
|
679,993
|
August
2010
|
|||||||
|
Series
C
|
969,696
|
$
|
0.65
|
$
|
630,302
|
October
2010
|
|||||||
|
2006
PIPE3
|
11,249,909
|
$
|
2.01
|
$
|
22,612,317
|
March
2011
|
|||||||
|
2005
Bridge Financing (Pre-IPO)
|
720,000
|
$
|
0.625
|
cashless
|
April
2010
|
||||||||
|
Series
C
|
1,333,333
|
$
|
1.25
|
cashless
|
May
2012
|
||||||||
|
Stock
options outstanding4
|
5,182,651
|
$
|
0.6685
|
$
|
3,464,395
|
||||||||
|
$
|
44,208,619
|
||||||||||||
|
Fully
diluted shares
|
114,071,961
|
||||||||||||
1 Represents
cash balance at 6/30/08.
2Assumes
a
$3m investment at $0.65 per share.
3Includes
294,442 warrants that become issuable following the Offering, resulting in
a
reduction in exercise price to $2.01 from $2.06.
4An
additional 2,345,000 options are issuable under the 2006 Option
Plan.
Exhibit
A
Form
of Legal Opinion
The
opinion will contain the usual and customary precatory language and exceptions
and will be to the effect that:
1. The
Company is a corporation validly existing and in good standing under the laws
of
the State of Delaware and has the requisite corporate power to own its property
and assets, to conduct its business as it is currently being conducted and
to
enter into and perform its obligations under the Agreement. The Company is
qualified as a foreign corporation to do business and is in good standing in
the
Commonwealth of Massachusetts.
2. The
execution, delivery and performance by the Company of the Agreement and the
issuance of the Common Stock have been duly authorized by all requisite
corporate action on the part of the Company and do not require any further
approval of its directors or stockholders.
3. The
Agreement has been duly executed and delivered by the Company and constitutes
a
valid and binding obligation of the Company, enforceable against the Company
in
accordance with its terms.
4. The
execution and delivery by the Company of the Agreement and the issuance of
the
Common Stock will not violate or contravene or be in conflict with (a) any
provision of the Company’s Certificate of Incorporation or By-laws; (b) any
provision of the Delaware General Corporation Law or any provision of any
federal or Massachusetts law, rule or regulation applicable to the Company
in
transactions of the nature contemplated by the Agreement; (c) any agreement,
indenture or other written agreement to which the Company is a party which
has
been identified as a material agreement in the officer’s certificate attached
hereto.
5. No
further consents, approvals, authorizations, registrations, declarations or
filings are required to be obtained or made by the Company from or with any
federal or Massachusetts governmental authority or pursuant to the Delaware
General Corporation Law or from any other Person under any material agreement
in
order for it to execute and deliver the Agreement, to issue the Common Stock
and
to perform its other obligations under the Agreement, other than those consents,
approvals, authorizations, registrations, declarations or filings that have
already been obtained and remain in full force and effect and except for the
filing of a Form D (the “Form D”) with the Securities and Exchange
Commission pursuant to Regulation D under the Securities Act of 1933, as
amended (the “Securities Act”) and with any requisite state
jurisdictions.
6. The
shares of Common Stock have been duly authorized and are validly issued,
outstanding, fully paid and nonassessable.
7. Assuming
the accuracy of the representations and warranties of the Purchasers set forth
in Section B of the Agreement, the offer, issuance and sale to the Purchasers
of
the Common Stock pursuant to the Agreement, are exempt from the registration
requirements of the Securities Act of 1933.
Exhibit
B
Confidential
Purchaser Questionnaire
Before
any sale of Securities by Novelos Therapeutics, Inc. can be made to you, this
Questionnaire must be completed and returned to Novelos Therapeutics, Xxx
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000; Attention: Xxxxxx
Xxxxxxx.
|
1.
|
IF
YOU ARE AN INDIVIDUAL PLEASE FILL IN THE IDENTIFICATION QUESTIONS
IN (A)
IF YOU ARE AN ENTITY PLEASE FILL IN THE IDENTIFICATION QUESTIONS
IN
(B)
|
| A. |
INDIVIDUAL
IDENTIFICATION QUESTIONS
|
Name
(Exact
name as it should appear on stock certificate)
Residence
Address
Home
Telephone Number
Fax
Number
Date of Birth
Social Security Number
| B. |
IDENTIFICATION
QUESTIONS FOR ENTITIES
|
Name
(Exact name as it will appear on stock certificate)
Address
of Principal Place of Business
State
(or
Country) of Formation or Incorporation
Contact
Person
Telephone
Number (
)
Type
of
Entity
(corporation, partnership, trust, etc.)
Was
entity formed for the purpose of this investment?
Yes:
¨
No:
¨
| 2. |
DESCRIPTION
OF INVESTOR
|
The
following information is required to ascertain whether you would be deemed
an
“accredited investor” as defined in Rule 501 of Regulation D under the
Securities Act. Please check whether you are any of the following:
|
¨
|
a
corporation or partnership with total assets in excess of $5,000,000,
not
organized for the purpose of this particular
investment
|
|
¨
|
private
business development company as defined in Section 202(a)(22) of
the
Investment Advisers Act of 1940, a U.S. venture capital fund which
invests
primarily through private placements in non-publicly traded securities
and
makes available (either directly or through co-investors) to the
portfolio
companies significant guidance concerning management, operations
or
business objectives
|
|
¨
|
a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958
|
|
¨
|
an
investment company registered under the Investment Company Act of
1940 or
a business development company as defined in Section 2(a)(48) of
that
Act
|
|
¨
|
a
trust not organized to make this particular investment, with total
assets
in excess of $5,000,000 whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of the Securities Act of
1933 and who completed item 4 below of this
questionnaire
|
|
¨
|
a
bank as defined in Section 3(a)(2) or a savings and loan association
or other institution defined in Section 3(a)(5)(A) of the Securities
Act of 1933 acting in either an individual or fiduciary
capacity
|
|
¨
|
an
insurance company as defined in Section 2(13) of the Securities Act
of 1933
|
|
¨
|
an
employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (i) whose investment decision
is made by a fiduciary which is either a bank, savings and loan
association, insurance company, or registered investment advisor,
or
(ii) whose total assets exceed $5,000,000, or (iii) if a
self-directed plan, whose investment decisions are made solely by
a person
who is an accredited investor and who completed Part I of this
questionnaire;
|
|
¨
|
a
charitable, religious, educational or other organization described
in
Section 501(c)(3) of the Internal Revenue Code, not formed for the
purpose of this investment, with total assets in excess of
$5,000,000
|
|
¨
|
an
entity not located in the U.S. none of whose equity owners are U.S.
citizens or U.S. residents
|
|
¨
|
a
broker or dealer registered under Section 15 of the Securities
Exchange Act of 1934
|
|
¨
|
a
plan having assets exceeding $5,000,000 established and maintained
by a
government agency for its employees
|
|
¨
|
an
individual who had individual income from all sources during each
of the
last two years in excess of $200,000 or
the joint income of you and your spouse (if married) from all sources
during each of such years in excess of $300,000 and who reasonably
excepts
that either
your own income from all sources during the current year will exceed
$200,000 or
the joint income of you and your spouse (if married) from all sources
during the current year will exceed
$300,000
|
|
¨
|
an
individual whose net worth as of the date you purchase the securities
offered, together with the net worth of your spouse, be in excess
of
$1,000,000
|
|
¨
|
an
entity in which all of the equity owners are accredited
investors
|
| 3. |
BUSINESS,
INVESTMENT AND EDUCATIONAL EXPERIENCE
|
Occupation
Number of Years
Present Employer
Position/Title
Educational
Background
Frequency
of prior investment (check one in each column):
|
Stocks & Bonds
|
Venture Capital Investments
|
||||
|
Frequently
|
|||||
|
Occasionally
|
|||||
|
Never
|
|
|
|
| 4. |
SIGNATURE
|
The
above
information is true and correct. The undersigned recognizes that the Company
and
its counsel are relying on the truth and accuracy of such information in
reliance on the exemption contained in Subsection 4(2) of the Securities
Act of 1933, as amended, and Regulation D promulgated thereunder. The
undersigned agrees to notify the Company promptly of any changes in the
foregoing information which may occur prior to the investment.
Executed at ___________________, on ____________,
2008
| (Signature) |
