8-K: Current report filing
Published on April 14, 2008
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date
of
Report: April 11, 2008
(Date
of earliest event reported)
NOVELOS
THERAPEUTICS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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333-119366
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04-3321804
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
Number)
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One
Gateway Center, Suite 504
Newton,
MA 02458
(Address
of principal executive offices)
(617)
244-1616
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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ITEM
1.01 ENTRY
INTO A MATERIAL DEFINITIVE AGREEMENT
Securities
Purchase Agreement
On
April
11, 2008, pursuant to a securities purchase agreement with accredited investors
dated March 26, 2008, as amended on April 9, 2008 (the “Purchase Agreement”), we
sold 113.5 shares of a newly created series of our preferred stock, designated
“Series D Convertible Preferred Stock”, par value $0.00001 per share (the
“Series D Preferred Stock”) and issued warrants to purchase 4,365,381 shares of
our common stock for an aggregate purchase price of $5,675,000 (the “Series D
Financing”). Pursuant to the Purchase Agreement, from and after the closing,
Xmark Opportunity Fund, L.P., Xmark Opportunity Fund, Ltd. and Xmark JV
Investment Partners, LLC (collectively, the “Xmark Entities”), will have the
right to designate one member to our Board of Directors. This right shall last
until such time as the Xmark Entities no longer hold
at
least one-third of the Series D Preferred Stock issued to them at closing.
In
addition, the Xmark Entities, Caduceus Master Fund Limited, Caduceus Capital
II,
L.P., Summer Street Life Sciences Hedge Fund Investors, LLC, UBS Eucalyptus
Fund, LLC and PW Eucalyptus Fund, Ltd. (collectively, the “Lead Investors”) will
have the right to designate one observer to attend all meetings of our Board
of
Directors, committees thereof and access to all information made available
to
members of the Board. This right shall last until such time as the Lead
Investors no longer hold
at
least one-third of the Series D Preferred Stock issued to them at
closing.
In
connection with the closing of the Series D Financing, the holders of our Series
B convertible preferred stock (the “Series B Preferred Stock”), exchanged all
300 of their shares of Series B Preferred Stock for 300 shares of Series D
Preferred Stock. Following the exchange, no shares of Series B Preferred Stock
are outstanding. The rights and preferences of the Series D Preferred Stock
are
substantially the same as the Series B Preferred Stock, however the conversion
price of the Series D Preferred Stock is $0.65. In addition, the holders of
Series B Preferred Stock waived liquidated damages that had accrued from
September 7, 2007 through the closing date as a result of our failure to
register for resale 100% of the shares of common stock underlying the Series
B
Preferred Stock and warrants.
Series
D Preferred Stock
The
shares of Series D Preferred Stock are convertible into shares of our common
stock any time after issuance at the option of the holder at $0.65 per share
of
common stock. If there is an effective registration statement covering the
shares of common stock underlying the Series D Preferred Stock and the VWAP,
as
defined in the Series D Certificate of Designations, of our common stock exceeds
$2.00 for 20 consecutive trading days, then the outstanding Series D Preferred
Stock will automatically convert into common stock at the conversion price
then
in effect. The conversion price will be subject to adjustment for stock
dividends, stock splits or similar capital reorganizations.
The
holders of Series D Preferred Stock are entitled to vote on all matters on
which
the holders of common stock are entitled to vote. The number of votes to which
each holder of Series D Preferred Stock is entitled is equal to the number
of
shares of common stock that would be issued to such holder if the Series D
Preferred Stock had been converted at the record date for the meeting of
stockholders.
The
Series D Preferred Stock has an annual dividend rate of 9%, payable
semi-annually on June 30 and December 31. Such dividends may be paid in cash
or
in registered shares of our common stock at our option, subject to certain
conditions.
The
Series D Preferred Stock ranks senior to all other outstanding series of
preferred stock and common stock as to the payment of dividends and the
distribution of assets upon voluntary or involuntary liquidation, dissolution
or
winding up of our affairs. The Series D preferred stockholders will be entitled
to receive first, $50,000 per share and all accrued and unpaid dividends. They
are then entitled to participate with the holders of the common stock in the
distribution of remaining assets on a pro rata basis. If, upon any winding
up of
our affairs, assets available to pay the holders of Series D Preferred Stock
are
not sufficient to permit the payment in full, then all assets will be
distributed to the holders of Series D Preferred Stock on a pro rata basis.
If
we sell, lease or otherwise transfers substantially all of our assets,
consummate a business combination in which we are not the surviving corporation
or, we are the surviving corporation, if the holders of a majority of the common
stock immediately before the transaction do not hold a majority of common stock
immediately after the transaction, in one or a series of events, change the
majority of the members of the board of directors, or if any person or entity
(other than the holders of Series D Preferred Stock) acquires more than 50%
of
our outstanding stock, then the holders of Series D Preferred Stock are entitled
to receive the same liquidation preference as described above, except that
after
receiving $50,000 per preferred share and any accrued but unpaid dividends,
they
are not entitled to participate with the common stock in a distribution of
the
remaining assets
For
as
long as any shares of Series D Preferred Stock remain outstanding, we are
prohibited from (i) paying dividends to our common stockholders, (ii) amending
our certificate of incorporation, (iii) issuing any equity security or any
security convertible into or exercisable for any equity security at a price
of
$0.65 or less or with rights senior to the Series D Preferred Stock (except
for
certain exempted issuances), (iv) increasing the number of shares of Series
D
Preferred Stock or issuing any additional shares of Series D Preferred Stock,
(v) selling or otherwise disposing of all or substantially all our assets or
intellectual property or entering into a merger or consolidation with another
company unless we are the surviving corporation, the Series D Preferred Stock
remains outstanding and there are no changes to the rights and preferences
of
the Series D Preferred Stock, (vi) redeeming or repurchasing any capital stock
other than Series D Preferred Stock, (vii) incurring any new debt for borrowed
money in excess of $500,000 and (viii) changing the number of our directors.
The
Company is required to reserve, out of authorized shares of common stock, 100%
of the number of shares of common stock into which Series D Preferred Stock
is
convertible.
Common
Stock Purchase Warrants
The
common stock purchase warrants issued to the investors are exercisable for
an
aggregate of 4,365,381 shares of our common stock at an exercise price of $0.65
and expire in April 2013. If after the six-month anniversary of the date of
issuance of the warrant there is no effective registration statement
registering, or no current prospectus available for, the resale of the shares
issuable upon the exercise of the warrants, the holder may conduct a cashless
exercise whereby the holder may elect to pay the exercise price by having us
withhold, upon exercise, shares having a fair market value equal to the
applicable aggregate exercise price. In the event of a cashless exercise, we
would receive no proceeds from the sale of our common stock in connection with
such exercise.
The
warrant exercise price and/or number of warrants is subject to adjustment only
for stock dividends, stock splits or similar capital reorganizations so that
the
rights of the warrant holders after such event will be equivalent to the rights
of warrant holders prior to such event.
If
there
is an effective registration statement covering the shares underlying the
warrants and the VWAP, as defined in the warrant, of our common stock exceeds
$2.50 for 20 consecutive trading days, then on the 31st
day
following the end of such period any remaining warrants for which a notice
of
exercise was not delivered shall no longer be exercisable and shall be converted
into a right to receive $.01 per share.
Registration
Rights Agreement
We
have
entered into a registration rights agreement with the investors which requires
us to file with the Securities and Exchange Commission no later than 5 business
days following the six-month anniversary of the closing of the Series D
Financing, a registration statement covering the resale of (i) a number of
shares of common stock equal to 100% of the shares issuable upon conversion
of
the Series D Preferred Stock (excluding 12,000,000 shares of common stock
issuable upon conversion of the Series D Preferred Stock that were included
on a
prior registration statement), (ii) a number of shares of common stock equal
to
100% of the shares issuable upon exercise of the warrants issued in the Series
D
Financing and (iii) 7,500,000 shares of common stock issuable upon exercise
of
warrants dated May 2, 2007 held by the investors. We are required to use our
best efforts to have the registration statement declared effective and keep
the
registration statement continuously effective under the Securities Act until
the
earlier of the date when all the registrable securities covered by the
registration statement have been sold or the second anniversary of the closing.
In the event we fail to file the registration statement within the timeframe
specified by the Registration Rights Agreement, we are required to pay to the
investors liquidated damages equal to 1.5% per month (pro-rated on a daily
basis
for any period of less than a full month) of the aggregate purchase price of
the
Series D Preferred Stock and warrants until we file the delinquent registration
statement. We will be allowed to suspend the use of the registration statement
for not more than 15 consecutive days or for a total of not more than 30 days
in
any 12 month period.
Placement
Agent Fee
Following
the closing of the preferred stock and warrant financing we are obligated to
pay
Rodman & Renshaw LLC (“Rodman”) a cash fee of $100,000.
Amendments
to Prior Warrants and Registration Rights Agreement
At
the
closing, we entered into an amendment to the registration rights agreement
dated
May 2, 2007 with the holders of our Series B Preferred Stock to revise the
definition of registrable securities under the agreement to only include the
12,000,000 shares of common stock that were included on a prior registration
statement and to extend our registration obligations under the agreement by
one
year. In addition, in connection with the closing, we amended the warrants
to
purchase common stock issued in connection with the sale of Series B Preferred
Stock to conform the terms of those warrants to the terms of the warrants issued
in the Series D Financing.
The
discussion in this current report is only a summary and is qualified in its
entirety by reference to the Certificate of Designations, Preferences and Rights
of Series D Convertible Preferred Stock, Certificate of Elimination of Series
A
8% Cumulative Convertible Preferred Stock, Form of Common Stock Purchase
Warrant, Securities Purchase Agreement, Amendment to the Securities Purchase
Agreement, the Registration Rights Agreement, the Amendment to Registration
Rights Agreement and the Warrant Amendment Agreement, which are included as
Exhibits 4.1, 4.2, 4.3, 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this
current report on Form 8-K and are incorporated by reference in this
Item.
ITEM
3.02 UNREGISTERED
SALES OF EQUITY SECURITIES
The
sale
of preferred stock and warrants described in Item 1.01 above was exempt from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
ITEM
3.03 MATERIAL
MODIFICATION TO RIGHTS OF SECURITY HOLDERS
Effective
April 4, 2008 our certificate of incorporation was amended to eliminate the
Certificate of Designations, Preferences and Rights of Series A 8% Cumulative
Convertible Preferred Stock. There had not been any shares of Series A preferred
stock outstanding since April 2007.
Effective
April 10, 2008 our certificate of incorporation was amended to include the
Certificate of Designations, Preferences and Rights of Series D Convertible
Preferred Stock as described in Item 1.01 above.
As
described above, in connection with the closing of the Series D Financing,
the
holders of our Series B Preferred Stock exchanged all 300 shares of their Series
B Preferred Stock for 300 shares of Series D Preferred Stock. In connection
with
this exchange, the holders of our Series C preferred stock consented and agreed
that the Series D preferred stock would be senior to the Series C Preferred
Stock with respect to the payment of dividends and liquidation
preference.
ITEM
7.01 REGULATION
FD DISCLOSURE
A
copy of
the press release issued by us on April 11, 2008 announcing the signing of
the
closing of the sale of Series D Preferred Stock is filed as Exhibit 99.1 and
is
incorporated by reference.
ITEM
9.01 FINANCIAL
STATEMENTS AND EXHIBITS
(c)
Exhibits
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Number
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Title
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4.1
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Certificate
of Designations, Preferences and Rights of Series D Convertible Preferred
Stock of Novelos Therapeutics, Inc.
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4.2
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Certificate
of Elimination Series A 8% Cumulative Convertible Preferred Stock
of
Novelos Therapeutics, Inc.
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4.3
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Form
of Common Stock Purchase Warrant
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10.1
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Securities
Purchase Agreement dated March 26, 2008
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10.2
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Amendment
to the Securities Purchase Agreement dated April 9,
2008
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10.3
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Registration
Rights Agreement dated April 11, 2008
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10.4
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Amendment
to Registration Rights Agreement dated April 11, 2008
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10.5
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Warrant
Amendment Agreement dated April 11, 2008
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99.1
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Press
Release dated April 11, 2008 entitled “Novelos Therapeutics Closes $5.7
Million Private Placement”
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Dated:
April 14, 2008
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NOVELOS
THERAPEUTICS, INC.
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By:
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/s/
Harry S. Palmin
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Harry
S. Palmin
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President
and Chief Executive Officer
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EXHIBIT
INDEX
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Number
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Title
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4.1
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Certificate
of Designations, Preferences and Rights of Series D Convertible Preferred
Stock of Novelos Therapeutics, Inc.
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4.2
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Certificate
of Elimination Series A 8% Cumulative Convertible Preferred Stock
of
Novelos Therapeutics, Inc.
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4.3
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Form
of Common Stock Purchase Warrant
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10.1
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Securities
Purchase Agreement dated March 26, 2008
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10.2
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Amendment
to the Securities Purchase Agreement dated April 9,
2008
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10.3
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Registration
Rights Agreement dated April 11, 2008
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10.4
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Amendment
to Registration Rights Agreement dated April 11, 2008
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10.5
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Warrant
Amendment Agreement dated April 11, 2008
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99.1
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Press
Release dated April 11, 2008 entitled “Novelos Therapeutics Closes $5.7
Million Private Placement”
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