CERTIFICATE
TO SET FORTH DESIGNATIONS, VOTING POWERS,
PREFERENCES,
LIMITATIONS, RESTRICTIONS, AND RELATIVE
RIGHTS
OF
SERIES C 8% CUMULATIVE CONVERTIBLE
PREFERRED
STOCK, $.00001 PAR VALUE PER SHARE
It
is
hereby certified that:
I. The
name
of the corporation is Novelos Therapeutics, Inc. (the "Corporation"), a Delaware
corporation.
II. Set
forth
hereinafter is a statement of the voting powers, preferences, limitations,
restrictions, and relative rights of shares of Series C 8% Cumulative
Convertible Preferred Stock hereinafter designated as contained in a resolution
of the Board of Directors of the Corporation pursuant to a provision of the
Certificate of Incorporation of the Corporation permitting the issuance of
said
Series C 8% Cumulative Convertible Preferred Stock by resolution of the Board
of
Directors:
Series
C
8% Cumulative Convertible Preferred Stock, $.00001 par value.
III. So
long
as any of the 400 shares of Series B Convertible Preferred Stock designated
in
the Series B certificate of designations (the “Series B Preferred Stock”) are
outstanding, the Series B Preferred Stock shall rank senior to any and all
other
preferred stock or equity securities of the Corporation, including, without
limitation, the Series C Preferred Stock. Notwithstanding anything herein to
the
contrary, without the prior written consent of the Requisite Holders (as such
term is defined in the certificate of designations for the Series B Preferred
Stock (the “Series B Designations”)) of the Series B Preferred Stock, or except
as expressly permitted in the Series B Designations, no payments shall be made
to the holders of the Series C Preferred Stock in respect of such Series C
Preferred Stock so long as any shares of Series B Preferred Stock are
outstanding.
1. Designation:
Number of Shares.
The
designation of said series of Preferred Stock shall be Series C 8% Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock"). The number of
shares of Series C Preferred Stock shall be 272. Each share of Series C
Preferred Stock shall have a stated value equal to $12,000 (as adjusted for
any
stock dividends, combinations or splits with respect to such shares) (the
"Stated Value"), and $.00001 par value. The Corporation may issue fractions
of a
share of Series C Preferred Stock.
2. Dividends.
(a) After
all
outstanding dividends on the Series B Preferred Stock (with respect to the
current fiscal year and all prior fiscal years) shall have been paid to the
holders of the Series B Preferred Stock, the holders of outstanding shares
of
Series C Preferred Stock shall be entitled to receive dividends in cash out
of
any funds of the Corporation before any dividend or other distribution will
be
paid or declared and set apart for payment on any shares of any Common Stock,
or
other class of stock presently authorized or to be authorized other than the
Series B Preferred Stock (the Common Stock, and such other stock (other than
the
Series B Preferred Stock) being hereinafter collectively the "Junior Stock")
at
the rate of 8% per annum on the Stated Value, until October 1, 2008 and
thereafter at the rate of 20% per annum on the Stated Value, payable commencing
with the period ending June 30, 2007 and quarterly thereafter. To the extent
not
prohibited by law or this Section 2(a), dividends must be paid to the Holders
not later than five (5) business days after the end of each period for which
dividends are payable.
(b) The
dividends on the Series C Preferred Stock at the rates provided above shall
be
cumulative whether or not declared so that, if at any time full cumulative
dividends at the rate aforesaid on all shares of the Series C Preferred Stock
then outstanding from the date from and after which dividends thereon are
cumulative to the end of the quarterly dividend period next preceding such
time
shall not have been paid or declared and set apart for payment, or if the full
dividend on all such outstanding Series C Preferred Stock for the then current
dividend period shall not have been paid or declared and set apart for payment,
the amount of the deficiency shall be paid or declared and set apart for payment
before any sum shall be set apart for or applied by the Corporation or a
subsidiary of the Corporation to the purchase, redemption or other acquisition
of the Series C Preferred Stock or any shares of any other class of stock
ranking on a parity with the Series C Preferred Stock ("Parity Stock") and
before any dividend or other distribution shall be paid or declared and set
apart for payment on any Junior Stock and before any sum shall be set aside
for
or applied to the purchase, redemption or other acquisition of Junior
Stock.
(c) Dividends
on all shares of the Series C Preferred Stock shall begin to accrue and be
cumulative from and after the date of issuance thereof. A dividend period shall
be deemed to commence on the day following a dividend payment date herein
specified and to end on the next succeeding dividend payment date herein
specified.
3. Liquidation
and Mandatory Redemption Rights.
(a) Upon
the
dissolution, liquidation or winding-up of the Corporation, whether voluntary
or
involuntary, and after payment of all amounts that holders of Series B Preferred
Stock shall be entitled to receive upon such dissolution, liquidation or
winding-up of the Corporation, the Holders of the Series C Preferred Stock
shall
be entitled to receive before any payment or distribution shall be made on
the
Junior Stock, out of the assets of the Corporation available for distribution
to
stockholders, the Stated Value per share of Series C Preferred Stock and all
accrued and unpaid dividends to and including the date of payment thereof.
Unless otherwise provided in Section 4(b) of the Series B Designations, upon
the
payment in full of all amounts due to the Holders of the Series B Preferred
Stock and the Holders of the Series C Preferred Stock, the Holders of the Common
Stock of the Corporation and any other class of Junior Stock shall be entitled
to receive all remaining assets of the Corporation legally available for
distribution. If the assets of the Corporation available for distribution to
the
Holders of the Series C Preferred Stock shall be insufficient to permit payment
in full of the amounts payable as aforesaid to the Holders of Series C Preferred
Stock upon such liquidation, dissolution or winding-up, whether voluntary or
involuntary, the holders of Series C Preferred Stock shall share ratably in
any
distribution of such remaining assets in proportion to the total Series C
Liquidation Amount that each of such holders would have received had there
been
sufficient assets and all such remaining assets of the Corporation shall be
distributed to the exclusion of the Holders of shares of Junior Stock.
(b) The
merger or consolidation of the Corporation with or into any other corporation
or
corporations or the sale or transfer by the Corporation of all or substantially
all of its assets shall be deemed to be a liquidation, dissolution or winding-up
of the Corporation for the purposes of this paragraph 3.
4. Conversion
into Common Stock.
Holders
of shares of Series C Preferred Stock shall have the following conversion rights
and obligations:
(a) Subject
to the further provisions of this paragraph 4 each Holder of shares of Series
C
Preferred Stock shall have the right at any time commencing after the issuance
to the Holder of Series C Preferred Stock, to convert any such shares or
fractions thereof, accrued and unpaid dividends on such shares, and any other
sum owed by the Corporation arising from the Series C Preferred Stock or
pursuant to a subscription agreement dated September 30, 2005 or October 3,
2005
entered into by the Corporation and the Holder or Holder’s predecessor in
connection with the issuance of Series A 8% Cumulative Convertible Preferred
Stock, $.00001 par value per share (“Subscription Agreement”) (collectively
“Obligation Amount”) into fully paid and non-assessable shares of Common Stock
of the Corporation (as defined in paragraph 4(i) below) determined in accordance
with the Conversion Price provided in paragraph 4(b) below (the "Conversion
Price"). All issued or accrued but unpaid dividends may be converted at the
election of the Holder simultaneously with the conversion of principal amount
of
Stated Value of Series C Preferred Stock being converted even in circumstances
where the Holder would not be entitled to such dividends in cash by operation
of
Section 2(a) hereof.
(b) The
number of shares of Common Stock issuable upon conversion of the Obligation
Amount shall equal (i) the sum of (A) the Stated Value per share being
converted, (B) at the Holder's election, accrued and unpaid dividends on such
share, and (C) at the Holder’s election, provided that the Conversion Price is
not less than the conversion price of the Series B Preferred Stock, any other
sum owed by the Corporation to the Holder arising from any source including
but
not limited to the Series C Preferred Stock or Subscription Agreement divided
by
(ii) the Conversion Price. The Conversion Price as of the date of this
Certificate of Designations shall be $1.00, subject to further adjustment as
described herein below.
(c) Holder
will give notice of its decision to exercise its right to convert the Series
C
Preferred Stock or part thereof by telecopying an executed and completed Notice
of Conversion (a form of which is annexed as Exhibit A to the Certificate of
Designation) to the Corporation via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of the Subscription Agreement. The Holder
will not be required to surrender the Series C Preferred Stock certificate
until
the Series C Preferred Stock has been fully converted. Each date on which a
Notice of Conversion is telecopied to the Corporation in accordance with the
provisions hereof shall be deemed a Conversion Date. The Corporation will itself
or cause the Corporation’s transfer agent to transmit the Corporation's Common
Stock certificates representing the Common Stock issuable upon conversion of
the
Series C Preferred Stock to the Holder via express courier for receipt by such
Holder within three (3) business days after receipt by the Corporation of the
Notice of Conversion (the "Delivery Date"). In the event the Common Stock is
electronically transferable, then delivery of the Common Stock must be made
by
electronic transfer provided request for such electronic transfer has been
made
by the Holder. A Series C Preferred Stock certificate representing the balance
of the Series C Preferred Stock not so converted will be provided by the
Corporation to the Holder if requested by Holder, provided the Holder has
delivered the original Series C Preferred Stock certificate to the Corporation.
To the extent that a Holder elects not to surrender Series C Preferred Stock
for
reissuance upon partial payment or conversion, the Holder hereby indemnifies
the
Corporation against any and all loss or damage attributable to a third-party
claim in an amount in excess of the actual amount of the Stated Value of the
Series C Preferred Stock then owned by the Holder.
In
the
case of the exercise of the conversion rights set forth in paragraph 4(a) the
conversion privilege shall be deemed to have been exercised and the shares
of
Common Stock issuable upon such conversion shall be deemed to have been issued
upon the date of receipt by the Corporation of the Notice of Conversion. The
person or entity entitled to receive Common Stock issuable upon such conversion
shall, on the date such conversion privilege is deemed to have been exercised
and thereafter, be treated for all purposes as the recordholder of such Common
Stock and shall on the same date cease to be treated for any purpose as the
record Holder of such shares of Series C Preferred Stock so
converted.
Upon
the
conversion of any shares of Series C Preferred Stock no adjustment or payment
shall be made with respect to such converted shares on account of any dividend
on the Common Stock, except that the Holder of such converted shares shall
be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
The
Corporation, in connection with any conversion of Series C Preferred Stock,
and
payment of dividends on Series C Preferred Stock may issue a fraction of a
share
of its Series C Preferred Stock, or may pay such amount in cash at the stated
value of the fractional portion.
The
Corporation and Holder may not convert that amount of the Obligation Amount
on a
Conversion Date in amounts that would result in the Holder having a beneficial
ownership of Common Stock which would be in excess of the sum of (i) the number
of shares of Common Stock beneficially owned by the Holder and its affiliates
on
such Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Obligation Amount with respect to which the
determination of this proviso is being made on such Conversion Date, which
would
result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Corporation. For the
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject
to
the foregoing, the Holder shall not be limited to successive exercises which
would result in the aggregate issuance of more than 4.99%. The Holder may revoke
the conversion limitation described in this Paragraph, in whole or in part,
upon
61 days prior notice to the Corporation. The Holder may allocate which of the
equity of the Corporation deemed beneficially owned by the Holder shall be
included in the 4.99% amount described above and which shall be allocated to
the
excess above 4.99%.
(d) The
Conversion Price determined pursuant to Paragraph 4(b) shall be subject to
adjustment from time to time as follows:
(i) In
case
the Corporation shall at any time (A) declare any dividend or distribution
on
its Common Stock or other securities of the Corporation other than the Series
C
Preferred Stock or Series B Preferred Stock, (B) split or subdivide the
outstanding Common Stock, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue by reclassification of its Common Stock
any shares or other securities of the Corporation, then in each such event
the
Conversion Price shall be adjusted proportionately so that the Holders of Series
C Preferred Stock shall be entitled to receive the kind and number of shares
or
other securities of the Corporation which such Holders would have owned or
have
been entitled to receive after the happening of any of the events described
above had such shares of Series C Preferred Stock been converted immediately
prior to the happening of such event (or any record date with respect thereto).
Such adjustment shall be made whenever any of the events listed above shall
occur. An adjustment made to the Conversion Price pursuant to this paragraph
4(d)(i) shall become effective immediately after the effective date of the
event.
(ii) Other
than in connection with an Exempted Issuance, if at any time when the Series
C
Preferred Stock is outstanding, the Company shall offer, issue or agree to
issue
any Common Stock or securities convertible into or exercisable for shares of
Common Stock (or modify any of the foregoing which may be outstanding) to any
person or any entity at a price per share or conversion or exercise price per
share which will be less than the Conversion Price in respect of the shares
issuable upon conversion of the Series C Preferred Stock (the “Preferred
Shares”), without the consent of each Holder of Series C Preferred Stock, then
the Company shall issue, for each such occasion, additional shares of Common
Stock to each Holder of Series C Preferred Stock so that the average per share
purchase price of the shares of Common Stock issued to the Holder of Series
C
Preferred Stock (of only the Preferred Shares still owned by the Holder of
the
Series C Preferred Stock which Preferred Shares may not be publicly sold by
the
Holder of Series C Preferred Stock at the time of the dilutive event) is equal
to such other lower price per share and the Conversion Price shall automatically
be adjusted to such other lower price.
An
“Exempted Issuance” shall mean (i) full or partial consideration in connection
with a strategic merger, acquisition, consolidation or purchase of substantially
all of the securities or assets of corporation or other entity which holders
of
such securities or debt are not at any time granted registration rights, (ii)
the Corporation's issuance of securities in connection with strategic license
agreements and other partnering arrangements so long as such issuances are
not
for the purpose of raising capital which holders of such securities or debt
are
not at any time granted registration rights, (iii) the Corporation's issuance
of
Common Stock or the issuances or grants of options to employees, consultants,
officers and directors to purchase Common Stock pursuant to stock option plans
and employee stock purchase plans duly adopted by a majority of the non-employee
members of the Board of Directors of the Corporation or a majority of the
members of a committee of non-employee directors established for such purpose
hereto, (iv) the Corporation’s issuance of the Series B Preferred Stock, shares
of Common Stock upon conversion of the Series B Preferred Stock, or any other
securities in exchange therefor, (v) as a result of the exercise of warrants
issued to the Holders of Series C Preferred Stock on September 30, 2005 or
October 3, 2005 or conversion of Series C Preferred Stock, (vi) the payment
of
dividends on the Series C Preferred Stock and liquidated damages, and (vii)
as
has been described in the reports or other written information filed with the
Securities and Exchange Commission not later September 27, 2005.
(e) (i)
In
case of any merger of the Corporation with or into any other corporation (other
than a merger in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification, conversion,
or
change of the outstanding shares of Common Stock) then unless the right to
convert shares of Series C Preferred Stock shall have terminated as part of
such
merger, lawful provision shall be made so that Holders of Series C Preferred
Stock shall thereafter have the right to convert each share of Series C
Preferred Stock into the kind and amount of shares of stock and/or other
securities or property receivable upon such merger by a Holder of the number
of
shares of Common Stock into which such shares of Series C Preferred Stock might
have been converted immediately prior to such consolidation or merger. Such
provision shall also provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in sub-paragraph (d)
of
this paragraph 4. The foregoing provisions of this paragraph 4(e) shall
similarly apply to successive mergers.
(ii) In
case
of any sale or conveyance to another person or entity of the property of the
Corporation as an entirety, or substantially as an entirety, in connection
with
which shares or other securities or cash or other property shall be issuable,
distributable, payable, or deliverable for outstanding shares of Common Stock,
then, unless the right to convert such shares shall have terminated, lawful
provision shall be made so that the Holders of Series C Preferred Stock shall
thereafter have the right to convert each share of the Series C Preferred Stock
into the kind and amount of shares of stock or other securities or property
that
shall be issuable, distributable, payable, or deliverable upon such sale or
conveyance with respect to each share of Common Stock immediately prior to
such
conveyance.
(f) Whenever
the number of shares to be issued upon conversion of the Series C Preferred
Stock is required to be adjusted as provided in this paragraph 4, the
Corporation shall forthwith compute the adjusted number of shares to be so
issued and prepare a certificate setting forth such adjusted conversion amount
and the facts upon which such adjustment is based, and such certificate shall
forthwith be filed with the Transfer Agent for the Series C Preferred Stock
and
the Common Stock; and the Corporation shall mail to each Holder of record of
Series C Preferred Stock notice of such adjusted conversion price.
(g) In
case
at any time the Corporation shall propose:
(i) to
pay
any dividend or distribution payable in shares upon its Common Stock or make
any
distribution (other than cash dividends) to the Holders of its Common Stock;
or
(ii) to
offer
for subscription to the Holders of its Common Stock any additional shares of
any
class or any other rights; or
(iii) any
capital reorganization or reclassification of its shares or the merger of the
Corporation with another corporation (other than a merger in which the
Corporation is the surviving or continuing corporation and which does not result
in any reclassification, conversion, or change of the outstanding shares of
Common Stock); or
(iv) the
voluntary dissolution, liquidation or winding-up of the
Corporation;
then,
and
in any one or more of said cases, the Corporation shall cause at least fifteen
(15) days prior notice of the date on which (A) the books of the Corporation
shall close or a record be taken for such stock dividend, distribution, or
subscription rights, or (B) such capital reorganization, reclassification,
merger, dissolution, liquidation or winding-up shall take place, as the case
may
be, to be mailed to the Transfer Agent for the Series C Preferred Stock and
for
the Common Stock and to the Holders of record of the Series C Preferred
Stock.
(h) So
long
as any shares of Series C Preferred Stock or any Obligation Amount shall remain
outstanding and the Holders thereof shall have the right to convert the same
in
accordance with provisions of this paragraph 4 the Corporation shall at the
time
of issuance of Series C Preferred Stock reserve from the authorized and unissued
shares of its Common Stock 100% of the number of shares of Common Stock that
would be necessary to allow the conversion of the entire Obligation
Amount.
(i) The
term
“Common Stock” as used in this Certificate of Designation shall mean the $.00001
par value Common Stock of the Corporation as such stock is constituted at the
date of issuance thereof or as it may from time to time be changed, or shares
of
stock of any class or other securities and/or property into which the shares
of
Series C Preferred Stock shall at any time become convertible pursuant to the
provisions of this paragraph 4.
(j) The
Corporation shall pay the amount of any and all issue taxes (but not income
taxes) which may be imposed in respect of any issue or delivery of stock upon
the conversion of any shares of Series C Preferred Stock, but all transfer
taxes
and income taxes that may be payable in respect of any change of ownership
of
Series C Preferred Stock or any rights represented thereby or of stock
receivable upon conversion thereof shall be paid by the person or persons
surrendering such stock for conversion.
(k) In
addition to any other rights available to the Holder, if the Corporation fails
to deliver to the Holder such certificate or certificates pursuant to Section
4(c) by the Delivery Date and if within seven (7) business days after the
Delivery Date the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Holder
of
the Common Stock which the Holder anticipated receiving upon such conversion
(a
"Buy-In"), then the Corporation shall pay in cash to the Holder (in addition
to
any remedies available to or elected by the Holder) within five (5) business
days after written notice from the Holder, the amount by which (A) the Holder's
total purchase price (including brokerage commissions, if any) for the shares
of
Common Stock so purchased exceeds (B) the aggregate Stated Value of the shares
of Series C Preferred Stock for which such conversion was not timely honored,
together with interest thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full (which amount shall
be
paid as liquidated damages and not as a penalty). For example, if the Holder
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of $10,000 of Stated
Value of Series C Preferred Stock, the Corporation shall be required to pay
the
Holder $1,000, plus interest. The Holder shall provide the Corporation written
notice indicating the amounts payable to the Holder in respect of the
Buy-In.
(m) The
Corporation understands that a delay in the delivery of Common Stock upon
conversion of Preferred Stock in the form required pursuant to this Certificate
and the Subscription Agreement after the Delivery Date could result in economic
loss to the Holder. As compensation to the Holder for such loss, the Corporation
agrees to pay (as liquidated damages and not as a penalty) to the Holder for
such late issuance of Common Stock upon Conversion of the Series C Preferred
Stock in the amount of $100 per business day after the Delivery Date for each
$10,000 of Obligation Amount being converted of the corresponding Common stock
which is not timely delivered. The Corporation shall pay any payments incurred
under this section in immediately available funds upon demand. Furthermore,
in
addition to any other remedies which may be available to the Holder, in the
event that the Corporation fails for any reason to effect delivery of the Common
Stock by the Delivery Date, the Holder will be entitled to revoke all or part
of
the relevant Notice of Conversion or rescind all by delivery of a notice to
such
effect to the Corporation whereupon the Corporation and the Holder shall each
be
restored to their respective positions immediately prior to the delivery of
such
notice, except that the liquidated damages described above shall be payable
through the date notice of revocation is given to the Corporation.
(n) In
the
event a Holder shall elect to convert any part of the Obligation Amount, the
Corporation may not refuse conversion based on any claim that Holder or any
one
associated or affiliated with Holder has been engaged in any violation of law,
or for any other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of such Obligation Amount
shall have been sought and obtained by the Corporation and the Corporation
has
posted a surety bond for the benefit of such Holder in the amount of 120% of
the
amount of the Obligation Amount which are sought to be subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent Holder obtains judgment.
(o)
Commencing
after the Actual Effective Date (as defined in the Subscription Agreement),
provided an Event of Default has not occurred, and provided further that no
Series B Preferred Stock is outstanding, whether or not such Event of Default
has been cured, the Corporation will have the option of prepaying the Obligation
Amount ("Optional Redemption"), in whole or in part, by paying to the Holder
a
sum of money equal to one hundred twenty percent (120%) of the Obligation Amount
to be redeemed (the "Redemption Amount"). The Corporation’s election to exercise
its right to prepay must be by notice in writing (“Notice of Redemption”) and
made proportionately to all Holders of Series C Preferred Stock. The Notice
of
Redemption shall specify the date for such Optional Redemption (the "Redemption
Payment Date"), which date shall be not less than thirty (30) business days
after service of the Notice of Redemption (the "Redemption Period"). A Notice
of
Redemption shall not be effective with respect to any portion of the Obligation
Amount for which the Holder has a pending election to convert pursuant to
Section 4 hereof, or for conversions initiated or made by the Holder during
the
Redemption Period. On the Redemption Payment Date, the Redemption Amount less
any portion of the Redemption Amount against which the Holder has exercised
its
rights pursuant to Section 4, shall be paid in good funds to the Holder. In
the
event the Corporation fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then (i) such Notice of Redemption will be
null and void, (ii) the Corporation will have no further right to deliver a
Notice of Redemption, and (iii) the Corporation’s failure may be deemed by the
Holder to be a non-curable Event of Default.
5. Voting
Rights.
The
Holder of shares of Series C Preferred Stock shall not have voting
rights.
6. Restrictions
and Limitations.
(a) Amendments
to Charter.
The
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock (voting together as a single
class):
(i) change
the relative seniority rights of the holders of Series C Preferred Stock as
to
the payment of dividends in relation to the holders of any other capital stock
of the Corporation, or create any other class or series of capital stock
entitled to seniority as to the payment of dividends in relation to the holders
of Series C Preferred Stock other than the Series B Preferred Stock; provided
that no such amendment shall increase the number of shares designated as Series
B Preferred Stock or the stated value thereof without approval of the
outstanding shares of Series C Preferred Stock;
(ii) reduce
the amount payable to the holders of Series C Preferred Stock upon the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, or
change the relative seniority of the liquidation preferences of the holders
of
Series C Preferred Stock to the rights upon liquidation of the holders of other
capital stock of the Corporation, or change the dividend rights of the holders
of Series C Preferred Stock;
(iii) cancel
or
modify the conversion rights of the holders of Series C Preferred Stock provided
for in Section 4 herein; or
(iv) cancel
or
modify the rights of the holders of the Series C Preferred Stock provided for
in
this Section 6.
(b) Amendments
to this Certificate of Designations.
So long
as any shares of Series B Preferred Stock remain outstanding, the Corporation
shall not amend this Certificate of Designations without first obtaining the
approval (by vote or written consent, as provided by law) of the Requisite
Holders of the Series B Preferred Stock.
7. Event
of Default.
The
occurrence of any of the following events of default ("Event of Default") shall,
after the applicable period to cure the Event of Default, cause the dividend
rate of 8% described in paragraph 2 hereof to become 20% (provided that any
payment of dividends shall be in accordance with Section 2(a)) from and after
the occurrence of such event:
(i) The
Corporation fails to timely pay any dividend payment or the failure to timely
pay any other sum of money due to the Holder from the Corporation and such
failure continues for a period of seven (7) days after written notice to the
Corporation from the Holder .
(ii) The
Corporation breaches any material covenant, term or condition of the
Subscription Agreement or in this Certificate of Designation, and if capable
of
being cured such breach continues for a period of seven (7) days after written
notice to the Corporation from the Holder.
(iii) Any
material representation or warranty of the Corporation made in the Subscription
Agreement, or in any agreement, statement or certificate given in writing
pursuant thereto shall prove to have been false or misleading at the time when
made.
(iv) The
Corporation or any of its subsidiaries shall make an assignment of a substantial
part of its property or business for the benefit of creditors, or apply for
or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee shall otherwise
be appointed.
(v) Any
money
judgment, confession of judgment, writ or similar process shall be entered
against the Corporation, a subsidiary of the Corporation, or their property
or
other assets for more than $100,000, and is not vacated, satisfied, bonded
or
stayed within 45 days.
(vi) Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings
for
relief under any bankruptcy law or any law for the relief of debtors shall
be
instituted by the Corporation or if instituted against the Corporation or any
of
its subsidiaries, is not dismissed within 45 days.
(vii) An
order
entered by a court of competent jurisdiction, or by the Securities and Exchange
Commission, or by the National Association of Securities Dealers, preventing
purchase and sale transactions in the Corporation’s Common Stock for a period of
five or more consecutive trading days.
(viii) The
Corporation's failure to deliver to the Holder Common Stock or a replacement
Preferred Stock certificate within ten (10) business days of the required
delivery date, if so required.
(ix) The
occurrence and continuation of a Non-Registration Event as described in Section
11.4 of the Subscription Agreement for a period of forty-five (45)
days.
(x) Delisting
of the Common Stock from the OTC Bulletin Board (“OTCBB”) or such other
principal market or exchange on which the Common Stock is listed for trading,
if
the Common Stock is not quoted or listed on such market or exchange, or quoted
on the automated quotation system of a national securities association or listed
on a national securities exchange, within ten (10) trading days after such
delisting.
(xi) The
Corporation fails to reserve the amount of Common Stock required to be reserved
pursuant to Section 4(h) hereof.
(xii) A
default
by the Corporation of a material term, covenant, warranty or undertaking of
any
other agreement to which the Corporation and Holder are parties, or the
occurrence of a material event of default under any such other agreement, in
each case, which is not cured after any required notice and/or cure
period.
(xiii) Upon
the
occurrence of a Change in Control. A “Change in Control” shall mean (i) the
Corporation becoming a Subsidiary of another entity, (ii) a majority of the
board of directors of the Corporation as of the Issue Date of Series C Preferred
Stock or successors appointed by the board of directors having a majority
consisting of such persons or their successors no longer serving as directors
of
the Corporation except due to natural causes, (iii) if any person or entity
other than officers or directors or persons or entities beneficially owning
more
than ten percent (10%) or more of the voting power of outstanding capital stock
of the Corporation as of the Issue date of Series C Preferred Stock, acquires
fifty percent (50%) or more of the voting power of outstanding capital stock
of
the Corporation, (iv) the sale, lease or transfer of substantially all the
assets of the Corporation or Subsidiaries.
8. Status
of Converted or Redeemed Stock.
In case
any shares of Series C Preferred Stock shall be redeemed or otherwise
repurchased or reacquired, the shares so redeemed, converted, or reacquired
shall resume the status of authorized but unissued shares of Preferred Stock
and
shall no longer be designated as Series C Preferred Stock.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Designations
to
be duly executed by its undersigned officer thereunto duly authorized, this
2nd
day of
May, 2007.
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NOVELOS
THERAPEUTICS, INC. |
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By: |
/s/ Harry
S.
Palmin |
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Harry
S. Palmin, President |
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EXHIBIT
A
NOTICE
OF
CONVERSION
(To
Be
Executed By the Registered Holder in Order to Convert the Series C Convertible
Preferred Stock of Novelos Therapeutics, Inc.)
The
undersigned hereby irrevocably elects to convert $______________ of the Stated
Value of the above Series C Convertible Preferred Stock into shares of Common
Stock of Novelos Therapeutics, Inc. (the "Corporation") according to the
conditions hereof, as of the date written below.
Date
of
Conversion:
Applicable
Conversion Price Per Share:
Number
of
Common Shares Issuable Upon This Conversion:
Select
one:
o A
Series C
Convertible Preferred Stock certificate is being delivered herewith. The
unconverted portion of such certificate should be reissued and delivered to
the
undersigned.
o A
Series C
Convertible Preferred Stock certificate is not being delivered to Novelos
Therapeutics, Inc.
Signature:
Print
Name:
Address:
Deliveries
Pursuant to this Notice of Conversion Should Be Made to: