Delaware
(State or other jurisdiction of incorporation or organization) |
2834
(Primary Standard Industrial Classification Code Number) |
45-3215903
(I.R.S. Employer Identification No.) |
Dale E. Short, Esq.
Marc L. Brown, Esq. TroyGould PC 1801 Century Park East, 16 th Floor Los Angeles, CA 90067 Phone: (310) 789-1259 Fax: (310) 789-1459 |
Ryan A. Murr, Esq.
Ropes & Gray LLP Three Embarcadero Center San Francisco, California 94111-4006 Phone: (415) 315-6395 Fax: (415) 315-6026 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
i
Page
1
11
26
28
33
33
34
35
46
59
61
65
68
69
74
76
78
79
80
F-1
EX-2.3
Ex-3.1
Ex-3.2
Ex-10.3
Ex-10.4
Ex-10.12
Ex-10.16
Ex-23.1
Table of Contents
1
2
3
4
5
6
7
8
9
10
We are currently working towards filing an investigational new drug application (
IND
)
for RXI-109 and initiating a Phase I/II clinical trial in 2012.
As reported in Cytokine & Growth Factor Reviews (2008) and other publications, CTGF
overexpression is implicated in scarring and fibrotic diseases. Data obtained from studies of
RXI-109 in preclinical models using direct local administration to the skin demonstrate robust
cellular delivery and statistically significant, dose-dependent silencing of CTGF that lasts for
at least one week with a single injection.
We believe that the potential commercial market for an effective dermal anti-scarring therapy
is significant. According to data available publicly on the Center for Disease Controls
(
CDC
) website at www.CDC.gov, approximately 42 million surgical procedures are
performed annually, with many patients experiencing hypertrophic
scarring and keloids.
Because abnormal overexpression of CTGF is implicated in dermal scarring and fibrotic
disease, we believe that RXI-109, or other CTGF-targeting compounds that reduce CTGF, or
block its action, may be able to treat other indications where fibrosis is a factor. These
include pulmonary, liver, and renal fibrotic diseases, as well as ocular scarring, acute spinal
injury (where scarring impedes regeneration) and restenosis (a
complication arising from vessel damage following stent placement). If clinical studies of RXI-109 produce successful
results in dermal anti-scarring, we may explore opportunities in these indications, as well as
other possible dermatology applications.
Novel RNAi Compounds,
referred to as rxRNA® compounds, that are distinct from, and we
believe convey significant advantages over, classic siRNA (conventionally-designed small
interfering RNA compounds), and offer many of the properties that we believe are important
to the clinical development of RNAi-based drugs. We have developed a number of unique
forms of rxRNA® compounds, all of which have been shown to be highly potent both in vitro
and in preclinical in vivo models. These RNAi compounds include rxRNAori®,
rxRNAsolo® and sd-rxRNA®, or self-delivering RNA. Based on our research, we believe
that these different, novel siRNA configurations have various potential advantages for
therapeutic use. These potential advantages include high potency, increased resistance to
nucleases and off-target effects, and, in the case of the sd-rxRNA® compounds, access to
cells and tissues with no additional formulation required.
Advanced Delivery Technologies
that enable the delivery of our rxRNA compounds to
potentially treat a variety of acute and chronic diseases using both local and systemic
approaches, potentially providing a competitive advantage in the development of many RNAi
therapeutic compounds. Our suite of delivery technologies is comprised of delivery vehicles,
which can be combined with various rxRNA® compounds, as well as sd-rxRNA®
compounds, which are chemically modified and have the unique property of entering cells
and tissues to effect silencing without the need for any additional delivery vehicle. This suite
of delivery technologies has broad applications for multiple therapeutic areas targeting both
local and systemic applications for the delivery of the RNAi drug.
Table of Contents
Galena assigned and contributed to us substantially all of its RNAi-related
technologies and assets, which consist primarily of novel RNAi compounds and licenses
relating to its RNAi technologies, as well as the lease of its Worcester, Massachusetts
laboratory facility, fixed assets and other equipment located at the facility and its
employment arrangements with certain scientific, corporate and administrative personnel
who have become our employees, as well as research grants of
approximately $800,000 that are subject to the approval of the
granting institutions; and
We agreed to assume approximately $411,000 of accrued expenses of the RXi-109 development
program, including assumed capital lease obligations, and all future obligations under the contributed licenses, employment
arrangements and other agreements. Additionally, we agreed to make future milestone payments to
Galena of up to $45 million, consisting of two one-time payments of $15 million and $30
million, respectively, if we achieve annual net sales equal to or greater than $500
million and $1 billion, respectively, of any covered products that may be developed
with the contributed RNAi technologies.
Table of Contents
TCP and RTW agreed to purchase a total of $9,500,000 of our Series A Convertible
Preferred Stock (the
Series A Preferred Stock
) at the closing of the spin-off
transaction and to lend to us up to $1,500,000 to fund our operations prior to the
closing, with the outstanding principal and accrued interest on the loan to be
converted into Series A Preferred Stock at the closing, at a conversion price of $1,000
per share, and such conversion will be applied to the $9,500,000
total investment by TCP and
RTW;
We agreed that the Series A Preferred Stock will be
convertible by TCP or RTW at
any time into shares of our common stock, except to the extent that the holder would
own more than 9.999% of the shares of our common stock outstanding immediately after
giving effect to such conversion. Without regard to this conversion limitation, the
shares of the Series A Preferred Stock to be held by TCP and RTW would be convertible
into shares of our common stock representing approximately 83% of the fully diluted
shares of our common stock upon the completion of the spin-off transaction;
We agreed that the Series A Preferred Stock will have the rights, preferences,
privileges and restrictions summarized below under Description of Capital
StockPreferred Stock;
Galena agreed to contribute $1.5 million of cash to us;
Galena agreed to distribute to its stockholders the shares of RXi common stock that
are the subject of this prospectus; the distribution by Galena of the shares of RXi
common stock and RXis separation from Galena is referred to in this prospectus as the
spin-off transaction
;
We and Galena agreed to take all necessary actions to constitute our initial board
of directors as described in the Management section of this prospectus; and
We agreed, upon completion of the spin-off
transaction, to reimburse Galena for up to a total of $300,000, and
to reimburse TCP and RTW for a total of up to $100,000, of transaction costs relating to the
contribution agreement with Galena, the
Table of Contents
securities purchase agreement summarized above
and the transactions contemplated by those agreements.
Advirna assigned to us its existing patent and technology rights related to
sd
-rxRNA technology in exchange for our agreement to pay Advirna an annual $100,000
maintenance fee and a one-time $350,000 milestone payment upon the future issuance of
the first patent with valid claims covering the assigned patent and technology rights;
We will be required to pay a 1% royalty to Advirna for any licensing revenue
received by us with respect to future licensing of the assigned Advirna patent and
technology rights;
We have granted back to Advirna a license under the assigned patent and technology
for fields of use outside the fields of human therapeutics and diagnostics; and
We have agreed to issue to Advirna, upon the completion of the spin-off transaction,
shares of our common stock equal to approximately 5% of the fully diluted shares of RXi common stock
assuming the conversion in full of all outstanding Series A Preferred Stock.
Table of Contents
We may be unable to achieve some or all of the benefits that we expect to achieve
from our separation from Galena.
We may be unsuccessful in recruiting a Chief Executive Officer or other
key employees.
We may not be able to obtain sufficient funding and may not be able to commercialize
our product candidates.
The approach we are taking to discover and develop novel therapeutics using RNAi is
unproven and may never lead to marketable products.
We may not be able to maintain the third-party relationships that are necessary to
develop or commercialize some or all of our product candidates.
If our preclinical testing does not produce successful results or our clinical
trials do not demonstrate safety and efficacy in humans, our products may not receive
FDA approval and we will not be able to commercialize our drug candidates.
Even if we receive regulatory approval to market our product candidates, our product
candidates may not be accepted commercially, which may prevent us from becoming
profitable.
We are dependent on technologies we license, and if we lose the right to license
such technologies or we fail to license new technologies in the future, our ability to
develop new products would be harmed.
Table of Contents
Galena Biopharma, Inc., a Delaware corporation.
RXi Pharmaceuticals Corporation, a Delaware
corporation.
A fixed number of 47,341,594 shares of RXi
common stock will be distributed to Galenas
stockholders.
Galenas lead therapeutic programs involve peptide-based immunotherapy products for
the treatment of various cancers, while our
therapeutic programs are focused on RNAi. The
discovery and development of immunotherapy
products requires skills, patents and
management expertise that are different from
the skills, patents and management expertise
that are required for RNAi drug development
and discovery. Because of the difference in
focus with respect to therapeutic programs,
and the difficulties that may arise adequately
funding and managing programs in both of these
areas, the Galena board of directors
determined that the best strategy for
realizing the potential value of Galenas RNAi
assets was to contribute them to RXi, with a
focus on developing and commercializing RNAi
therapeutics, followed by the spin-off of RXi as described in this
prospectus.
Table of Contents
Each holder of Galena common stock as of the
close of business on [_______],
2012, the
record date for the distribution, will receive
a dividend of one share of RXi common stock
for each share of Galena common stock held by
such holder.
The distribution will consist of Galenas
payment of a dividend to Galenas stockholders
in the form of shares of RXi common stock. No
vote or approval of Galenas stockholders is
required in connection with the distribution.
You will not be required to make any payment,
or to surrender or exchange your shares of
Galenas common stock, or take any other action
to receive your shares of our common stock, and Galenas stockholders will continue to own all shares of Galena
common stock held by them.
If you own Galena common stock as of the close
of business on the record date, Galena, with
the assistance of Computershare, the
distribution agent and RXis transfer agent, will electronically issue
shares of our common stock to you or to your
brokerage firm on your behalf by way of direct
registration in book-entry form.
Computershare will mail to you a book-entry
account statement that reflects your shares of
RXi common stock, or your bank or brokerage
firm will credit your account for the shares.
If you sell shares of Galena common stock in
the regular-way market up to and including
through the distribution date, you will be
selling your right to receive shares of RXi
common stock in the distribution. Following
the distribution, stockholders may request that their shares be transferred
to a brokerage or other account at any time,
without charge. Please see The Distribution
Direct Registration System section of this
prospectus for a more detailed description of
the direct registration system and how shares
of Galena common stock may be sold and
transferred.
[_______], 2012.
Computershare will be the distribution agent
for the distribution and the transfer agent
and registrar for RXi common stock following
the distribution.
Galena expects that the distribution will be
treated as a taxable distribution in an amount
equal to the fair market value of the RXi
shares on the distribution date. This amount
will be treated as a dividend to the extent of
any current year earnings and profits of
Galena, including any gain resulting from the
distribution, with the excess treated as a
non-taxable return of capital,
Table of Contents
to the extent of
a holders tax basis in Galena common stock
and any remaining excess treated as capital
gain. For a discussion of the tax
consequences to Galena and Galenas
stockholders of the distribution, see the
Material United States Federal Income Tax
Considerations section of this prospectus.
Galenas stockholders should consult with
their own individual tax advisors regarding
the tax consequences of the distribution.
There currently is no public market
for our common stock. We will apply for trading of our common stock in the OTC Markets Group under the symbol RXII in
conjunction with the effectiveness of the registration statement of which this prospectus is a
part. We expect that our common stock will begin trading in the OTC Markets Group following the
distribution. We cannot predict whether or when trading of our common stock will begin or the trading prices for
our common stock.
Immediately following the completion of the
spin-off transaction, Galena will own
approximately 4% of our common stock on a
fully diluted basis assuming the conversion in
full of all Series A Preferred Stock without
regard to applicable conversion limitations.
We are a party to several agreements with
Galena relating to its ownership of our common
stock and other matters as described in the
Certain Relationships and Related Party
Transactions section of this prospectus.
RXi has never declared a dividend on its
common stock and does not plan to do so for
the foreseeable future.
You should carefully consider the matters
discussed in the Risk Factors section of
this prospectus.
If you have any questions relating to the
separation of RXi from Galena, you should
contact:
Mark J. Ahn, Ph.D
President and Chief Executive Officer
Galena Biopharma, Inc.
310 N. State Street, Suite 208
Lake Oswego, Oregon 97034
(855) 855-4253
Table of Contents
Table of Contents
Period from
January 1, 2003
(Date of Inception)
Nine Months Ended September 30,
Years Ended December 31,
to September 30, 2011
2011
2010
2010
2009
(Amounts in thousands)
$
44,181
$
5,074
$
6,126
$
7,873
$
8,892
36,276
5,206
6,803
8,752
8,628
80,457
10,280
12,929
16,625
17,520
629
1
5
5
(5
)
5,401
1,636
2,762
4,627
(862
)
$
(74,427
)
$
(8,643
)
$
(10,162
)
$
(11,993
)
$
(18,387
)
December 31,
September 30, 2011
2010
2009
(Amounts in thousands)
$
422
$
6,891
$
5,684
$
720
$
7,041
$
5,804
$
428
$
419
$
432
$
1,148
$
7,476
$
6,252
$
13,088
$
5,046
$
5,511
(11,940
)
2,430
741
$
1,148
$
7,476
$
6,252
Table of Contents
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Table of Contents
Table of Contents
Delays in filing the initial drug application for RXI-109 or other product
candidates;
Difficulty in securing centers to conduct trials;
Conditions imposed on us by the FDA or comparable foreign authorities regarding the
scope or design of RXis clinical trials;
Problems in engaging IRBs to oversee trials or problems in obtaining or maintaining
IRB approval of studies;
Difficulty in enrolling patients in conformity with required protocols or projected
timelines;
Third-party contractors failing to comply with regulatory requirements or to meet
their contractual obligations to us in a timely manner;
Our drug candidates having very different chemical and pharmacological properties in
humans than in laboratory testing and interacting with human biological systems in
unforeseen, ineffective or harmful ways;
Table of Contents
The need to suspend or terminate clinical trials if the participants are being
exposed to unacceptable health risks;
Insufficient or inadequate supply or quality of our drug candidates or other
necessary materials necessary to conduct our clinical trials;
Effects of our drug candidates not being the desired effects or including
undesirable side effects or the drug candidates having other unexpected
characteristics;
The cost of our clinical trials being greater than we anticipate;
Negative or inconclusive results from our clinical trials or the clinical trials of
others for similar drug candidates or inability to generate statistically significant
data confirming the efficacy of the product being tested;
Changes in the FDAs requirements for testing during the course of that testing;
Reallocation of our limited financial and other resources to other clinical
programs; and
Adverse results obtained by other companies developing similar drugs.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
They are incidental to a physicians services;
They are reasonable and necessary for the diagnosis or treatment of the illness or
injury for which they are administered according to accepted standard of medical
practice;
They are not excluded as immunizations; and
They have been approved by the FDA.
Table of Contents
To conduct research and development to successfully develop our RNAi technologies;
To obtain regulatory approval for our products;
To file and prosecute patent applications and to defend and assess patents to
protect our technologies;
To retain qualified employees, particularly in light of intense competition for
qualified scientists;
To manufacture products ourselves or through third parties;
To market our products, either through building our own sales and distribution
capabilities or relying on third parties; and
To acquire new technologies, licenses or products.
Table of Contents
Table of Contents
Announcements of regulatory developments or technological innovations by us or our
competitors;
Changes in our relationship with our licensors and other strategic partners;
Our quarterly and annual operating results;
Developments in patent or other technology ownership rights;
Public concern regarding the safety of our technology;
Government regulation of drug pricing; and
General changes in the economy, the financial markets or the pharmaceutical or
biotechnology industries.
Table of Contents
Table of Contents
Delaying, deferring or preventing a change in control of our company;
Impeding a merger, consolidation, takeover or other business combination involving
our company; or
Discouraging a potential acquirer from making a tender offer or otherwise attempting
to obtain control of our company.
Table of Contents
Authorize the issuance of blank check preferred stock that our board could issue
to increase the number of outstanding shares and to discourage a takeover attempt;
Prohibit stockholder action by written consent, which requires all stockholder
actions to be taken at a meeting of our stockholders;
Provide that the board of directors is expressly authorized to adopt, alter or
repeal our bylaws; and
Establish advance notice requirements for nominations for election to our board or
for proposing matters that can be acted upon by stockholders at stockholder meetings.
Table of Contents
26
27
We may be unable to achieve some or all of the benefits that we expect to achieve
from our spin-off from Galena;
We may be unsuccessful in recruiting a Chief Executive
Officer, Chief Financial Officer or other
key employees;
Higher costs associated with being a separate, publicly traded company;
The difficulty in evaluating our financial information due to the distribution;
The inability to raise additional future financing and lack of financial and other
resources to us as a separate company;
Our ability to control product development costs;
We may not be able to attract and retain key employees;
We may not be able to compete effectively;
We may not be able enter into new strategic collaborations;
Changes in government regulation affecting our RNAi-based therapeutics could
increase our development costs;
Our involvement in patent and other intellectual property litigation could be
expensive and could divert managements attention;
The possibility that there will be no market acceptance for our products; and
Changes in third-party reimbursement policies could adversely affect potential
future sales of any of our products that are approved for marketing.
Table of Contents
Table of Contents
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F - 11
F - 12
F - 13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F - 23
F - 24
F - 25
F - 26
F - 27
F - 28
F - 29
F - 30
II-1
II-2
II-3
II-4
II-5
II-6
II-7
Allow us direct access to capital markets to finance our RNAi drug development activities;
Allow our management and the management of Galena to each pursue its own separate
business strategies and strategic relationships based on its specific technologies and assets;
Potentially enhance the ability of Galena and us to attract advisors and collaborators who are
leaders in the particular fields of research and development being pursued by the separate
companies, including collaborators who may be competitors or potential competitors of the
other company;
Facilitate acquisitions, joint ventures and partnerships by Galena and us with other companies
focusing on the same or complementary technologies;
Provide Galenas stockholders with a direct ownership interest in us, in addition to the
indirect interest in us that they will have as Galenas stockholders, recognizing the possibility
that there may be greater collective investment demand for the separate, publicly traded
shares of Galena and us;
Enhance public disclosures regarding Galena and us and improve investor understanding of
the two companies; and
Allow for stock options and other equity securities in our company with a value related
directly to our own drug development efforts and the performance of our business, with such
equity securities enabling us to provide incentives for our management and other key
employees that are directly related to the market performance of our publicly traded shares
and improve our ability to attract, retain and motivate additional qualified personnel.
We may not achieve the expected benefits of our separation from Galena;
We may be unable to obtain financing for our business and activities as a stand-alone company and will
be subject to the other risks described in the Risk Factors section of this prospectus;
Galena and we will each incur substantial transaction costs in connection with the contribution and spin-off transactions;
As two companies, the general and administrative costs
incurred by Galena and us, collectively, will be greater than the
general and administrative expenses
that Galena has historically incurred;
Galena expects that the distribution will be treated as a taxable distribution to its stockholders;
Pending the distribution, Mark J. Ahn, Ph.D. will devote only a limited amount of time in his capacity as our President and
Chief Financial Officer and will devote the majority of his business time and attention to Galenas business and operations, and he
will be subject to potential conflicts of interest between Galena and us; and
The distribution and the investment by TCP and RTW in our Series A Preferred Stock are subject to closing
conditions, including the absence of any material adverse effect on us, and there is no assurance it will be completed.
Table of Contents
Table of Contents
TCP and RTW agreed to purchase a total of $9,500,000 of our Series A Preferred
Stock at the closing of the spin-off transaction and to lend to us up to $1,500,000 to
fund our operations prior to the closing, with the outstanding principal and accrued
interest from the loan to be converted into Series A Preferred Stock at the closing, at
a conversion price of $1,000 per share, and such conversion will be applied to the $9,500,000
total investment by TCP and RTW;
We agreed that the Series A Preferred Stock will be convertible by TCP or RTW at
any time into shares of our common stock, except to the extent that the holder would
own more than 9.999% of the shares of our common stock outstanding immediately after
giving effect to such conversion;
We agreed that the Series A Preferred Stock will have the rights, preferences,
privileges and restrictions summarized in the Description of Capital StockPreferred
Stock section of this prospectus;
Galena agreed to contribute $1.5 million of cash to us;
Galena agreed to distribute to its stockholders, on a share-for-share basis, the RXi
common stock that is the subject of this prospectus; the distribution of the RXi common
stock and our separation from Galena is referred to in this prospectus as the
spin-off
transaction
; and
We agreed, upon completion of the spin-off
transaction, to reimburse Galena for up to a total of $300,000, and
to reimburse TCP and RTW for up to a
total of $100,000, of transaction costs relating to the
contribution agreement with Galena, the securities purchase agreement and the
transactions contemplated by the agreements.
Table of Contents
Advirna has assigned its existing patent and technology rights related to sd-rxRNA
technology in exchange for an annual $100,000 maintenance fee and a one-time $350,000
milestone payment to Advirna upon the future issuance of the first patent with valid claims
covering the assigned technology;
We will be required to pay a 1% royalty to Advirna for any licensing revenue
received by RXi on the license of the assigned Advirna technology;
We have granted back to Advirna a license under the assigned technology for fields
of use outside the fields of human therapeutics and diagnostics; and
We have agreed to issue to Advirna, upon the completion of the spin-off transaction, a
number of shares of our common stock equal to approximately 5% of the fully diluted shares of RXi
common stock upon completion of the spin-off transaction.
Dr. Khvorova serves as our Senior Vice President and Chief Scientific Officer at an
annual salary of $310,000 and is entitled to a grant of stock options to purchase 2% of
the fully diluted common stock after the spin-off transaction at an exercise price per
share to be determined based on the fair value of our common stock at the date of
grant; the options will be subject to vesting in equal monthly installments over the
four-year period following the effective date of her employment, subject to accelerated
vesting in some events; and
Dr. Pavco serves as our Senior Vice President of Pharmaceutical Development at an
annual salary of $300,000 and also is entitled to a grant of stock options to purchase
2% of the fully diluted common stock after the spin-off transaction at an exercise
price per share to be determined based on the fair value of RXi common stock at the
date of grant; the options will be subject to vesting in equal monthly installments
over the four-year period following the effective date of her employment, subject to
accelerated vesting in some events.
Table of Contents
A registration statement that the SEC has declared effective under the Securities
Act; or
An exemption from registration under the Securities Act, such as the exemption
afforded by Rule 144, as summarized below in Shares Eligible for Future Sale.
Table of Contents
Table of Contents
As of September 30, 2011
Actual
As Adjusted
(unaudited)
(Amounts in thousands)
$
422
$
9,422
$
500
$
$
$
9,500
$
$
10
$
$
(1,824
)
$
(11,940
)
$
$
$
7,686
$
(11,440
)
$
7,686
Table of Contents
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our ability to advance product candidates into preclinical research and clinical
trials;
The scope and rate of progress of our preclinical program and other research and
development activities;
The scope, rate of progress and cost of any clinical trials we commence;
Table of Contents
The cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights;
Clinical trial results;
The terms and timing of any collaborative, licensing and other arrangements that we
may establish;
The cost and timing of regulatory approvals;
The cost of establishing clinical and commercial supplies of our product candidates
and any products that we may develop;
The cost and timing of establishing sales, marketing and distribution capabilities;
The effect of competing technological and market developments; and
The effect of government regulation and insurance industry efforts to control
healthcare costs through reimbursement policy and other cost management strategies.
Table of Contents
Table of Contents
For the Nine Months ended
September 30,
2011
2010
1.59
%
3.02
%
103.27
%
121.19
%
5.49
7.37
0.00
%
0.00
%
Table of Contents
For the Nine Months
Ended September 30,
2011
2010
$
4,652
$
4,589
471
814
(49
)
723
$
5,074
$
6,126
For the Years Ended
December 31,
2010
2009
$
6,046
$
6,728
1,084
867
743
1,297
$
7,873
$
8,892
Table of Contents
For the Nine Months Ended
September 30,
2011
2010
$
3,527
$
4,228
91
654
23
1,565
1,921
$
5,206
$
6,803
For the Years Ended
December 31,
2010
2009
$
5,493
$
5,483
718
826
281
2,541
2,038
$
8,752
$
8,628
Table of Contents
For the Nine Months Ended
September 30,
2011
2010
$
1,636
$
2,762
$
1,636
$
2,762
For the Years Ended
December 31,
2010
2009
$
3,049
$
(858
)
785
793
(4
)
$
4,627
$
(862
)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
We are currently working towards filing an investigational
new drug application (
IND
) for RXI-109 and initiating a Phase I/II clinical trial in 2012.
As reported in Cytokine & Growth Factor Reviews (2008) and
other publications, CTGF overexpression is implicated in scarring and fibrotic diseases.
Data obtained from studies of RXI-109 in preclinical models
using direct local administration to the skin demonstrate robust cellular delivery and statistically significant,
dose-dependent silencing of CTGF that lasts for at least one week with a single injection.
We believe that the potential commercial market for an effective dermal anti-scarring therapy is significant.
According to data available publicly on the Center for Disease Controls (
CDC
) website at www.CDC.gov,
approximately 42 million surgical procedures are performed annually, with many patients experiencing
hypertrophic scarring and keloids.
Because abnormal overexpression of CTGF is implicated in dermal scarring and fibrotic disease,
we believe that RXI-109, or other CTGF-targeting compounds that reduce CTGF or block its action, may be
able to treat many other indications where fibrosis is a factor. These include pulmonary, liver, and renal
fibrotic diseases, as well as ocular scarring, acute spinal injury (where scarring impedes regeneration) and
restenosis (a complication arising from vessel damage following stent placement). If clinical studies of RXI-109
produce successful results in dermal anti-scarring, we may explore opportunities in these indications as well as
other dermatology applications.
Novel RNAi Compounds
, referred to as rxRNA
®
compounds, that are distinct from,
and we believe convey significant
advantages over, classic siRNA (conventionally-designed small interfering RNA compounds), and offer many of the
properties that we believe are important to the clinical development of RNAi-based drugs. We have developed a number
of unique forms of rxRNA compounds, all of which have been shown to
be highly potent both
in vitro
and in preclinical
in vivo
models. These RNAi compounds include
rxRNAori
®
,
rxRNAsolo
®
and sd-rxRNA
®
, or self-delivering RNA. Based
on our research, we believe that these different, novel siRNA configurations have various potential advantages for
therapeutic use. These potential advantages include high potency, increased resistance to nucleases and off-target
effects, and, in the case of the sd-rxRNA compounds, access to cells and tissues with no additional formulation
required.
Advanced Delivery Technologies
that enable the delivery of our rxRNA
®
compounds to potentially treat a
variety of acute and chronic diseases using both local and systemic approaches, potentially providing a competitive
advantage in the development of many RNAi therapeutic compounds. Our suite of delivery technologies is comprised of
delivery vehicles, which can be combined with various rxRNA
®
compounds, as well as
sd-rxRNA
®
compounds, which are
chemically modified and have the unique property of entering cells and tissues to effect silencing without the need
for any additional delivery vehicle. This suite of delivery technologies has broad applications for multiple therapeutic
areas targeting both local and systemic applications for the delivery of the RNAi drug.
Table of Contents
In November 2010, we announced that the United States Internal Revenue Service awarded us four Therapeutic Discovery
Project, or TDP, grants totaling $977,917 as part of the Patient Protection and Affordable Care Act of 2010. The TDP grants
were awarded in four equal amounts for developing: (1) sd-rxRNAi
®
therapeutics for fibrotic disease; (2) sd-rxRNAi
®
therapeutics for age-related macular degeneration; (3) sd-rxRNAi
®
therapeutics for ALS (Lou Gehrigs disease); and (4)
glucan-encapsulated siRNAs that can be delivered orally for rheumatoid arthritis.
In January 2011, we announced positive research results in collaboration with Generex Biotechnology
Corporation, and its wholly owned subsidiary Antigen Express, Inc., in developing proprietary vaccine formulations
for active immunotherapy. Initial results demonstrated success in
using sd-rxRNA
®
compounds to silence genes up to
80% in hematopoietic cells. The ability to reduce expression of certain genes in isolated hematopoietic-derived cancer
cells (
ex vivo
) has the potential to convert them into specific immune-stimulants.
In January 2011, we announced positive initial results as part of our collaboration with miRagen Therapeutics,
Inc. in creating microRNA mimics, or artificial copies of microRNAs, using our sd-rxRNA
®
technology. In particular, the collaboration demonstrated efficient down-regulation of a reporter
gene (
in vitro
) whose expression is controlled
by the microRNA in cell culture model systems develop by miRagen. Increasing the level of particular microRNAs by using
therapeutic mimics may treat certain diseases, including cardiovascular, cancer, and inflammatory, fibrotic and metabolic
disorders.
In February 2011, we announced the initiation of our development program for RXI-109. IND-enabling toxicology
studies of RXI-109 are currently underway and the manufacturing of the clinical drug supply is ongoing. We are on track
for an IND submission and a Phase I/II trial in 2012.
In March 2011, we announced new preclinical data using our proprietary sd-rxRNA
®
compounds, including RXI-109.
We announced preclinical
in vivo
data showing robust, dose dependent, long-lasting,
target-specific silencing data with
an sd-rxRNA
®
compound targeting CTGF.
Included in these new data were our preclinical results using intradermal injection
of CTGF targeting sd-rxRNAs
®
that showed strong silencing for more than a week, as well as downstream effects related to
abrogation of scar formation.
In April 2011, we announced that the National Institutes of Health (NIH) awarded us two Small Business
Innovation Research grants totaling approximately $580,000. The first grant was in the amount of $304,559 to provide
funding for an ongoing collaboration between us and Robert Brown, M.D., D.Phil., Chair of the Department of Neurology
at UMASS, which is focused on the preclinical development of novel RNAi therapeutics for ALS and other neurodegenerative
disorders. The second grant was in the amount of $273,824 to provide funding for a project seeking to improve the delivery
of RNAi therapeutics through medicinal chemistry.
In April 2011, we announced that our collaborative project on development of an sd-rxRNA
®
based ALS therapeutic
with Dr. Brown was selected to receive $500,000 of additional funding from Massachusetts Life Sciences Center Cooperative
Research Grant.
In September 2011, we announced new preclinical data using our proprietary sd-rxRNA
®
compounds, including RXI-109,
at the 7th Annual Meeting of the Oligonucleotide Therapeutics Society. The data included preclinical efficacy data of
RXI-109 demonstrating robust, dose dependent, long-lasting, target-specific silencing of CTGF in skin, which in turn,
impacted myofibroblast differentiation and collagen deposition, key markers of the fibrosis process. In addition,
intraocular efficacy and safety data were presented along with preliminary data clarifying the mechanism of cellular
uptake of sd-rxRNA
®
compounds in cultured cells.
Table of Contents
Table of Contents
Table of Contents
High specificity for targeted genes;
High potency (low doses);
Ability to interfere with the expression of potentially any gene;
Accelerated generation of lead compounds; and
Low toxicity, natural mechanism of action.
Table of Contents
Up to 100 times more active than classic siRNA;
More resistant to nuclease degradation;
Readily manufactured;
Potentially more specific for the target gene;
More reliable at blocking immune side effects than classic siRNA; and
In the case of
sd
-rxRNA, the unique ability to be self-delivering, without the
need for any additional delivery vehicle.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
All Other
Salary
Bonus
Stock Awards
Option Awards
Compensation
Total
Name and Principle Position
Year
($)(1)
($)(1)
($)(2)
($)(3)
($)(4)
($)
2010
376,731
90,000
29,455
300
496,486
2011
331,667
7,326
50,000
300
389,293
2010
283,752
49,941
198,572
300
532,565
2011
292,500
7,255
90,304
300
390,359
2010
281,197
38,933
203,006
300
523,436
(1)
The salary and bonus attributable to the period prior to September 24,2011 were paid by Galena. Drs. Khvorova and Pavco served in the capacities indicated with Galena during that period.
(2)
Represents shares of common stock of Galena, our predecessor. The amounts shown reflect the
grant date fair value computed in accordance with FASB ASC 718 for the indicated year.
(3)
Represents options to purchase common stock of Galena, our predecessor. The amounts shown
reflect the grant date fair value computed in accordance with FASB ASC 718 for the indicated
year, adjusted to disregard the effects of any estimate of forfeitures related to
service-based vesting. The assumptions we used in valuing options are described more fully in
the Managements Discussion and Analysis section and the footnotes to our financial
statements for the year ended December 31, 2011.
(4)
Consists of life insurance premiums.
(5)
Mr. Beerman became President and Chief Executive Officer of Galena on November 5, 2009. He
resigned effective March 31, 2011. The salary, bonus, option awards and other compensation
paid to Mr. Beerman by Galena may not be indicative of what we may pay to the person or
persons who may serve in the same capacities following the spin-off of RXi.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Galena assigned and contributed to us substantially all of its RNAi-related
technologies and assets, which consist primarily of novel RNAi compounds and licenses
from Dharmacon, Inc., Northwestern University, the Carnegie Institute of Washington,
and the University of Massachusetts Medical School relating to its RNAi technologies,
as well as the lease of its Worcester, Massachusetts laboratory facility, fixed assets
and other equipment located at the facility and its employment arrangements with
certain scientific, corporate and administrative personnel who have become our
employees, as well as research grants from the National Institute of Neurological
Disorders and Stroke, National Institute of Allergy and Infectious Diseases, and the
National Institute of General Medical Sciences of approximately $800,000 that are
subject to the approval of the granting institutions; and
We agreed to assume certain recent accrued expenses of the RXi-109 development
program and all future obligations under the contributed licenses, employment
arrangements and other agreements, and we agreed to make future milestone payments to
Galena of up to $45 million, consisting of two one-time payments of $15 million and $30
million, respectively, if we achieve annual net sales equal to or greater than $500
million and $1 billion, respectively, of any covered products that may be developed
with the contributed RNAi technologies.
TCP and RTW agreed to purchase a total of $9,500,000 of our Series A Preferred
Stock at the closing of the spin-off transaction and to lend to us up to $1,500,000 to
fund our operations prior to the closing, with the outstanding principal and accrued
interest from the loan to be converted into Series A Preferred Stock at the closing, at
a conversion price of $1,000 per share, and such conversion will be
applied to the $9,500,000
total investment by TCP and RTW;
We agreed that the Series A Preferred Stock will be convertible by TCP or RTW at
any time into shares of our common stock, except to the extent that the holder would
own more than 9.999% of the shares of our common stock outstanding immediately after
giving effect to such conversion; without regard to this conversion limitation, the
shares of the Series A Preferred Stock to be held by TCP and RTW would be convertible
into shares of our common stock representing
Table of Contents
approximately 83% of the shares of our common stock that would be outstanding upon
the completion of the spin-off transaction and after such Series A Preferred Stock
conversion;
We agreed that the Series A Preferred Stock will have the rights, preferences,
privileges and restrictions summarized below in the Description of Capital
StockPreferred Stock section of this prospectus;
Galena agreed to contribute $1.5 million of cash to us;
Galena agreed to distribute to its stockholders the shares of RXi common stock that
are the subject of this prospectus;
We and Galena agreed to take all necessary actions to constitute our initial board
of directors as described in the Management section of
this prospectus; and
We agreed, upon completion of the spin-off
transaction, to reimburse Galena for up to a total of $300,000, and TCP and RTW
for a total of up to $100,000, of transaction costs relating to the
contribution agreement with Galena, the securities purchase agreement summarized below
and the transactions contemplated by those agreements.
Advirna assigned to us its existing patent and technology rights related to sd-rxRNA
technology in exchange for our agreement to pay Advirna an annual $100,000 maintenance
fee and a one-time $350,000 milestone payment upon the future
issuance of the first patent
with valid claims covering the assigned patent and technology rights;
We will be required to pay a 1% royalty to Advirna for any licensing revenue
received by us with respect to future licensing of the assigned Advirna patent and
technology rights;
We have granted back to Advirna a license under the assigned patent and technology
for fields of use outside the fields of human therapeutics and diagnostics; and
We have agreed to issue to Advirna, upon the completion of the spin-off transaction,
shares of our common stock equal to approximately 5% of the fully diluted shares of RXi common stock
assuming the conversion in full of all outstanding Series A Preferred Stock.
Table of Contents
Table of Contents
Each person known by us to be the beneficial owner of 5% or more of our common
stock, including any group as that term is defined in the Exchange Act;
Each director, director nominee and current named executive officer identified in the
Management and Executive
Compensation sections of this prospectus; and
All of our directors, director nominees and executive officers as a group.
Amount and Nature of
Beneficial Ownership
Before the Spin-Off
Transaction
After
the Spin-Off Transaction
Number of Shares
Number of Shares
Name and Address of Beneficial Owner
of Common Stock
Percentage
of Common Stock
Percentage
-0-
-0-
-0-
-0-
-0-
-0-
11,176,634
(2)
9.999
% (2)
-0-
-0-
11,176,634
(4)
9.999
% (4)
29,588,496
(5)
29.4
%
-0-
-0-
100
%
100
%
23,670,797
23.5
%
-0-
-0-
11,176,634
(2)
9.999
% (2)
-0-
-0-
11,176,634
(4)
9.999
% (4)
-0-
-0-
29,588,496
29.4
%
-0-
-0-
51,941,764
(7)
42.2
%
(1)
The address for Kevin C. Tang and Tang Capital Partners, LP
(
TCP
) is 4747 Executive Drive, Suite 510, San Diego, California 92121. Tang Capital Management, LLC is the general partner of TCP. Kevin C. Tang is the
Managing Director of Tang Capital Management, LLC and, following the spin-off transaction, will be a member of our
board of directors. Mr. Tang shares voting and investment power over the shares shown with TCP and Tang
Capital Management, LLC and, as such, may be deemed to be a beneficial owner of such shares. Mr. Tang
disclaims beneficial ownership of such shares, except to the extent
of his pecuniary interest therein.
Table of Contents
(2)
Represents shares of common stock issuable upon the
conversion of Series A Preferred Stock that will be owned of record
by TCP after the spin-off transaction. In accordance with the conversion limitation contained within the Certificate of Designations, in no event may TCP convert shares of Series A Preferred Stock into
shares of our common stock if such conversion would result in beneficial ownership of more than
9.999% of the then issued and outstanding shares of our common stock. This conversion limitation
may not be waived and any purported conversion that is inconsistent with this conversion limitation is
null and void. But for the conversion limitation, TCP would have the right to acquire up to
approximately 465,318,036 shares, or 78.6%, of our
common stock following the spin-off transaction and TCP and RTW, collectively, would have the right
to acquire up to approximately
491,169,038 shares, or 83%, of our common stock.
See Certain Relationships and Related Party
TransactionsAgreements with TCP and RTW.
(3)
The address for RTW Investments, LLC (
RTW
) is 1350 Avenue of the Americas,
28
th
Floor, New York, New York 10019. Roderick T. Wong is the Managing Member
of RTW and, following the spin-off transaction, will be a member of
our board of directors. Mr. Wong has sole voting and investment power over the
shares shown and, as such, may be deemed to be a beneficial owner of such shares.
(4)
Represents shares of common stock issuable upon the
conversion of Series A Preferred Stock that will be owned of record
by RTW after the spin-off transaction. In accordance with the conversion limitation contained within
the Certificate of Designations, in no event may RTW convert shares of Series A Preferred Stock into
shares of our common stock if such conversion would result in beneficial ownership of more than
9.999% of the then issued and outstanding shares of our common stock. This conversion limitation
may not be waived and any purported conversion that is inconsistent with this conversion limitation is
null and void. But for the conversion limitation, RTW would have the right to acquire up to
approximately 25,851,002 shares, or 4.4%, of our common stock following the spin-off
transaction and TCP and RTW, collectively, would have the right to acquire up to approximately
491,169,038 shares, or 83%, of our common stock. See Certain Relationships and Related Party
TransactionsAgreements with TCP and RTW.
(5)
The address for Dr. Khvorova is c/o RXi Pharmaceuticals Corporation, at 60 Prescott Street,
Worcester, Massachusetts 01605. The shares shown will be owned by
Advirna, LLC. Dr. Khvorova is a
director and 50% member of Advirna, LLC and, as such, may be deemed to be
a beneficial owner of the shares shown. Dr. Khvorova disclaims
beneficial ownership of such shares, except to the extent of her pecuniary interest
therein.
(6)
The address of Advirna, LLC is 10 Rocklawn Road, Westborough, Massachusetts
01581.
(7)
Includes 22,129,780 shares
issuable upon the conversion of Series A Preferred Stock. Also includes the shares to be
owned by Advirna, LLC that may be deemed to be beneficially owned by Dr. Khorova as described in note 5, above.
Table of Contents
Table of Contents
Table of Contents
Prior to such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder becoming an
interested stockholder;
Upon consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, other than
statutorily excluded shares; or
On or subsequent to such date, the business combination is approved by the board of
directors of the corporation and authorized at an annual or special meeting of the
stockholders by the affirmative vote of at least 66-2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
Any person that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the owner of
15% or more of the outstanding voting stock of the corporation at any time within three
years immediately prior to the date of determination; and
The affiliates and associates of any such person.
Table of Contents
Table of Contents
1% of the number of shares of common stock then outstanding; or
the average weekly trading volume of our common stock during the four calendar weeks
preceding the filing of a notice on Form 144 with respect to such sale.
Table of Contents
Table of Contents
Table of Contents
an individual citizen or resident of the United States;
a corporation (including any entity treated as a corporation for U.S. federal income
tax purposes), partnership or other entity created or organized in or under the laws of
the United States, any state or any political subdivision thereof;
an estate, the income of which is subject to U.S. federal income taxation regardless
of the source of the income; or
a trust whose administration is subject to the primary supervision of a U.S. court
and which has one or more United States persons who have the authority to control all
of its substantial decisions or which has elected to be treated as a United States
person.
Table of Contents
Table of Contents
Table of Contents
Investor Relations
60 Prescott Street
Worcester, Massachusetts 01605
Telephone: (508) 767-3861
Table of Contents
RXi PHARMACEUTICALS CORPORATION AND PREDECESSOR CARVE-OUT
FINANCIAL STATEMENTS
Table of Contents
RXi Pharmaceuticals Corporation
Worcester, Massachusetts
/s/ BDO USA, LLP
October 25, 2011
Table of Contents
(A Development Stage Company)
(Amounts in thousands)
Table of Contents
(A Development Stage Company)
STATEMENTS OF EXPENSES
(Amounts in thousands)
Period from
January 1, 2003
Nine Months Ended
Years Ended
(Date of Inception)
September 30,
December 31,
to September 30, 2011
2011
2010
2010
2009
(unaudited)
(unaudited)
(unaudited)
$
31,335
$
4,652
$
4,589
$
6,046
$
6,728
2,878
471
814
1,084
867
6,014
(49
)
723
743
1,297
3,954
44,181
5,074
6,126
7,873
8,892
24,637
3,527
4,228
5,493
5,483
2,385
91
654
718
826
304
23
281
8,950
1,565
1,921
2,541
2,038
36,276
5,206
6,803
8,752
8,628
(80,457
)
(10,280
)
(12,929
)
(16,625
)
(17,520
)
629
1
5
5
(5
)
5,401
1,636
2,762
4,627
(862
)
(74,427
)
(8,643
)
(10,162
)
(11,993
)
(18,387
)
$
(74,427
)
$
(8,643
)
$
(10,162
)
$
(11,993
)
$
(18,387
)
Table of Contents
(A Development Stage Company)
2011 AND PARENT COMPANYS NET DEFICIT FOR THE PERIOD FROM
JANUARY 1, 2003 (DATE OF INCEPTION) TO
DECEMBER 31, 2006
(Amounts in thousands)
Divisional
Parent
Equity
Companys
(Deficit)
Net Deficit
Total
$
$
$
(89
)
(89
)
(89
)
(89
)
(3,272
)
(3,272
)
2,393
2,393
(968
)
(968
)
(2,209
)
(2,209
)
2,727
2,727
(450
)
(450
)
(2,405
)
(2,405
)
2,587
2,587
$
$
(268
)
$
(268
)
$
$
$
2
2
2
2
4,318
4,318
15,679
15,679
1,814
1,814
(10,990
)
(10,990
)
10,823
10,823
750
750
7,944
7,944
3,824
3,824
(14,373
)
(14,373
)
8,968
8,968
(1,756
)
(1,756
)
7,714
7,714
4,202
4,202
(18,387
)
(18,387
)
741
741
(2,326
)
(2,326
)
11,640
11,640
4,368
4,368
(11,993
)
(11,993
)
2,430
2,430
(8,083
)
(8,083
)
369
369
1,987
1,987
(8,643
)
(8,643
)
$
(11,940
)
$
$
(11,940
)
Table of Contents
(A Development Stage Company)
(Amounts in thousands)
Period from
January 1, 2003
(Date of
Inception) through
Nine
Months Ended September 30,
Years Ended December 31,
September 30, 2011
2011
2010
2010
2009
(unaudited)
(unaudited)
(unaudited)
$
(74,427
)
$
(8,643
)
$
(10,162
)
$
(11,993
)
$
(18,387
)
625
124
127
172
162
12
4
29
35
(6
)
17,844
1,987
3,458
4,368
4,202
900
900
(785
)
(785
)
2,385
91
654
718
826
304
23
281
(4,727
)
(2,536
)
(2,762
)
(3,049
)
858
3,954
(282
)
(132
)
(214
)
(30
)
(47
)
936
212
211
99
231
(207
)
1,238
(82
)
306
243
101
877
877
(51,289
)
(7,179
)
(8,388
)
(10,257
)
(11,769
)
(37,532
)
(5,990
)
(5,990
)
37,497
5,990
(739
)
(53
)
(65
)
(106
)
(82
)
(1
)
(1
)
(45
)
(820
)
(53
)
(6,055
)
(106
)
(83
)
43,497
369
11,641
11,640
7,714
500
500
(232
)
(106
)
(46
)
(70
)
(34
)
8,766
52,531
763
11,595
11,570
7,680
422
(6,469
)
(2,848
)
1,207
(4,172
)
6,891
5,684
5,684
9,856
$
422
$
422
$
2,836
$
6,891
$
5,684
$
724
$
$
1
$
$
1
$
8
$
1
$
$
$
Table of Contents
Period From
January 1, 2003
(Date of
Inception) through
Nine
Months Ended September 30,
Years Ended December 31,
September 30, 2011
2011
2010
2010
2009
(Amounts in thousands)
(unaudited)
(unaudited)
(unaudited)
$
978
$
$
$
$
$
14,072
$
8,743
$
2,466
$
2,466
$
2,863
$
785
$
$
785
$
785
$
$
551
$
$
$
$
$
48
$
$
$
$
$
277
$
80
$
53
$
53
$
101
$
50
$
$
$
$
$
474
$
427
$
47
$
47
$
$
207
$
$
207
$
207
$
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Galena assigned and contributed to us substantially all of its RNAi-related technologies and
assets, which consist primarily of novel RNAi compounds and licenses from Dharmacon,
Inc., Northwestern University, the Carnegie Institute of Washington, and the University of
Massachusetts Medical School relating to its RNAi technologies, as well as the lease of its
Worcester, Massachusetts laboratory facility, fixed assets and other equipment located at the
facility and its employment arrangements with certain scientific, corporate and administrative
personnel who have become our employees, as well as research grants from the National
Institute of Neurological Disorders and Stroke, National Institute of Allergy and Infectious
Diseases, and the National Institute of General Medical Sciences of approximately $800,000
that are subject to the approval of the granting institutions; and
RXi agreed to assume certain recent accrued expenses of the RXi-109 development program and
all future obligations under the contributed licenses, employment arrangements and other agreements, and RXi agreed to
make future milestone payments to Galena of up to $45 million, consisting of two one-time payments of $15 million and $30
million, respectively, if RXi achieves annual net sales equal to or greater than $500 million and $1 billion, respectively,
of any covered products that may be developed with the contributed RNAi technologies.
TCP and RTW agreed to purchase a total of $9,500,000 of RXis Series A Convertible
Preferred Stock (the Series A Preferred Stock) at the closing of the spin-off transaction
and to lend to RXi up to $1,500,000 to fund RXis operations prior to the closing, with the
outstanding principal and accrued interest on the loan to be converted into Series A Preferred
Stock at the closing, at a conversion price of $1,000 per share, and such conversion will be
applied to the $9,500,000 total investment by TCP and RTW;
RXi agreed that the Series A Preferred Stock will be convertible by TCP or RTW at any time
into shares of RXi common stock, except to the extent that the holder would own more than
9.999% of the shares of RXi common stock outstanding immediately after giving effect to
such conversion. Without regard to this conversion limitation, the shares of the Series A
Preferred Stock to be held by TCP and RTW would be convertible into shares of RXi
common stock representing approximately 83% of the fully diluted shares of RXi common
stock upon the completion of the spin-off transaction;
Galena agreed to contribute $1.5 million of cash to RXi;
Galena agreed to distribute to its stockholders 8% of the fully diluted shares of common stock
of RXi that will be outstanding immediately upon the completion of the spin-off transaction; and
RXi agreed to reimburse, upon completion of the spin-off transaction, Galena for up to a total
of $300,000, and TCP and RTW for a total of up to $100,000, of transaction costs relating to
the contribution agreement with Galena, the securities purchase agreement summarized above
and the transactions contemplated by those agreements.
Advirna assigned to RXi its existing patent and technology rights related to sd-rxRNA
technology in exchange for RXis agreement to pay Advirna an annual $100,000 maintenance
fee and a one-time $350,000 milestone payment upon the future issuance of the first patent
with valid claims covering the assigned patent and technology rights;
RXi will be required to pay a 1% royalty to Advirna for any licensing revenue received by
RXi with respect to future licensing of the assigned Advirna patent and technology rights;
RXi has granted back to Advirna a license under the assigned patent and technology for fields
of use outside the fields of human therapeutics and diagnostics; and
RXi has agreed to issue to Advirna, upon the completion of the spin-off transaction, shares of
RXis common stock equal to approximately 5% of the fully diluted shares of RXi common
stock assuming the conversion in full of all outstanding Series A Preferred Stock.
Dr. Khvorova serves as RXi's Senior Vice President and Chief Scientific Officer at an annual
salary of $310,000 and is entitled to a grant of stock options to purchase 2% of RXi's fully
diluted shares of common stock after the spin-off transaction at an exercise price per share to
be determined based on the fair value of RXi common stock at the date of grant; and
Dr. Pavco serves as RXis Senior Vice President of Pharmaceutical Development
at an annual salary of $300,000 and also is entitled to a grant of stock options to purchase 2% of RXis fully
diluted shares of common stock after the spin-off transaction at an exercise price per share to be determined based
on the fair value of RXi common stock at the date of grant.
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Quoted Prices in
Significant Other
September 30,
Active Markets
Observable Inputs
Unobservable Inputs
Description
2011
(Level 1)
(Level 2)
(Level 3)
$
422
$
422
$
$
$
422
$
422
$
$
$
10,126
$
$
10,126
$
$
10,126
$
$
10,126
$
Quoted Prices in
Significant Other
December 31,
Active Markets
Observable Inputs
Unobservable Inputs
Description
2010
(Level 1)
(Level 2)
(Level 3)
$
6,891
$
6,891
$
$
$
6,891
$
6,891
$
$
$
3,138
$
$
3,138
$
$
3,138
$
$
3,138
$
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Quoted Prices in
Significant Other
December 31,
Active Markets
Observable Inputs
Unobservable Inputs
Description
2009
(Level 1)
(Level 2)
(Level 3)
$
5,684
$
5,684
$
$
$
5,684
$
5,684
$
$
$
3,721
$
$
3,721
$
$
3,721
$
$
3,721
$
September 30,
December 31,
2011
2010
2009
$
73
$
313
$
390
210
60
28
321
740
659
$
604
$
1,113
$
1,077
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Non-Cancelable
Cancelable
Operating
Employment
License
Leases(1)
Agreements(2)
Subtotal
Agreements(3)
Total
(In thousands)
$
48
$
298
$
346
$
110
$
456
98
802
900
228
1,128
228
228
213
213
213
213
1,561
1,561
$
146
$
1,100
$
1,246
$
2,553
$
3,799
(1)
Operating leases are primarily facility and equipment related obligations with third
party vendors. Operating lease expenses during the nine months ended September 30, 2011 and
2010 were approximately $170,000 and $156,000, respectively. Operating lease expenses during
the years ended December 31, 2010 and 2009 were approximately $274,000 and $260,000,
respectively.
(2)
Employment agreement obligations include management contracts, as well as scientific advisory
board member compensation agreements. Certain agreements, which have been revised from time to
time, provide for minimum salary levels, adjusted annually at the discretion of the Board of
Directors, as well as for minimum bonuses that are payable.
(3)
License agreements generally relate to the Companys obligations associated with RNAi.
The
Company continually assesses the progress of its licensed technology and the progress of its
research and development efforts as it relates to its licensed technology and may terminate
with notice to the licensor at any time. In the event these licenses are terminated, no
amounts will be due.
Dr. Khvorova serves as RXis Senior Vice President and Chief Scientific Officer at an
annual salary of $310,000 and is entitled to a grant of stock options to purchase 2% of RXis
fully diluted shares of common stock after the spin-off transaction at an exercise price per share to be determined based on the fair value of RXi common stock at the date of grant;
and
Dr. Pavco serves as RXis Senior Vice President of Pharmaceutical Development at an annual salary
of $300,000 and also is entitled to a grant of stock options to purchase 2% of RXis
fully diluted shares of common stock after the spin-off transaction at an exercise price per share to be determined based on the fair value of RXi common stock at the date of grant.
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
For
the Nine Months ended September 30,
2011
2010
1.59
%
3.02
%
103.27
%
121.19
%
5.49
7.37
0.00
%
0.00
%
Year Ended December 31,
2010
2009
1.88% - 3.28
%
1.55% - 3.91
%
118.3% - 133.62
%
116.72% - 122.93
%
6-10
6-10
0
%
0
%
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Weighted
Stock
Average
Options
Exercise Price
2,223,452
$
6.11
1,622,546
3.84
(281
)
4.19
(263,378
)
5.05
3,582,339
5.16
926,768
4.81
(53,500
)
4.75
(122,471
)
4.85
4,333,136
5.10
3,262,500
0.87
(1,144,067
)
4.22
6,451,569
$
3.29
2,131,298
$
5.42
3,155,900
$
5.22
4,652,517
$
3.71
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
As of December 31,
2010
2009
$
$
(4,853
)
(5,533
)
(1,283
)
(2,257
)
(6,136
)
(7,790
)
6,136
7,790
$
$
As of December 31,
2010
2009
$
13,328
$
10,348
1,061
753
5,864
4,222
104
74
3,264
2,089
23,621
17,486
(23,621
)
(17,486
)
$
$
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Advirna assigned to RXi its existing patent and technology
rights related to
sd
-rxRNA
technology in exchange for RXis agreement to pay Advirna an annual $100,000 maintenance
fee and a one-time $350,000 milestone payment upon the future issuance of the first patent
with valid claims covering the assigned patent and technology rights;
RXi will be required to pay a 1% royalty to Advirna for any licensing revenue received by
RXi with respect to future licensing of the assigned Advirna patent and technology rights;
RXi has granted back to Advirna a license under the assigned patent and technology for fields
of use outside the fields of human therapeutics and diagnostics; and
RXi has agreed to issue to Advirna, upon the completion of the spin-off transaction, shares of
RXis common stock equal to approximately 5% of the fully diluted shares of RXi common
stock assuming the conversion in full of all outstanding Series A Preferred Stock.
Table of Contents
(A Development Stage Company)
(Information as of September 30, 2011 and for the
nine months ended September 30, 2011 and 2010 is
unaudited)
Table of Contents
Table of Contents
Description
Amount
$
14
$
125,000
$
350,000
$
100,000
$
10,000
$
10,000
$
595,014
Table of Contents
(a)
Exhibits
Table of Contents
Exhibit
Number
Description
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated March 5, 2009.(4)
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated August 28, 2008.***
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated November 4, 2008.***
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated June 9, 2011.***
RXi Pharmaceuticals Corporation
2012 Long Term Incentive Plan.* ****
Form of Incentive Stock Option
Award.* ***
Form of Non-qualified Stock Option
Award.* ***
Form of Restricted Stock Unit
Award.* ***
Form of Indemnification Agreement.* ****
Consent of BDO USA, LLP.****
Consents of TroyGould PC (included in Exhibits 5.1 and 8.1).
Consent of Kevin C. Tang.***
Consent of Roderick T. Wong.***
(1)
Incorporated by reference to the Current Report on Form 8-K of Galena Biopharma, Inc. filed
with the SEC on September 26, 2011 (File No. 001-33958).
(2)
Incorporated by reference to the Amendment No. 1 to the Registration Statement on Form S-1 of
Galena Biopharma, Inc. filed with the SEC on November 19, 2007 (File No. 333-147009).
(3)
Incorporated by reference to the Current Report on Form 8-K of Galena Biopharma, Inc. filed
with the SEC on January 29, 2009 (File No. 001-33958).
(4)
Incorporated by reference to the Quarterly Report on Form 10-Q of Galena Biopharma, Inc. filed
with the SEC on May 15, 2009 (File No. 001-33958).
*
Indicates a management contract or compensatory plan or arrangement.
***
Previously filed.
****
Filed herewith.
+
Confidential treatment has been requested or granted for certain portions which have been blanked
out in the copy of the exhibit filed with the Securities and Exchange Commission. The omitted
information has been filed separately with the Securities and Exchange Commission.
Table of Contents
Table of Contents
RXi PHARMACEUTICALS CORPORATION
By:
/s/ Mark J. Ahn, Ph.D.
Mark J. Ahn, Ph.D.
President and Chief Financial Officer
Signatures
Title
Date
President and Chief
Financial Officer
(Principal Executive
Officer and Principal
Accounting and Financial
Officer) and Sole Director
February 7, 2012
Table of Contents
Exhibit
Number
Description
Contribution Agreement, dated as of September 24, 2011, between RXi
Pharmaceuticals Corporation (formerly RNCS, Inc.) and Galena
Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation).***
Securities Purchase Agreement, dated as of September 24, 2011,
among RXi Pharmaceuticals Corporation (formerly RNCS, Inc.), Galena
Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation), Tang
Capital Partners, LP and RTW Investments, LLC.***
Omnibus Amendment to Securities
Purchase Agreement, dated as of February 6, 2012,
among RXi Pharmaceuticals Corporation, Galena
Biopharma, Inc., Tang
Capital Partners, LP and RTW Investments, LLC.****
Amended and Restated Certificate of Incorporation of RXi
Pharmaceuticals Corporation.****
Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Stock of RXi Pharmaceuticals
Corporation.****
Bylaws of RXi Pharmaceuticals Corporation, as amended.***
Secured Convertible Promissory Note, dated September 24, 2011 of
RXi Pharmaceuticals Corporation (formerly RNCS, Inc.), issued to
Tang Capital Partners, LP.***
Secured Convertible Promissory Note, dated September 24, 2011 of
RXi Pharmaceuticals Corporation (formerly RNCS, Inc.), issued to
RTW Investments, LLC.***
Opinion of TroyGould PC regarding
the securities being registered.***
Opinion of TroyGould PC regarding
tax matters.***
Employment Agreement, dated September 24, 2011, between RXi
Pharmaceuticals Corporation (formerly, RNCS, Inc.) and Anastasia
Khvorova, Ph.D.(1)*
Employment Agreement, dated September 24, 2011, between RXi
Pharmaceuticals Corporation (formerly, RNCS, Inc.) and Pamela
Pavco, Ph.D.(1)*
License Agreement between RXi Pharmaceuticals Corporation and
Dharmacon, Inc. (now part of Thermo Fisher Scientific Inc.), dated
October 29, 2007.(+)****
Non-Exclusive License Agreement, between CytRx Corporation and the
University of Massachusetts Medical School, related to UMMS
disclosure number 01-36, dated April 15, 2003, as amended February
1, 2004.(+)****
Patent and Technology Assignment Agreement between RXi
Pharmaceuticals Corporation (formerly RNCS, Inc.) and Advirna, LLC,
effective as of September 24, 2011.***
Lease between RXi Pharmaceuticals Corporation and Newgate
Properties, LLC for One Gateway Place, Worcester, Massachusetts
01605, dated September 25, 2007.(2)
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated January 23, 2009.(3)
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated March 5, 2009.(4)
Table of Contents
Exhibit
Number
Description
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated August 28, 2008.***
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated November 4, 2008.***
Amendment to Lease between RXi Pharmaceuticals Corporation and
Newgate Properties, LLC for One Gateway Place, Worcester,
Massachusetts 01605, dated June 9, 2011.***
RXi Pharmaceuticals Corporation
2012 Long Term Incentive Plan.* ****
Form of Incentive Stock Option
Award.* ***
Form of Non-qualified Stock
Option Award.* ***
Form of Restricted Stock Unit
Award.* ***
Form of Indemnification Agreement.*
****
Consent of BDO USA, LLP.****
Consents of TroyGould PC (included in Exhibits 5.1 and 8.1).
Consent of Kevin C. Tang.***
Consent of Roderick T. Wong.***
(1)
Incorporated by reference to the Current Report on Form 8-K of Galena Biopharma, Inc. filed
with the SEC on September 26, 2011 (File No. 001-33958).
(2)
Incorporated by reference to the Amendment No. 1 to the Registration Statement on Form S-1 of
Galena Biopharma, Inc. filed with the SEC on November 19, 2007 (File No. 333-147009).
(3)
Incorporated by reference to the Current Report on Form 8-K of Galena Biopharma, Inc. filed
with the SEC on January 29, 2009 (File No. 001-33958).
(4)
Incorporated by reference to the Quarterly Report on Form 10-Q of Galena Biopharma, Inc. filed
with the SEC on May 15, 2009 (File No. 001-33958).
*
Indicates a management contract or compensatory plan or arrangement.
***
Previously filed.
****
Filed herewith.
+
Confidential treatment has been requested or granted for certain portions which have been blanked
out in the copy of the exhibit filed with the Securities and Exchange Commission. The omitted
information has been filed separately with the Securities and Exchange Commission.
|
GALENA BIOPHARMA, INC. | |
|
||
|
By: /s/ Mark J.
Ahn
|
|
|
Mark J. Ahn | |
|
President and Chief Executive Officer | |
|
||
|
RXi PHARMACEUTICALS CORPORATION | |
|
||
|
By: /s/ Mark J. Ahn
|
|
|
Mark J. Ahn | |
|
President | |
|
||
|
TANG CAPITAL PARTNERS, LP | |
|
||
|
By: /s/ Kevin C. Tang
| |
|
Kevin C. Tang | |
|
Managing Director | |
|
||
|
RTW INVESTMENTS, LLC | |
|
||
|
By: /s/ Roderick Wong
|
|
|
Roderick Wong | |
|
Managing Member |
-2-
-3-
-4-
RXI PHARMACEUTICALS CORPORATION
|
||||
By: | /s/ Mark J. Ahn | |||
Name: | Mark J. Ahn | |||
Title: | President | |||
A. | Beneficial Ownership and Beneficially Owns shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and Regulations 13D-G thereunder. | ||
B. | Change of Control shall mean any of the following: |
(i) | the consolidation, merger or other business combination of the Corporation with or into another entity (other than a consolidation, merger or other business combination in which holders of the Corporations voting power immediately prior to the transaction continue after the |
transaction to hold, directly or indirectly, in substantially the same proportion as immediately preceding the transaction, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities); | |||
(ii) | the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of all or substantially all of the intellectual property or assets of the Corporation and its subsidiaries, taken as a whole, or the sale or disposition (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries; | ||
(iii) | the sale, in a single transaction or series of transactions, of Common Stock and/or Preferred Stock ( Capital Stock ) to any purchaser (a Purchaser ) who, with the Purchasers affiliates, Beneficially Owns (without giving effect to any blocking provisions that would otherwise serve to limit the Purchasers ability to exercise purchase rights, conversion rights or other rights to acquire Capital Stock) immediately after such purchase either: (A) a majority of the outstanding Capital Stock of the Corporation, determined on an as-converted basis or (B) a number of shares of Capital Stock that would entitle the holder(s) thereof to elect a majority of the Board; or | ||
(iv) | the consolidation, merger or other business combination of the Corporation with or into another entity that results in the cancellation of shares of Series A Preferred Stock or that results in the conversion of shares of Series A Preferred Stock into (1) shares of any other class or series of capital stock of the Corporation; (2) securities of the Corporation or any other person (or the right to receive any such securities); (3) any property (including, without limitation, cash and the right to receive cash or other property); or (4) any combination of the foregoing. |
C. | Closing Date means 11:59 p.m. on the date of the closing under the Securities Purchase Agreement, dated September 24, 2011, by and among the Corporation, Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) and the purchasers named therein, as the same may be amended from time to time (the Purchase Agreement ). | ||
D. | Closing Sales Price means, as of any date, (i) the last trading price of the Common Stock on the principal Trading Market during regular trading |
-2-
hours on which such security is listed or traded as reported by Bloomberg Financial L.P. (or a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to the Requisite Holders, if Bloomberg Financial L.P. is not then reporting closing sales prices of the Common Stock) (collectively, Bloomberg ) or (ii) if no last trading price is so reported for such date, the average of the closing bid and ask prices on the principal Trading Market during regular trading hours on which such security is listed or traded as reported by Bloomberg. If the Closing Sales Price cannot be calculated for such Common Stock as of any of such dates on any of the foregoing bases, the Closing Sales Price on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Requisite Holders and reasonably acceptable to the Corporation, with the reasonable costs of such determination to be borne by the Corporation. | |||
E. | Common Stock means the Corporations common stock, par value $0.0001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into. | ||
F. | Common Stock Equivalents means any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time, Common Stock or any security of any subsidiary of the Corporation, including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, Common Stock or any security of any subsidiary of the Corporation. | ||
G. | Conversion Date means, for any Optional Conversion, the date specified in the notice of conversion in the form attached hereto (the Notice of Conversion ), so long as a copy of the Notice of Conversion is delivered via electronic mail resulting in notice to the Corporation before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however , that if the Notice of Conversion is not so e-mailed before such time, then the Conversion Date shall be the date the holder e-mails the Notice of Conversion to the Corporation. | ||
H. | Conversion Price means the price obtained by dividing $1,000 by the Conversion Rate, and shall be subject to adjustment as set forth in Article IX below. | ||
I. | Conversion Rate means the Series A Preferred Conversion Rate, as set forth in Annex II attached to the Purchase Agreement. | ||
J. | Face Amount shall mean, with respect to the Series A Preferred Stock, $1,000 per share, as adjusted (i) for stock splits, stock dividends, |
-3-
combinations, recapitalizations, reclassifications or the like and (ii) with respect to any given share or shares of Series A Preferred Stock, to account for any accretion in the Face Amount as a result of accrued but unpaid dividends or any other increase provided for in this Certificate of Designations. | |||
K. | Measurement Date means for purposes of any issuance of securities, the date of issuance thereof. | ||
L. | Original Issue Date means, with respect to each share of Series A Preferred Stock, the date of issuance of such share. | ||
M. | Other Stock means (i) any class or series of preferred stock or other capital stock of the Corporation, other than Common Stock, Common Stock Equivalents and Series A Preferred Stock and (ii) any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time any capital stock listed in clause (i), including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, any capital stock listed in clause (i). | ||
N. | Unless otherwise expressly provided in this Certificate of Designations, each reference to a person refers to any individual, entity or association, including, without limitation, any corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, and trust, business trust or other organization, whether or not a legal entity, or a government or agency or any political subdivision thereof. | ||
O. | Requisite Holders means the holders of at least ninety-eight percent (98%) of the then outstanding shares of Series A Preferred Stock, voting together as one class. | ||
P. | Trading Day means, except as set forth below, a day on which the Corporations securities are traded on a Trading Market; provided, however , that in the event that the Corporations securities are not traded on a Trading Market, then Trading Day shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York are authorized or required by law or other government action to close. | ||
Q. | Trading Market means the OTC Bulletin Board or the Pink Sheets, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange, the NYSE, Amex or any of the markets operated by the OTC Markets Group, Inc., or any successor markets thereto. |
-4-
A. | Holders of Series A Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative mandatory dividends at the rate per share of seven percent (7%) of the Face Amount per annum, payable quarterly on each March 31, June 30, September 30 and December 31, beginning on the first such date after the applicable Original Issue Date (each such date, a Dividend Payment Date ) (if any Dividend Payment Date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day). Such dividends shall be payable in additional shares of Series A Preferred Stock valued for this purpose at the Face Amount; provided, however , that if such additional shares of Series A Preferred Stock are not legally available for the payment of dividends on the Series A Preferred Stock, such dividends shall, effective on the close of business on a Dividend Payment Date with respect to an unpaid dividend, accrete to, and increase, the Face Amount of the Series A Preferred Stock. Dividends on the Series A Preferred Stock shall be calculated on the basis of a three hundred sixty (360) day year, consisting of twelve (12) thirty (30) day periods, shall accrue daily commencing on the applicable Original Issue Date, and, subject to the preceding sentence, shall be deemed to accrue from such applicable Original Issue Date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The record date for determining the holders of Series A Preferred Stock entitled to dividends pursuant to this Paragraph A. shall be the fifth (5th) Trading Day before the Dividend Payment Date. If any such cumulative dividends would result in the issuance of a fractional share of Series A Preferred Stock, the Corporation shall issue a fractional share therefor, rounded to the nearest 1/1000 th of a share. For the avoidance of doubt, (i) for purposes of any conversion or redemption of shares of Series A Preferred Stock, any amount accreted to the Face Amount of such shares pursuant to this Paragraph A. as of such conversion or redemption shall not be deemed accrued but unpaid dividends and (ii) in the event of a conversion or redemption that occurs between Dividend Payment Dates, dividends shall be deemed to accrue through the date of such conversion or redemption, even if such accrual is less than a full quarterly dividend period. | ||
B. | For any other dividends or distributions by the Corporation, Holders of Series A Preferred Stock will participate with the holders of Common Stock on an as-converted basis. |
A. | Conversion at the Option of the Holder . Subject to the limitations on conversions contained in Paragraph C. of this Article IV. , each holder of shares of Series A Preferred Stock may, at any time and from time to time, convert (an Optional Conversion ) each of its shares of Series A Preferred |
-5-
Stock into a number of fully paid and non-assessable shares of Common Stock determined in accordance with the following formula: |
Following the effectiveness of any Optional Conversion, the shares of Series A Preferred Stock so converted shall also entitle the former holder of such shares to receive, on the Dividend Payment Date next following such conversion, a number of shares of Series A Preferred Stock equal to the unpaid dividends that accrued on the shares so converted through the date of such conversion, divided by the Face Amount. |
B. | Mechanics of Conversion . In order to effect an Optional Conversion, a holder shall deliver via electronic mail a copy of the fully executed Notice of Conversion (in the form attached hereto) to the Corporation (Attention: Chief Financial Officer). Such notice shall be delivered to conversions@rxipharma.com or such other address as the Corporation may, from time to time, provide to the holders upon delivery of a written notice. Upon receipt by the Corporation of a copy of a Notice of Conversion from a holder, the Corporation shall promptly send, via facsimile or electronic mail, a confirmation to such holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion. |
(i) | Delivery of Common Stock Upon Conversion . The Corporation (itself, or through its transfer agent) shall, no later than the second Trading Day following the Conversion Date (the Delivery Period ), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the holder or its nominee a certificate representing that number of shares of Common Stock issuable upon conversion of such shares of Series A Preferred Stock being converted. Notwithstanding the foregoing, if the Corporations transfer agent is participating in the Depository Trust Company ( DTC ) Fast Automated Securities Transfer program or any other program that provides for the electronic delivery of Common Stock, the Corporation shall cause its transfer agent, by the end of the Delivery Period, to electronically transmit the Common Stock (not in physical stock certificate form) issuable upon conversion to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system or with any such equivalent program. | ||
(ii) | Taxes . The Corporation shall pay any and all taxes that may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the Series A Preferred Stock. |
-6-
(iii) | No Fractional Shares . If any conversion of Series A Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be payable in cash based upon the Closing Sales Price on the Trading Day immediately preceding the Conversion Date and the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be the next lower whole number of shares. | ||
(iv) | Conversion Disputes . In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock as are not disputed in accordance with Subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the relevant holder and the Corporation, the Corporation shall submit the disputed calculations to an independent outside accountant within three Trading Days of receipt of the Notice of Conversion. The accountant, at the Corporations sole expense, shall promptly audit the calculations and notify the Corporation and the holder of the results no later than three Trading Days from the date it receives the disputed calculations. The accountants calculation shall be deemed conclusive, absent manifest error. The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with Subparagraph (i) above. |
C. | Limitations on Conversions . Notwithstanding anything in this Certificate of Designations to the contrary, in no event shall any holder of shares of Series A Preferred Stock have the right to convert shares of Series A Preferred Stock into shares of Common Stock (x) to the extent that such issuance or sale or right to effect such conversion would result in the holder or any of its affiliates together Beneficially Owning more than 9.999% of the then issued and outstanding shares of Common Stock or (y) if such holder or any of its affiliates together Beneficially Own more than 9.999% of the then issued and outstanding Common Stock immediately prior to such purported issuance, sale, transfer or conversion. The restriction contained in this Paragraph C. may not be waived. Any purported conversion effected in violation of this Paragraph C. shall be null and void. Certificates representing shares of Series A Preferred Stock shall have imprinted, typed, stamped or otherwise affixed thereon a legend in substantially the following form: | ||
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND CONVERSION RESTRICTIONS AND MAY BE TRANSFERRED OR CONVERTED ONLY AS PERMITTED BY THE TERMS OF THE CERTIFICATE OF DESIGNATIONS SETTING FORTH THE RIGHTS, POWERS AND PREFERENCES OF SUCH PREFERRED STOCK, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE UPON A REQUEST THEREFOR SUBMITTED TO THE SECRETARY. |
-7-
A. | If the authorized and unissued number of shares of Common Stock (the Reserved Amount ) for any three consecutive Trading Days (the last of such three Trading Days being the Authorization Trigger Date ) shall be less than a number sufficient to provide for the conversion in full, at the then current Conversion Price thereof, without taking into account the limitations on conversion set forth in Article IV.C., of all of the Series A Preferred Stock (i) then outstanding; (ii) then issuable; and (iii) then issuable as the payment of dividends on the Series A Preferred Stock described in clause (i) or (ii) for a period of four (4) years (the Required Reserve Amount ), then the Corporation shall immediately notify the holders of Series A Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking stockholder approval to increase the number of shares of Common Stock that the Corporation is authorized to issue) to increase the Reserved Amount to the Required Reserve Amount. If the Reserved Amount shall be less than the Required Reserve Amount for more than fifteen (15) days in any twelve (12) month period, then each holder of Series A Preferred Stock may elect, by delivery of a notice to the Corporation, to have such holders outstanding shares of Series A Preferred Stock redeemed at the Face Amount (plus the amount of any accrued but unpaid dividends thereon) out of funds legally available therefor by the Corporation. Nothing contained in this Article V.A. shall limit any other rights or remedies of the holders of the Series A Preferred Stock hereunder or under applicable law. |
A. | Conversion Defaults . If, at any time, (i) a holder of shares of Series A Preferred Stock submits a Notice of Conversion and the Corporation fails for any reason (including without limitation because such issuance would exceed such holders allocated portion of the Reserved Amount, but not including because of the limitations set forth in Article IV.C. ) to deliver in strict accordance with the terms hereof, on or prior to the last Trading Day of the Delivery Period for such conversion, such number of shares of Common Stock to which such holder is entitled upon such conversion or (ii) the Corporation provides written notice to any holder of Series A Preferred Stock (or makes a public announcement via press release) at any time of its intention not to issue shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the terms of this Certificate of Designations (each of (i) and (ii) being a Conversion Default ), then, in either such case, if such Conversion Default is not cured within five Trading Days of its initial occurrence, each holder of Series A Preferred Stock may elect, by delivery of a notice (the Conversion Default Notice ) to the Corporation, to have such holders outstanding shares of Series A Preferred Stock redeemed at the Face Amount (plus the amount of |
-8-
any accrued but unpaid dividends thereon) out of funds legally available therefor by the Corporation. | |||
B. | Buy-In Cure . Without limiting the other rights or remedies of the holders (including, but not limited to, the right to redemption under Article VI.A. ), if (i) the Corporation fails to timely deliver during the Delivery Period shares of Common Stock to a holder upon a conversion of shares of Series A Preferred Stock and (ii) thereafter, such holder purchases (in an open market transaction or otherwise) shares of Common Stock (the Cover Shares ) to make delivery in satisfaction of a sale by such holder of the shares of Common Stock (the Sold Shares ) that such holder anticipated receiving upon such conversion (a Buy-In ), at the election of the holder as a redemption out of funds legally available therefor, the Corporation shall pay such holder (in addition to any other remedies available to the holder) the amount equal to such holders total purchase price (including brokerage commissions, if any) for the Cover Shares and, upon making such payment, the Corporations conversion obligations shall be deemed satisfied and the Series A Preferred Stock that was tendered pursuant to the Notice of Conversion shall thereupon be cancelled and the holder shall not have any further right or remedy against the Corporation with respect to such shares of Series A Preferred Stock that were tendered pursuant to the Notice of Conversion. A holder shall provide the Corporation written notification and supporting documentation indicating any amounts payable to such holder pursuant to this Article VI.B. The Corporation shall make any payments required pursuant to this Article VI.B. in accordance with and subject to the provisions of Article XII.I. |
-9-
A. | If: |
(i) | the Corporation shall (1) commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law; (2) consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property; or (3) make an assignment for the benefit of its creditors; | ||
(ii) | a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days; or | ||
(iii) | the Corporation enters into a transaction or a series of related transactions that would result in a Change of Control or Corporate Change; or | ||
(iv) | the Corporation shall liquidate, dissolve or wind up; |
(each, a Deemed Liquidation Event ), then in each case, no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities pursuant to the rights, preferences and privileges thereof) upon liquidation, dissolution or winding up unless prior thereto the holders of shares of Series A Preferred Stock shall have received the Liquidation Preference with respect to each share then outstanding. If, upon the occurrence of a Deemed Liquidation Event, the assets and funds legally available for distribution among the holders of the Series A Preferred Stock and holders of Pari Passu Securities, if any, shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series A Preferred Stock and the Pari Passu Securities, if any, shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. |
B. | The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, if approved by the Requisite Holders, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. |
-10-
C. | The Liquidation Preference with respect to a share of Series A Preferred Stock means an amount equal to the Face Amount thereof plus all accrued and unpaid dividends on the Series A Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares). The Liquidation Preference with respect to any Pari Passu Securities, if any, shall be as set forth in the Certificate of Designations filed in respect thereof. |
A. | Stock Splits, Stock Dividends, Etc . If, at any time on or after the Closing Date, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, combination, reclassification or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately reduced. If the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares, or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately increased. In any such event described in this Paragraph A. , the Corporation shall notify the Corporations transfer agent of such change on or before the effective date thereof. | ||
B. | Adjustment Due to Merger, Consolidation, Etc . With respect to each share of Series A Preferred Stock, if, at any time after the Closing Date, there shall be: |
(i) | any recapitalization, reclassification or change of the outstanding shares of Common Stock (but not of such share of Series A Preferred Stock), other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a transaction causing an adjustment pursuant to Article IX.A. ; | ||
(ii) | any Change of Control transaction or event of the type set forth in Articles II.B.(i) , II.B.(ii) or II.B.(iv) , in each case pursuant to which the Common Stock (but not such share of Series A Preferred Stock) is converted into or exchanged for capital stock or other securities of the Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such stock or securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or any combination of the foregoing; or | ||
(iii) | any share exchange pursuant to which all of the outstanding shares of Common Stock (but not such share of Series A Preferred Stock) are converted into or exchanged for capital stock or other securities of the |
-11-
Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or into any combination of the foregoing (each of Subparagraphs (i) - (iii) of this Paragraph B. being a Corporate Change ); |
then in each case, the holder of such share of Series A Preferred Stock shall thereafter have the right to receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of stock, securities and/or other property as would have been issued or payable in such Corporate Change if such share of Series A Preferred Stock had been converted into Common Stock immediately prior to such Corporate Change without taking into account the limitations on conversion set forth in Article IV. The Corporation shall not effect any Corporate Change unless: (i) each holder of Series A Preferred Stock has received written notice of such transaction at least twenty (20) days prior thereto, but in no event later than ten (10) days prior to the record date for the determination of stockholders entitled to vote with respect thereto; and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument (in form and substance reasonable satisfactory to the Requisite Holders) the obligations of this Certificate of Designations. The above provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series A Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive recapitalizations, changes, conversions, combinations, reclassifications, consolidations, mergers, sales, transfers or share exchanges. |
C. | Adjustment Due to Distribution . If, at any time after the Closing Date, the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock other than a dividend for which an adjustment is provided under Paragraphs A. or D. of this Article IX. ), by way of return of capital or otherwise (including, without limitation, any dividend or distribution to the Corporations stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a Distribution ), then the holders of Series A Preferred Stock shall be entitled, upon any conversion of shares of Series A Preferred Stock after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the holder with respect to the shares of Common Stock issuable upon such conversion had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Distribution involves rights, warrants, or options and the right to exercise or convert such right, warrant or option would expire in accordance with its terms prior to the conversion of the Series A Preferred Stock, then the terms of such right, warrant or option shall provide that such exercise or convertibility right shall remain in effect |
-12-
until 10 days after the date the holder of Series A Preferred Stock receives such right, warrant or option pursuant to the conversion thereof. | |||
D. | Purchase Rights . If, at any time after the Closing Date, the Corporation issues any securities ( Purchase Rights ) that are convertible into or exercisable or exchangeable for or impart a right to purchase securities other than Common Stock or Common Stock Equivalents (whether of the Corporation or any subsidiary of the Corporation) pro rata to the record holders of any class of Common Stock, then the holders of Series A Preferred Stock will be entitled to acquire (at the same time the holders of Common Stock receive such Purchase Rights), upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series A Preferred Stock (without giving effect to the limitations on conversion set forth in Article IV. ) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. | ||
E. | Adjustment Due to Dilutive Issuances . |
(i) | Dilutive Issuance . Except as otherwise provided in Paragraphs A. and B . of this Article IX. , if and whenever the Corporation issues or sells, or in accordance with Article IX.E.(ii) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Conversion Price on the Measurement Date for such shares of Common Stock (a Dilutive Issuance ), then effective immediately upon the such Dilutive Issuance, the Conversion Price will be adjusted to equal the per share price at which such shares were issued, sold or deemed to have been issued or sold in such Dilutive Issuance. | ||
(ii) | Effect on Conversion Price of Certain Events . For purposes of determining the adjusted Conversion Price under Subparagraph (i) , the following will be applicable: |
(a) | Issuance of Options . If the Corporation in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or Common Stock Equivalents (such warrants, rights and options to purchase Common Stock or Common Stock Equivalents are hereinafter referred to as Options ) and the price per share for which Common Stock is issuable upon the exercise of such Options (and the price of any conversion of Common Stock Equivalents, if applicable) is less than the Conversion Price (in effect on the Measurement Date of such Options) ( Below Conversion Price Options ), then the maximum total number of |
-13-
shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full exercise, conversion or exchange of Common Stock Equivalents, if applicable) will, as of the date of the issuance or grant of such Below Conversion Price Options, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For purposes of the preceding sentence, the price per share for which Common Stock is issuable upon the exercise of such Below Conversion Price Options is determined by dividing (i) the minimum aggregate amount of consideration, if any, payable to the Corporation upon the exercise of all such Below Conversion Price Options, plus, in the case of Common Stock Equivalents issuable upon the exercise of such Below Conversion Price Options, the minimum aggregate amount of consideration payable upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or exchangeable by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full conversion of Common Stock Equivalents, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Below Conversion Price Options or upon the exercise, conversion or exchange of Common Stock Equivalents issuable upon exercise of such Below Conversion Price Options. | |||
(b) | Issuance of Common Stock Equivalents . If the Corporation in any manner issues or sells any Common Stock Equivalents, whether or not immediately exercisable, convertible or exchangeable (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange of such Common Stock Equivalents is less than the Conversion Price (in effect on the Measurement Date for such Common Stock Equivalents), then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents will, as of the date of the issuance of such Common Stock Equivalents, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For the purposes of the preceding sentence, the price per share for which Common Stock is issuable upon such exercise, conversion or exchange is determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the issuance or sale of all such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first |
-14-
become exercisable, convertible or exchangeable by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Common Stock Equivalents. |
(iii) | Change in Option Price or Conversion Rate . If there is a change at any time in (a) the amount of consideration payable to the Corporation upon the exercise of any Options; (b) the amount of consideration, if any, payable to the Corporation upon the exercise, conversion or exchange of any Common Stock Equivalents; or (c) the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock, such change shall be deemed to be a new issuance of such Option or Common Stock Equivalent as of the date of such change for purposes of this Article IX.E. , and the Conversion Price in effect at the time of such change will be readjusted in accordance with Paragraphs (i) , (ii) or (iii) of this Article IX.E. , as applicable. | ||
(iv) | Calculation of Consideration Received . If any Common Stock, Options or Common Stock Equivalents are issued, granted or sold for cash, the consideration received therefor will be the amount received by the Corporation therefor, after deduction of all underwriting discounts or allowances in connection with such issuance, grant or sale. In case any Common Stock, Options or Common Stock Equivalents are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Corporation will be the fair market value of such consideration as determined by a majority of the Board of Directors and the Requisite Holders, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation will be the market price thereof as of the date of receipt; in the event that the Board of Directors and the Requisite Holders cannot agree on the value of such consideration, then the matter shall be promptly submitted to an independent accountant mutually agreed upon by the Board of Directors and the Requisite Holders, whose determination shall be binding, absent manifest error. In case any Common Stock, Options or Common Stock Equivalents are issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Common Stock Equivalents, as the case may be. Notwithstanding anything else herein to the contrary, if Common Stock, Options or Common Stock Equivalents are issued, granted or sold in conjunction with each other as part of a single transaction or in a series of related transactions, a deduction shall be made |
-15-
to the issuance price of any such securities to account for the fair value of any of the other securities issued, granted or sold in conjunction therewith or as part of the same transaction or series of related transactions. An adjustment pursuant to this Article IX . shall be made, if applicable, for each separate security issued, granted or sold as if such security was not issued, granted or sold in conjunction with any other security as part of a single transaction or in a series of related transactions. | |||
(v) | No adjustment shall be made pursuant to this Paragraph E. if such adjustment would result in an increase in the Conversion Price. |
F. | Exceptions to Adjustment of Conversion Price . Paragraph E of this Article IX shall not apply to any of the following: (i) the grant or exercise of any stock or options to employees, directors or consultants of the Corporation which may hereafter be granted to or exercised by any employee, director or consultant under any stock option, employee stock purchase or similar benefit plan of the Corporation now existing or to be implemented in the future, so long as the issuance of such stock or options is approved (by vote or written consent, as provided by the DGCL) by a majority of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose; (ii) upon issuance or conversion of the Series A Preferred Stock; or (iii) any other transaction as to which the Requisite Holders shall have waived in writing any anti-dilution adjustment hereunder. | ||
G. | Notice of Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article IX . amounting to a more than five percent (5%) change in such Conversion Price, the Corporation, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish to such holder a like certificate setting forth (i) such adjustment or readjustment; (ii) the Conversion Price at the time in effect; or (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of Series A Preferred Stock. |
A. | The holders of the Series A Preferred Stock have no voting power whatsoever, except as otherwise required by the DGCL, or as contemplated in Article IX.B. , this Article X. or Article XI. | ||
B. | Notwithstanding the above: |
-16-
(i) | The Corporation shall be required to obtain the approval of the Requisite Holders of the outstanding Series A Preferred Stock (by vote or written consent, as provided by the DGCL), with the Series A Preferred Stock voting together with the Common Stock on an as-converted basis, without regard to the limitations on conversion set forth in Article IV. , prior to the consummation of any transaction that would result in a Deemed Liquidation Event. | ||
(ii) | The Corporation shall provide each holder of Series A Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders). | ||
(iii) | If the Corporation takes a record of its stockholders for the purpose of determining stockholders entitled to (a) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right or (b) to vote in connection with any proposed Deemed Liquidation Event, then in each case, the Corporation shall mail a notice to each holder, at least ten (10) days prior to the record date specified therein (or twenty (20) days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time. |
-17-
A. | amend, alter, change or repeal the rights, powers, preferences or privileges of the Series A Preferred Stock so as to affect the Series A Preferred Stock adversely; provided, however , that if such amendment, alteration, change or repeal would affect adversely the rights, powers, preferences or privileges of any one or more series of Series A Preferred Stock but shall not so affect each series of Series A Preferred Stock, this Paragraph A. shall require the approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders of Series A Preferred Stock adversely affected, voting together as a single class, in lieu of the approval of the Requisite Holders required by this Paragraph A. ; | ||
B. | amend, alter, change or repeal any provision of the Corporations (i) Bylaws or (ii) Certificate of Incorporation (including, for the avoidance of doubt, any Certificate of Designation or Certificate of Designations (including this Certificate of Designations) filed pursuant to Section 151(g) of the DGCL), so as to affect the Series A Preferred Stock adversely (including, but not limited to, increasing the authorized number of shares of Series A Preferred Stock (except as may be necessary to allow the Corporation to fulfill the obligations of the Corporation in Article III. ); | ||
C. | increase the par value of the Common Stock; or | ||
D. | authorize, create or issue Senior Securities or Pari Passu Securities (except for the issuance of additional shares of Series A Preferred Stock as may be necessary to allow the Corporation to fulfill the obligations of the Corporation in Article III. ). |
A. | Cancellation of Series A Preferred Stock . If any shares of Series A Preferred Stock are converted pursuant to Article IV. or redeemed or repurchased by the Corporation, the Corporation shall take all actions necessary to cause the shares so converted or redeemed to be canceled and return to the status of authorized, but unissued preferred stock of no designated series, and such shares shall not be issuable by the Corporation as Series A Preferred Stock. | ||
B. | Lost or Stolen Certificates . Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any stock certificate(s) representing shares of Series A Preferred Stock (each a Preferred Stock Certificate ) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the |
-18-
Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Corporation shall execute and deliver Series A Preferred Stock Certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to convert in full all shares of Series A Preferred Stock represented by such Preferred Stock Certificate(s). | |||
C. | Allocation of Reserved Amount . The Reserved Amount shall be allocated pro rata among the holders of Series A Preferred Stock based on the number of shares of Series A Preferred Stock issued to each holder then held of record by such holder. Each increase to the Reserved Amount shall be allocated pro rata among the holders of Series A Preferred Stock based on the number of shares of Series A Preferred Stock held by each holder at the time of the increase Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Series A Preferred Stock shall be allocated to the remaining holders of shares of Series A Preferred Stock, pro rata based on the number of shares of Series A Preferred Stock then held of record by such holders. | ||
D. | Quarterly Statements of Available Shares . For each calendar quarter beginning after the Closing Date occurs and thereafter so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder upon its written request a written report notifying such holder of any occurrence which prohibits the Corporation from issuing Common Stock upon any such conversion. The report shall also specify (i) the total number of shares of Series A Preferred Stock outstanding as of the end of such quarter; (ii) the total number of shares of Common Stock issued upon all conversions of Series A Preferred Stock prior to the end of such quarter; (iii) the total number of shares of Common Stock which are reserved for issuance upon conversion of the Series A Preferred Stock as of the end of such quarter; and (iv) the total number of shares of Common Stock which may thereafter be issued by the Corporation upon conversion of the Series A Preferred Stock before the Corporation would exceed the Reserved Amount. In addition, the Corporation shall provide (or cause its transfer agent to provide), as promptly as practicable delivery to the Corporation of a written request by any holder, any of the information enumerated in clauses Subparagraphs (i) (iv) of this Paragraph D. as of the date of such request. | ||
E. | Status as Stockholder . Upon submission of a Notice of Conversion by a holder of Series A Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the holders rights as a holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the |
-19-
Corporation to comply with the terms of this Certificate of Designations. Notwithstanding the foregoing, if a holder has not received all shares of Common Stock prior to the last Trading Day of the Delivery Period with respect to a conversion of Series A Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five Trading Days after the expiration of such Delivery Period) the holder shall regain the rights of a holder of Series A Preferred Stock with respect to such unconverted shares of Series A Preferred Stock and the Corporation shall, as soon as practicable, return any certificate representing such unconverted shares to the holder. In all cases, the holder shall retain all of its rights and remedies for the Corporations failure to convert Series A Preferred Stock. | |||
F. | Waiver . Notwithstanding any provision in this Certificate of Designations to the contrary, any provision contained herein and any right of the holders of Series A Preferred Stock granted hereunder may be waived as to all shares of Series A Preferred Stock (and the holders thereof) upon the written consent of the Requisite Holders, unless a higher percentage is required by applicable law, in which case the written consent of the holders of not less than such higher percentage shall be required. | ||
G. | Reference to Other Agreements and Documents . When the terms of this Certificate of Designations refers to a specific agreement or other document to determine the meaning or operation of a provision hereof, the secretary of the Corporation shall maintain a copy of such agreement or document at the principal executive offices of the Corporation and a copy thereof shall be provided free of charge to any stockholder who makes a request therefor. Unless otherwise provided in this Certificate of Designations, a reference to any specific agreement or other document shall be deemed a reference to such agreement or document as amended from time to time in accordance with the terms of such agreement or document. | ||
H. | Severability . If any term of any series of Series A Preferred Stock is invalid, unlawful, or incapable of being enforced by reason of any rule of law or public policy, all other terms of such series of Series A Preferred Stock as set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term of any series of Series A Preferred Stock will be deemed dependent upon any other such term unless so expressed in this Certificate of Designations. | ||
I. | Payment of Cash; Defaults . Whenever the Corporation is required to make any cash payment to a holder under this Certificate of Designations (upon redemption or otherwise), such cash payment shall be made to the holder within three Trading Days after delivery by such holder of a notice specifying that the holder elects to receive such payment in cash and the method (e.g., by check, wire transfer) in which such payment should be |
-20-
made and any supporting documentation reasonably requested by the Corporation to substantiate the holders claim to such cash payment or the amount thereof. If such payment is not delivered within such three Trading Day period, such holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of eighteen percent (18%) and the highest interest rate permitted by applicable law until such amount is paid in full to the holder. In the event of the Corporations breach of any representation, warranty, covenant or other term in any of the Transaction Documents (as defined in the Purchase Agreement), the Corporation shall promptly provide written notice of such breach to the holders of the issued and outstanding Series A Preferred Stock, whereupon each holder of Series A Preferred Stock may elect, by delivery of a notice to the Corporation, to have such holders outstanding shares of Series A Preferred Stock redeemed at the greater of (i) the Face Amount (plus the amount of any accrued but unpaid dividends thereon); or (ii) the product of (a) the Closing Sales Price one Trading Day prior to the delivery of such notice, by (b) the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock (at the Conversion Rate in effect on the date the redemption is paid), without regard to the conversion limits set forth in Article IV.C, in each case to the extent that funds of the Corporation are legally available therefor. |
-21-
|
RXi Pharmaceuticals Corporation | |||
|
||||
|
By: /s/ Mark J. Ahn | |||
|
|
|||
|
Title: President and Chief Executive Officer |
Date of Conversion:
|
||||
|
|
|||
Applicable Conversion Price:
|
||||
|
||||
|
||||
Shares of Common Stock Beneficially Owned:
|
||||
|
|
||
Signature
|
||
|
||
|
||
Printed Name
|
Date:
|
||||
|
|
|||
Address:
|
||||
|
|
|||
|
||||
|
|
1. | RXi shall pay Dharmacon $150,000 as a non-refundable (except if the 12 applications are not able to be filed, the pro rata amount shall be refundable) fee within 30 days of the signing of this letter. The $150,000 shall be credited towards the $ [***] fee per application filed between October 24, 2007 and October 31, 2007 that meets the criteria of paragraph 3, below. RXi shall pay Dharmacon a further non-refundable fee of $ [***] per additional (beyond the first 12 cited above) application filed between October 24, 2007 and October 31, 2007 that meets the criteria of paragraph 3, below, payable within thirty (30) days of RXis receipt of notice of the filing of the respective First Round Application. If it comes to pass that the U S Patent And Trademark Office allows claims to additional gene targets to be filed and prosecuted subsequent to Nov 1 st 2007, then RXi shall have the right to add additional human gene targets under the terms of this agreement for an initial fee of $ [***] per additional human gene target for the First Round Application as specified herein and under the additional terms and restrictions set forth in this agreement. | ||
2. | At or before 3 PM MDT on October 26, 2007 , RXi shall transmit to Dharmacon a list of no more than fifty (50) proposed human gene targets (by name and NCBI accession number) in priority ranking order. Dharmacon shall promptly inform RXi which of the proposed gene targets are excluded because of Dharmacon commitments to third |
parties (Excluded Targets) or because Dharmacon has already filed, prior to October 24, 2007, a U S patent application claiming priority from one or more of the Priority Applications directed to sequences for silencing that human gene target (Already Filed Targets). | |||
3. | For each human gene target proposed by RXi which is not an Excluded Target or an Already Filed Target, Dharmacon shall use commercially reasonable efforts (following RXis prioritization) to file a target-specific application before November 1, 2007 directed at multiple sequences disclosed, but not claimed, in at least one of the Priority Applications. Dharmacon shall report promptly to RXi which such patent applications (First Round Applications) have been filed and, for each, the serial number and filing date. After Dharmacons receipt of the $ [***] fee per First Round Application, Dharmacon shall transmit to RXi a copy of the respective First Round Application Information transmitted by either party to the other under Paragraphs 2 and 3 shall be subject to an obligation of non-disclosure in effect until December 31, 2008, excluding that which is in the public domain, but otherwise shall be without obligation except as expressly provided in this agreement. | ||
4. | Each human gene target on which a First Round Application has been filed shall remain subject to the following terms so long as the First Round Application and any divisional or continuation of that First Round Application remains pending or, if issued, remains in force, provided, however, that RXi may remove any First Round Application (and the associated human gene target) from the coverage of these terms by thirty days notice to Dharmacon. | ||
5. | So long as a human gene target is subject to these terms, RXi shall promptly reimburse Dharmacon for: (a) any and all out-of-pocket expenses (including outside attorney fees and USPTO fees) associated with the prosecution (but not filing which would have already been paid as part of the fees specified above) of each respective First Round Application and (b) any and all out-of-pocket expenses (including outside attorneys fees and USPTO fees) associated with the filing and prosecution of each divisional or continuation of each respective First Round Application which RXi either proposes (and Dharmacon accepts) or which Dharmacon proposes (and RXi accepts). Neither party shall be obligated to file or support more than three pending applications at any one time on the same human gene target. | ||
6. | So long as a human gene target is subject to these terms, RXi shall have a non-exclusive license under the respective First Round Application and all continuations and divisionals of it to make, use and sell siRNA (defined herein as RNAi having a duplexed region shorter than 25 nucleotides) compositions and methods for all purposes including, without limitation, research, diagnostics, the development of therapeutics (subject to the progress payments of Paragraph 10) and therapeutics compositions and methods (subject to the progress payments of Paragraph 10 having been paid). Each such license shall be without the right to sublicense or assign, except as provided in paragraphs 8 and 9, below. Furthermore, so long as a human gene target is subject to these terms, RXi shall have an exclusive license |
under the respective First Round Application and all continuations and divisionals of it to make, use and sell RNAi compositions and methods for RNAi compounds having a duplexed region 25 nucleotides or longer that cleave the respective target mRNA and specifically excludes antigomers, for all purposes including, without limitation, research, diagnostics, the development of therapeutics (subject to the progress payments of Paragraph 10) and therapeutics compositions and methods (subject to the progress payments of Paragraph 10 having been paid); provided, however, that for RNAi compounds having a duplexed region of 25 nucleotides or longer, Dharmacon reserves a non-exclusive right to make, use and sell for research purposes. Each such license shall be without the right to sublicense or assign, except as provided in paragraphs 8 and 9, below. | |||
7. | Dharmacon shall consult with, and give reasonable consideration to the comments and recommendations of RXi in the prosecution of each First Round Application subject to this agreement and in the selection, filing and prosecution of divisional applications and continuation applications claiming priority from each such First Round Application (Subsequent Round Applications). To the extent that RXi has made a progress payment under paragraph 10 with respect to a particular sequence which is within the scope of a First Round Application as filed which has been subject to a restriction requirement, Dharmacon shall either (after consultation with RXi) elect a species which covers RXis sequence of interest or, if the period for such election has passed, file a divisional application directed to a species which covers RXis sequence of interest. | ||
8. | RXi may not sublicense any rights under this agreement to any third party, except for the limited purpose of evaluating siRNA composition made by RXi for possible acquisition of rights consistent with the terms of paragraph 9, below. | ||
9. | RXi may not assign its rights under this agreement to any third party (including without limitation, a change of control in RXi), in whole or in part, except: |
a. | With respect to a particular human gene target which is subject to this Agreement, RXi may assign its license rights to a third party upon paying Dharmacon a non-refundable, non-creditable fee of [***] , provided that RXi shall remain liable (along with the third party assignee) to reimburse Dharmacon for patent filing and prosecution costs unless and until Dharmacon is notified by RXi that the license rights with respect to that human gene target have been terminated. | ||
b. | With respect to all of RXis license rights (excluding those assigned to other third parties under subparagraph 9(a)), RXi may assign all of its rights hereunder in case of a merger or acquisition of its RNAi therapeutics program to a single third party (or such rights may survive a change of control in RXi). |
c. | If such merger or acquisition involves payment to RXi or RXi shareholders of $ [***] or more by a company worth [***] dollars or more, RXi pays Dharmacon $ [***] . |
10. | If RXi or a permitted assignee under subparagraph 9(a) or 9(b) achieves any of the following milestones with respect to the therapeutic development of an siRNA composition covered by any of: a) a First Round Application as filed or b) a pending continuation or division of a First Round Application or c) any patent issuing on either, then Dharmacon shall be paid the milestone payment indicated below (for which RXi shall remain responsible, jointly and severally with the permitted assignee unless Dharmacon has expressly accepted the assignee as solely responsible): |
a. | Approval of IND or equivalent $ [***] | ||
b. | First dosing in a Phase II study $ [***] | ||
c. | First dosing in a Phase III study $ [***] | ||
d. | Regulatory approval (USA) $ [***] | ||
e. | Regulatory approval (EU) $ [***] |
11. | For sales of siRNA compositions covered by a claim of an issued patent in the country of manufacture, use or sale, RXi and its permitted assignee shall pay Dharmacon a royalty of one half percent (0.5%) of Net Sales (subject to standard definitions) for an exclusive license or one quarter percent (0.25%) for a non-exclusive license. RXi shall be permitted to downgrade to a nonexclusive license at it sole discretion. | ||
12. | Upon payment of either Regulatory Approval milestone payment with respect to a particular human gene target and indication, RXi or its permitted assignee may notify Dharmacon which particular sequence (among those disclosed in the respective First Round Application) is the basis for the approval and, then and only then, the licenses provided in this Agreement shall become exclusive for nucleic acids compositions containing that sequence, directed against that human gene target for that clinical indication (subject to whatever rights Dharmacon may have granted to third parties during the period of non-exclusivity). Within the scope of such exclusivity, RXi or the permitted licensee shall have the right to participate (at its own expense) in any enforcement of Dharmacons patent rights on such basis as the parties then reasonably determine. |
13. | No license is granted by either party to the other under any invention, patent application or patent, nor are any rights granted by either party to the other expressly or by implication with respect to any trade secret or other propriety right by virtue of this Letter Agreement. | ||
14. | While the parties shall negotiate in good faith a restated License Agreement to memorialize the terms of this Letter Agreement in greater detail, it is the intention of the parties that this Letter Agreement be a binding agreement, enforceable as of October 26, 2007 (the Effective Date). The parties may address, but undertake no obligation to address intellectual property in the License Agreement which is not addressed in this Letter Agreement. | ||
15. | This Letter Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts irrespective of conflict of laws principles. Any legal action that arises out of or in connection with its provisions shall be brought solely in the Superior Court of Suffolk County, Massachusetts unless subject to the exclusive jurisdiction of federal courts, in which event it shall be brought in the federal district of Massachusetts. | ||
16. | This letter agreement may be executed via facsimile or electronic means, and each fully-signed copy exchanged by the parties shall be deemed to be an original of the same instrument and agreement. |
Dharmacon, Inc.
|
||||
By: | /s/ Mitchell Kennedy | |||
Mitchell Kennedy, General Manager | ||||
Date: October 29, 2007 | ||||
RXi Pharmaceuticals Corporation
|
||||
By: | /s/ Tod Woolf | |||
Tod Woolf, Ph.D. | ||||
President and CEO |
2
3
4
5
6
7
8
9
10
11
12
13
14
15
MEDICAL SCHOOL OF MASSACHUSETTS | CYTRX CORPORATION | |||||
|
||||||
By:
|
/s/ Joseph F.X. McGuirl | By: | /s/ Steven A. Kriegsman | |||
|
||||||
|
Joseph F.X. McGuirl | Steven A. Kriegsman | ||||
|
Executive Director, CVIP | Chief Executive Officer |
16
USSN 60/265232 entitled RNA Sequence-Specific Mediators of RNA Interference , by David P. Bartel, Philip A. Sharp, Thomas Tuschl, and Philip D. Zamore |
USSN 09/821832 entitled RNA Sequence-Specific Mediators of RNA Interference , by David P. Bartel, Philip A. Sharp, Thomas Tuschl, and Philip D. Zamore |
PCT/US01/10188 entitle RNA Sequence-Specific Mediators of RNA Interference , by David P. Bartel, Philip A. Sharp, Thomas Tuschl, and Philip D. Zamore |
A - 1
-1-
-2-
MEDICAL SCHOOL OF MASSACHUSETTS | CYTRX CORPORATION | |||||
|
||||||
By:
|
/s/ Chester A. Bisbee | By: | /s/ Steven A. Kriegsman | |||
|
||||||
|
Acting Executive Director | Steven A. Kriegsman | ||||
|
Office of Technology Management | Chief Executive Officer |
-3-
-2-
-3-
-4-
-5-
-6-
-7-
-8-
-9-
-10-
-11-
-12-
-1-
-2-
-3-
-4-
-1-
-2-
-3-
-4-
-5-
-6-
-7-
-8-
-9-
-10-
-11-
-12-
-13-
-14-
-15-
|
||||
RXi Pharmaceuticals Corporation | ||||
|
||||
|
||||
|
By: | |||
|
||||
|
Name: | |||
|
Title: | |||
|
||||
INDEMNITEE | ||||
|
||||
|
Name: | |||
|
||||
|
Address: | |||
-16-