Attached files
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| 8-K - Intellect Neurosciences, Inc. | v167847_8k.htm |
| EX-5.2 - Intellect Neurosciences, Inc. | v167847_ex5-2.htm |
| EX-5.1 - Intellect Neurosciences, Inc. | v167847_ex5-1.htm |
Exhibit
5.3
Intellect
Neurosciences, Inc.,
7 West
18th
Street, 9th
Floor,
New York,
NY 10011
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CONFIDENTIAL: The
contents of this letter may constitute material non-public
information. Disclosure of any such information, or trading in
securities of Intellect Neurosciences while in possession of such
information, could be a violation of U.S. and state securities
laws.
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Daniel Chain, Chairman &
CEO
November
24, 2009
Re: Series B Convertible
Preferred Stock
Dear
Preferred Stockholder,
As we
have previously reported, our cash balance is dangerously low and we have
engaged HFP Capital Markets LLC to seek equity financing on our
behalf. It has become clear to us, through discussions with HFP and
potential investors, that the significant amount of the Company’s outstanding
convertible preferred stock impairs our ability to attract a meaningful amount
of new equity funding.
The
shares of Series B Convertible Preferred Stock (“Pref Stock”) that you hold are
currently convertible into our common stock at a conversion price of $1.75 per
share. If the Company were to sell common stock at a price below
$1.75 per share, the conversion price of your Pref Stock would be reduced to
equal the sale price of that common stock, pursuant to the anti-dilution
adjustment provisions of Section 6(g) of the Certificate of Designations,
Preferences, and Rights of Series B Preferred Stock (the “Certificate of
Designations”). Our common stock has been trading in the range of
approximately $0.06 to $0.16 during the past 3 months on the OTC Bulletin
Board. Therefore, if the Company were able to sell any common stock
at this time, the sale price would be considerably lower than the $1.75
conversion price of your Pref Stock, and your conversion price would drop as
described above.
The
Company would be willing to sell one or more shares of common stock for $0.10
per share in order to automatically reduce the conversion price of your Pref
Stock to $0.10 and thereby provide you with an incentive to voluntarily elect to
convert your Pref Stock into common stock in accordance with the terms of the
Certificate of Designations. Based on our discussions with HFP and
potential investors, we believe that, if a substantial portion of the Pref Stock
were converted, the Company would be in a far stronger position to attract new
financing. Therefore, enclosed with this letter is a Conversion
Request. If you would be willing to convert any or all shares of
Pref. Stock that you own into common stock at $0.10 per share subject to the
conditions described on the Conversion Request, then please complete the
Conversion Request and send it to Elliot Maza, CFO, Intellect Neurosciences,
Inc. as described on the Conversion Request. DO NOT SEND ANY SERIES B
CONVERTIBLE PREFERRED STOCK CERTIFICATES AT THIS TIME. Mr. Maza will
hold the Conversion requests in escrow. If and when the conditions described in
the Conversion Request have been satisfied, the Company will issue and sell
shares of common stock for $0.10 per share. The Company will then
notify you that the conversion price of the Pref. Stock has been reduced to
$0.10 per share pursuant to the provisions of Section 6(g) of the Certificate of
Designations. At that time, you will be instructed to send to the
Company the certificates representing the shares of Pref Stock that you have
chosen to convert and the Company will issue and deliver to you a certificate
for the number of shares of common stock to which you are entitled upon
conversion at $0.10 per share, in accordance with Section 6(b) of the
Certificate of Designations.
If all
the conditions described in the Conversion Notice are not satisfied, you would
not be able to convert your Pref Stock into common stock at $0.10 per share, and
your Conversion Notice will be returned to you by Mr. Maza. There can
be no assurance that any of those conditions will be satisfied. Even
if all such conditions are satisfied and your Pref Stock is converted into
common stock, there can be no assurance that the Company will be able to sell
new equity or otherwise obtain funding necessary to continue its
operations.
As a
further inducement to potential new investors, the Company is seeking from
holders of Pref Stock a waiver of the anti-dilution adjustment provisions of
Section 6(g) of the Certificate of Designations. This waiver would
permit the Company to issue shares of common stock at a price below $0.10 per
share, without the conversion price of the Pref Stock being lowered below $0.10,
except as described below and more fully in the enclosed Waiver Consent
form. The waiver would not take effect until after the Company has
issued shares of common stock at $0.10 per share and the conversion price of
your Pref Stock has been reduced to $0.10 per share. The waiver would
apply only to “Qualified Issuances,” which are issuances of common stock by the
Company before February 1, 2010 at a price per share of less than $0.10, but not
less than $0.08 per share, and the concurrent issuance for no additional
consideration of warrants to purchase common stock of the Company at an exercise
price of not less than $0.09 per share. The waiver would be a
complete waiver of all anti-dilution adjustment rights under Section 6(g) of the
Certificate of Designations for any Qualified Issuances.
As a
further inducement to Pref Stock holders who may desire to invest additional
funds, the Company proposes that any holder of Pref Stock that purchases
securities in a Qualified Issuance for a total cash payment equal to at least
25% of the stated value of such holder’s Pref Stock would be entitled to the
anti-dilution adjustment rights under Section 6(g) of the Certificate of
Designations with respect to all the Pref Stock held by such holder, which would
reduce the conversion price of all of such holder’s Pref Stock below $0.10 per
share.
The
written consent of the holders of more than 50% of the outstanding shares of
Pref Stock are required to approve the foregoing waiver, in accordance with
Section 5(b) of the Certificate of Designations. The approval by such
a majority would apply to all outstanding Pref Stock, including shares owned by
holders who did not consent to such waiver.
A copy of
the Certificate of Designations has been enclosed with this
letter. If your shares of Pref Stock are converted into common stock,
you will no longer have the preferences and other rights provided in the
Certificate of Designations for the shares converted, including the right to
receive dividends and a liquidation preference. Please read the
Certificate of Designations in its entirety and consult with your own legal,
financial and tax advisors for advice as to whether you should elect to convert
shares of Pref Stock upon the stated conditions or grant the waiver requested by
this letter.
If you or
your advisors have any questions or would like additional information, please
contact Elliot Maza, Chief Financial Officer of the Company, at (212) 448-9300
or by email at Elliot.Maza@IntellectNS.com.
Thank
you.
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Sincerely,
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Intellect
Neurosciences, Inc.
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/s/ Daniel Chain
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Daniel
Chain, PhD
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Chairman
of the Board & Chief Executive Officer
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INTELLECT
NEUROSCIENCES, INC.
SERIES
B CONVERTIBLE PREFERRED STOCK
NOTICE OF
CONVERSION
The undersigned is the registered
holder of ______ shares of Series B Convertible Preferred Stock, par value
$0.001 per share (“Pref Stock”), of Intellect Neurosciences, Inc., a Delaware
corporation (the “Company”). The undersigned hereby elects to convert
_____ shares of Pref. Stock, plus all accrued and unpaid dividends on such
shares, into shares of common stock, par value $0.001 per share, of the Company
(“Common Stock”) at the conversion price of ten cents ($0.10) per share (the
“Conversion”), with such conversion to be effective if and when all of the
“Requisite
Events” set forth below have occurred, the “Adjustment Notice”
(as defined below) has been sent to the undersigned by the Company, and the
Company has received the certificate(s) representing the shares of Pref Stock to
be converted.
The Company agrees to issue and sell
one or more shares of Common Stock for a consideration per share of ten cents
($0.10) promptly following the occurrence of all of the Requisite Events and in
consideration of the undersigned agreeing to the “Conversion
Conditions” set forth below. Immediately upon the issuance by
the Company of shares of Common Stock for a consideration of $0.10 per share,
the conversion price of the Pref. Stock will automatically be adjusted to $0.10
per share pursuant to Section 6(g) of the Certificate of Designations,
Preferences, and Rights of Series B Convertible Preferred Stock. The
Company agrees to promptly send to the undersigned notice of such adjustment
(the “Adjustment
Notice”) and the undersigned agrees to send to the Company, promptly
following receipt of the Adjustment Notice, the stock certificate(s) for all of
the shares of Pref. Stock to be converted.
Requisite
Events – Before
the Conversion can become effective, all of the following events must occur (the
“Requisite
Events”):
1. Holders
of at least eighty percent (80%) of the total outstanding shares of Pref Stock
shall have agreed to the Conversion of such shares, and they shall have
delivered to the Escrow Agent (and not revoked) properly completed Notices of
Conversion and Purchase Forms;
2. Holders
of more than fifty percent (50%) of the total outstanding shares of Pref Stock
shall have consented in writing to the waiver of anti-dilution adjustments as
provided in the Waiver Consent form sent to Pref Stock holders with this Notice
of Conversion; and
3. Holders
of Common Stock and Pref. Stock shall have duly approved an amendment to the
Company’s certificate of incorporation to increase the number of authorized
shares of Common Stock from 100 million to 650 million.
Representations
& Warranties – With respect to the issuance
of shares of Common Stock upon the Conversion, the undersigned represents and
warrants to the Company that the undersigned: (i) is an “accredited
investor” as such term is defined in Section 501 of Regulation D promulgated
under the Securities Act of 1933, as amended (the “Securities Act”); (ii) is
aware that the shares of Common Stock have not and will not be
registered under the Securities Act or any state securities laws and
may not be sold, distributed or otherwise disposed of unless there is an
effective registration statement under the Securities Act covering any such
transaction or the Company receives a legal opinion satisfactory to the Company
from the undersigned’s legal counsel that such transaction is exempt from
registration; (iii) has been furnished with all information that it deems
necessary to evaluate the merits and risks of Conversion; (iv) is acquiring the
Common Stock for its own account for investment and not with a view to the sale
or distribution of any such stock in violation of applicable securities
laws.
This completed Notice of Conversion
shall be sent to the Escrow Agent, Elliot Maza, CFO, Intellect Neurosciences, Inc.
(Tel: 212-697-9500 x102). Do not send any stock certificates
for Pref Stock at this time.
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Name
of registered holder
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Signature
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Title
(if applicable):
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INTELLECT
NEUROSCIENCES, INC.
SERIES
B CONVERTIBLE PREFERRED STOCK
WAIVER
CONSENT
The
undersigned is the registered holder of ______ shares of Series B Convertible
Preferred Stock, par value $0.001 per share (“Pref Stock”), of Intellect
Neurosciences, Inc., a Delaware corporation (the “Company”). Pursuant to
Section 5(h) of the Certificate of Designations, Preferences, and Rights of
Series B Convertible Preferred Stock (the “Certificate of Designations”, a
complete copy of which has been provided to the undersigned before executing
this document, the undersigned hereby consents with respect to all such shares
of Pref Stock to the following waiver of the rights of all holders of Pref
Stock:
The
provisions of Section 6(g) of the Certificate of Designations (titled “Certain
Anti-Dilution Adjustments”) shall be waived to the extent set forth below with
respect only to the following issuances of securities by the Company (referred
to herein as “Waived Issuances”): issuances before February 1, 2010 of common
stock, par value $0.001 per share, of the Company (“Common Stock”) at a price
per share less than ten cents ($0.10) but not less than eight cents ($0.08) and
concurrent issuances for no additional consideration of warrants to purchase
shares of Common Stock at an exercise price of not less than nine cents ($0.09)
per share. This waiver shall be a complete waiver of the provisions of
Section 6(g) and there shall be no adjustment of the Conversion Price (as such
term is defined in the Certificate of Designations) with respect to any Waived
Issuances; provided,
however, this waiver shall not apply to any shares of Pref. Stock held by
a Qualified Purchaser (as defined below). A “Qualified Purchaser” is a
holder of Pref. Stock (together with any affiliates) that purchases securities
in one or more Waived Issuances for a total cash payment to the Company equal to
at least twenty-five percent (25%) of the stated value of the Pref Stock held by
such holder (together with its affiliates) as of November 1, 2009.
This
waiver shall not take effect until after the Company has issued one or more
shares of Common Stock at $0.10 per share and the Conversion Price of the Pref
Stock has been reduced to $0.10 per share pursuant to the provisions
of Section 6(g) of the Certificate of Designations.
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Name
of registered holder
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Signature:
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Title
(if applicable):
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