Exhibit 10.32
SUBSCRIPTION AGREEMENT
(European Subscribers)
TO: LIFE MEDICAL SCIENCES, INC.
AND TO: ▇▇▇▇▇ BIOCAPITAL LIMITED
RE: SUBSCRIPTION FOR UNITS
1. Subscription
The undersigned (the "Purchaser") hereby subscribes for on and subject to
the terms and conditions set forth herein, from Life Medical Sciences,
Inc. (the "Corporation") ____________________ units (the "Purchased
Units") each comprised of one (1) share of Series B Convertible Preferred
Stock, par value $0.01 per share, of the Corporation (a "Preferred
Share"); one warrant (a "Series B Warrant") to purchase up to 10 shares of
common stock of the Corporation ("Common Shares") at an exercise price of
$0.24 per Common Share (the "Series B Warrant Exercise Price"); and one
warrant (an "Additional Warrant") to purchase up to 10 Common Shares at an
exercise price of $0.12 per Common Share (the "Additional Warrant Exercise
Price"). The Purchased Units are being sold to the Purchaser in
consideration for either a conversion of debt of the Corporation ("Debt")
and related warrants held by the Purchaser or a cash payment by the
Purchaser, in each case at a price of $1.20 per Unit (the "Subscription
Price"), and as part of an offering (the "Offering") of up to $1.2 million
of Units. As part of a settlement of a debt owed to Dimotech Limited
("Dimotech"), from whom the Corporation has licensed certain technology,
the Corporation has agreed to issue an additional $25,000 of Units to
Dimotech concurrently with the issuance of Units in the Offering and at
the same price per Unit. The Series B Warrants and Additional Warrants,
together with the broker and other warrants referred to in Section 11
hereof, are sometimes referred to collectively as the "Warrants". ▇▇▇▇▇
Biocapital Limited (the "Agent") is serving as a placement agent for the
Offering pursuant to an agency agreement to be entered into with the
Corporation (the "Agency Agreement").
2. Description of Units
The Preferred Shares shall have the attributes described in Appendix I
hereto. Each Series B Warrant shall be exercisable to acquire 10 Common
Shares at the Series B Warrant Exercise Price for a period commencing on
the date of issue and expiring on the date which is the later of two years
after the date of issue or 18 months after the date upon which the
Corporation implements an increase to its authorized Common Shares to an
amount sufficient to permit the conversion or exercise of all presently
outstanding securities of the Corporation (including securities to be sold
in the Offering) convertible into or exchangeable for Common Shares (the
"Authorized Capital Increase"). The Series B Warrants shall be issued in
substantially the form attached hereto as Appendix
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II. Each Additional Warrant shall be exercisable to acquire 10 Common
Shares at the Additional Warrant Exercise Price for a period commencing on
the date of issue and expiring on June 30, 2002, or in the event that the
Authorized Capital Increase has not been implemented by May 31, 2002, on
the date which is six (6) months after the implementation of the
Authorized Capital Increase. The Additional Warrants shall be issued in
substantially the form attached hereto as Appendix III.
3. Use of Proceeds
The proceeds of the Offering will be used by the Corporation to fund
product development costs and for working capital and general corporate
purposes including the settlement of certain trade liabilities.
4. Documents to be provided by Purchaser
In the case of a Purchaser converting Debt and related warrants into
Purchased Units, the Purchaser must complete, sign and return two executed
copies of: (i) this Subscription Agreement, (ii) the Investor Rights
Agreement attached hereto as Appendix IV (the "Investor Rights Agreement")
and (iii) the Conversion Letter attached hereto as Appendix V (together
with the note and warrant to be attached thereto), to the Agent as soon as
possible.
In the case of a Purchaser purchasing the Purchased Units for cash, the
Purchaser must complete, sign and return two executed copies of: (i) this
Subscription Agreement, and (ii) the Investor Rights Agreement, and the
Subscription Price must be paid in U.S. dollars by wire transfer to the
following account:
Bank of America NT & SA
New York, New York
CIBC Toronto Account No. ▇▇▇▇-▇-▇▇▇▇▇
Swift Address: ▇▇▇▇▇▇▇▇
Chips Member ID: 015035
ABA No. ▇▇▇▇▇▇▇▇▇
For Further Credit To:
Canadian Imperial Bank of Commerce
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Transit No. 00002
Beneficiary: Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, in Trust
Account No. 02-44414
Reference: ▇▇▇▇ - 65283/7
or in such other manner as may be specified by the Agent. At Closing (as
defined below), the Subscription Price will be released to the Corporation
by Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the Agent, subject to Sections
6 and 7 hereof. In either case, such deliveries hereinafter referred to as
the "Purchaser's Closing Deliveries".
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5. Closing and Delivery of Share and Warrant Certificates
Delivery and sale of the Purchased Units will be completed (the "Closing")
at the offices of the Corporation (or such other place or places as the
Corporation and the Agent may agree) at 10:00 a.m. (Eastern Standard Time)
(the "Closing Time") on such date as the Corporation and the Agent may
agree (the "Closing Date"), expected to be no later than March 29, 2002.
Certificates representing the Preferred Shares, Series B Warrants and the
Additional Warrants comprising the Purchased Units will be delivered at
Closing against delivery by the Purchaser of the Purchaser's Closing
Deliveries, subject to the Withheld Amount described in section 6 below.
The Purchaser, on its own behalf or on behalf of others for whom it is
contracting hereunder, hereby appoints the Agent, with full power of
substitution, as its true and lawful attorney and agent with the full
power and authority in its place and stead to swear, execute, file and
record any document necessary to give effect to the delivery and sale of
the Purchased Units, to terminate this subscription on its behalf in the
event that any condition precedent to the Offering has not been satisfied,
to execute a receipt for the Purchased Units and all other documentation,
and to modify or waive any conditions or grant any waivers on its behalf
in connection with this transaction including any extension to the
deadline date for Closing agreed with the Corporation.
6. Withheld Amount Pending Authorized Capital Increase
Pending the implementation of the Authorized Capital Increase, the Agent,
on behalf of the Purchasers, will cause US$300,000 (the "Withheld Amount")
to be withheld from the Corporation. The Withheld Amount shall be held in
a trust account of Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP. The Agent shall direct
that the Withheld Amount be promptly released to the Corporation upon
receipt by the Agent of written notice from the Corporation, in form
satisfactory to the Agent acting reasonably, that the Authorized Capital
Increase has been implemented. If the Authorized Capital Increase has not
been implemented within one year from the date of issuance of the
Purchased Units, then the Agent shall direct that the Withheld Amount be
released to the Purchasers, pro rata in accordance with the number of
Purchased Units issued to each Purchaser in connection with the Offering.
7. Certain Matters Relating to the Offering
The Purchaser, on its own behalf (or on behalf of others for whom it is
contracting hereunder) acknowledges and agrees that:
(a) it (or others for whom it is contracting hereunder) has not been provided
with a prospectus or an offering memorandum or any similar document in
connection with its purchase of Units;
(b) its decision to execute this Subscription Agreement and the Investor
Rights Agreement and to subscribe for the Purchased Units (on its own
behalf or on behalf of others for whom it is contracting hereunder) has
not been based upon any verbal or written representations as to fact or
otherwise made by or on behalf of the Agent or the
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Corporation and that the Purchaser's decision (or the decision of others
for whom the Purchaser is contracting hereunder) is based entirely upon
publicly available information concerning the Corporation (any such
information having been delivered to the Purchaser without independent
investigation or verification by the Agent);
(c) the Agent and its directors, officers, employees, agents and
representatives assume no responsibility or liability of any nature
whatsoever for the accuracy or adequacy of any such publicly available
information or as to whether all information concerning the Corporation
required to be disclosed by it has been generally disclosed;
(d) neither the Preferred Shares nor the Series B Warrants nor the Additional
Warrants comprising the Purchased Units have been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), with the
result that such Preferred Shares, Series B Warrants and the Additional
Warrants (and the Common Shares into which they are convertible or
exercisable) are "restricted securities" within the meaning of Regulation
S and Rule 144 promulgated under the Securities Act and may not be offered
or sold within the United States or to or for the account or benefit of a
U.S. Person (as defined in Rule 902(o) of Regulation S promulgated under
the Securities Act) except pursuant to registration under the Securities
Act or an exemption therefrom;
(e) the Purchaser (or others for whom the Purchaser is contracting hereunder)
has been advised to consult its own legal advisors with respect to any
applicable resale restrictions and the Purchaser (or others for whom the
Purchaser is contracting hereunder) is solely responsible (and neither the
Corporation nor the Agent is in any way responsible) for compliance with
applicable resale restrictions;
(f) the Purchaser understands that each certificate representing Preferred
Shares, Series B Warrants and Additional Warrants comprising the Purchased
Units, and any securities issued on conversion or exercise thereof or in
exchange therefor shall bear a legend in substantially the following form
(in addition to any legend required under applicable state securities
laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT") AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION ONLY (A) TO THE CORPORATION, (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR 904 OF
REGULATION S UNDER THE 1933 ACT OR (C) PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, PROVIDED IN SUCH
LATTER CASE THAT THE HOLDER UPON REQUEST PRIOR TO SUCH SALE
FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED
STANDING TO THAT EFFECT REASONABLY SATISFACTORY TO THE CORPORATION."
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(g) the Purchaser (or others for whom the Purchaser is contracting hereunder)
(i) is not a "distributor" of securities as that term is defined in
Regulation S nor a dealer in securities, and (ii) acknowledges that it has
not engaged in any hedging transactions with regard to the Purchased
Units; and
(h) upon or following the closing of the Offering, the Corporation intends to
acquire certain assets of Phairson Ltd., a company organized under the
laws of the United Kingdom, in exchange for the issuance of approximately
6,900,000 Common Shares (the "Acquisition"). While the Corporation has
advised the Purchaser that the parties to the Acquisition have reached
preliminary oral agreement on the terms of the transaction, the Purchaser
acknowledges that there can be no assurance that the Acquisition will be
consummated on the foregoing terms or at all.
(i) until such time as the Authorized Capital Increase is implemented, the
Corporation does not have a sufficient number of Common Shares authorized
and unissued such that the Corporation can reserve the number of Common
Shares required to be issued upon the exercise of the Series B Warrants
and the Additional Warrants. While the Corporation has covenanted to
convene a meeting of shareholders as soon as reasonably practicable to
place before shareholders the proposal for the Authorized Capital
Increase, there can be no assurance that the shareholders will approve
this proposal. If the Authorized Capital Increase is not implemented, the
Purchaser acknowledges that, notwithstanding any other provision of this
Agreement, such failure to implement the Authorized Capital Increase would
not constitute a breach of this Subscription Agreement by the Corporation
and that the sole recourse for the Purchaser in such a circumstance is to
the cash payment remedy, as described under section 7 in the form of
warrant for each of the Series B Warrants (attached hereto as Appendix II)
and the Additional Warrants (attached hereto as Appendix III).
8. Representations, Warranties and Covenants of the Corporation
The Corporation represents, warrants and covenants to and with the Agent,
the Purchaser (and to any others on whose behalf the Purchaser is
contracting hereunder) as of the date hereof and as of the Closing Date,
which representations, warranties and covenants shall survive the Closing
for a period of two years and any investigation made by the Agent, the
Purchaser or such others, that:
(a) the Corporation is a validly existing corporation in good standing under
the laws of the jurisdiction in which it is incorporated, and the
Corporation has no subsidiaries;
(b) the Corporation is duly qualified and authorized to do business in the
jurisdiction(s) in which it carries on business or to own property where
required under the laws of the jurisdiction(s) in which any such property
is located;
(c) the Corporation is current with all material filings required to be made
under the laws of any jurisdiction in which it carries on any material
business, and the Corporation has all necessary licenses, leases, permits,
authorizations and other approvals necessary to permit it to conduct its
business as currently conducted, except where the failure to have
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any such license, lease, permit, authorization or approval would not have
a material adverse effect on the Corporation and its business;
(d) the audited financial statements of the Corporation as at and for the year
ended December 31, 2000 present fairly, in all material respects, the
financial position of the Corporation as at that date, and the results of
its operations and the changes in its financial position for the 12-month
period then ended in accordance with generally accepted accounting
principles, and the unaudited financial statements of the Corporation as
at and for the nine months ended September 30, 2001 present fairly, in all
material respects, the financial position of the Corporation as at that
date, and the results of its operations and the changes in its financial
position for the nine-month period then ended; since September 30, 2001,
there has been no material adverse change in the business, affairs or
financial or other condition of the Corporation or any of its
subsidiaries, except as disclosed in the notes to the financial statements
for the nine-month period then ended;
(e) the Corporation has all requisite power and authority to carry out its
obligations under this Agreement, the Investor Rights Agreement, the
Preferred Shares, the Series B Warrants and the Additional Warrants;
(f) this Agreement has been, and the Investor Rights Agreement, the Preferred
Shares, the Series B Warrants and the Additional Warrants, will be on the
Closing Date, duly authorized, executed and delivered by the Corporation
and constitute or on the Closing Date will constitute, legal, valid and
binding obligations of the Corporation enforceable in accordance with
their terms except that: (i) the enforcement hereof or thereof may be
limited by bankruptcy, insolvency, reorganization and other laws affecting
the enforcement of creditors' rights generally, (ii) rights of indemnity
thereunder may be limited under applicable law, and (iii) equitable
remedies, including without limitation specific performance and injunctive
relief, may be granted only in the discretion of a court of competent
jurisdiction;
(g) the Preferred Shares comprising part of the Units are or on the Closing
Date will be duly and validly authorized and, when issued and delivered
against payment therefor, will be duly and validly issued, fully paid and
non-assessable shares in the capital stock of the Corporation;
(h) the Corporation will, as soon as reasonably practicable, convene a meeting
of shareholders of the Corporation at which the Corporation will place
before shareholders a proposal for the Authorized Capital Increase;
(i) immediately following the Authorized Capital Increase, the Corporation
will reserve a sufficient number of Common Shares unissued as may be
required to be issued pursuant to the conversion of the Preferred Shares
and the exercise of the Series B Warrants and the Additional Warrants
comprising the Purchased Units and, assuming the implementation of the
Authorized Capital Increase, when issued and delivered upon such
conversion or exercise, such Common Shares will be duly and validly issued
as fully paid and non-assessable shares in the capital stock of the
Corporation;
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(j) the authorized capital of the Corporation consists of 43,750,000 Common
Shares and 5,000,000 shares of preferred stock, $.01 par value per share.
Of the preferred stock, 500,000 shares have been designated as Series A
Convertible Preferred Stock and, on or prior to the Closing Date, not more
than 1,124,833 shares will be designated as Preferred Shares. There are
15,343,342 Common Shares outstanding, no shares of Series A Convertible
Preferred Stock or Preferred Shares outstanding (other than Preferred
Shares issued or to be issued in the Offering or to Dimotech as referred
to in Section 1 hereof). In addition, the Corporation has (i) outstanding
a convertible note held by Dimotech (the "Convertible Note") in the
principal amount of $40,000 which is convertible, at the holder's option,
into Common Shares at a price of $1.00 per share or into any class of
preferred shares at the price paid by the purchasers thereof; provided,
however, that if any such preferred shares are convertible into Common
Shares (as is the case with the Preferred Shares), the holder would be
entitled to receive no more than the number of preferred shares which, at
the then existing conversion rate, would convert into 40,000 Common
Shares, and (ii) available for issuance pursuant to options which may be
granted under its 1992 Stock Option Plan, 2000 Stock Option Plan and 2001
Stock Option Plan, an aggregate of approximately 6,000,000 Common Shares
and outstanding options and warrants to purchase an aggregate of
approximately 9,000,000 Common Shares, of which all outstanding Class A
and Class B warrants (to purchase 4,768,000 Common Shares) are scheduled
to expire in March 2002. The Corporation has agreed to grant options to
purchase an additional 5,200,000 Common Shares upon the closing of the
Offering, at an exercise price equal to the initial conversion price of
the Preferred Shares. The Corporation has agreed to settle a debt of
approximately $320,000 owing to a creditor, Polymer Technology Group. The
settlement involves a cash payment, issuance of Common Shares at the
market price on the date of the agreement and issuance of a note principal
amount equal to a portion of the debt. The note is convertible into Common
Shares at a price in excess of the current market price;
(k) the Corporation is not, and at the Closing Date will not be: (i) in breach
or violation of any of the terms or provisions of, or in default under,
this Agreement, any other Subscription Agreement for the purchase of
Units, the Agency Agreement, the Preferred Shares or the Warrants, any
indenture, mortgage, deed of trust or loan agreement, (except as disclosed
in the Corporation's SEC filings), other agreement (written or oral) or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject, which breach or violation or the
consequences thereof would result in a material adverse change to it or
its business; or (ii) in violation of the provisions of its articles,
by-laws, resolutions or any statute or any other rule or regulation of any
court or governmental agency or body having jurisdiction over it or any of
its properties which violation or the consequences thereof would result in
a material adverse change to it or its business;
(l) the issue and sale of the Purchased Units and the issue of Preferred
Shares, Series B Warrants, Additional Warrants, any Common Shares on the
conversion of Preferred Shares or the exercise of Series B Warrants and
Additional Warrants, and the performance and consummation of the
transactions contemplated herein will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement
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(written or oral) or instrument to which the Corporation or any subsidiary
is bound or to which any of the property or assets of the Corporation or
any subsidiary is subject, which breach or violation or the consequences
thereof would result in a material adverse change to the Corporation and
its business, nor will any such action conflict with or, assuming
implementation of the Authorized Capital Increase, result in any violation
of the provisions of the articles, by-laws or resolutions of the
Corporation or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Corporation or
any subsidiary or any of its properties which violation or the
consequences thereof would result in a material adverse change to the
Corporation or its business;
(m) the Corporation has established on its books reserves which are adequate
for the payment of all taxes not yet due and payable; there are no liens
or other liabilities for taxes on the assets of the Corporation except for
taxes not yet due; there are no audits of any of the tax returns of the
Corporation which are known by the Corporation's management to be pending
and there are no claims which have been or may be asserted relating to any
such tax returns which, if determined adversely, would result in the
assertion by any government or agency of any deficiency having a material
adverse effect on the properties, business or assets of the Corporation;
(n) the Corporation has good and valid title to its properties, leaseholds and
assets, including without limitation the properties, leaseholds and assets
reflected in the balance sheet as of September 30, 2001 referred to in
clause 8(d) above, except properties, leaseholds and assets disposed of
since such date at fair market value in the ordinary course of business,
and has good title to all its leasehold estates, in each case subject to
no mortgage, pledge, lien, lease, encumbrance, charge, rights of first
refusal or options to purchase, whether or not relating to extensions of
credit or the borrowing of money, other than as disclosed in such balance
sheet except as incurred in the ordinary course of business since the date
of such balance sheet, and except in any event (i) for a security interest
in the Corporation's tangible assets to secure payment of the Convertible
Note, and (ii) where the failure to hold good title or the existence of a
mortgage, pledge, lien, lease, encumbrance, charge, right of first refusal
or option to purchase would not have a material adverse effect on the
Corporation or its business; there exists no condition which interferes
with the economic value or use of such properties and assets and all
tangible assets are in good working condition and repair (subject to
ordinary wear and tear) except where the existence of any such condition
would not have a material adverse effect on the Corporation or its
business;
(o) the Corporation owns, or has applied for registration of, all patents,
trade-marks, service marks, trade names, and copyrights necessary for the
conduct of its business, except where the failure to so own or apply for
registration would not have a material adverse effect on the Corporation
or its business; to the best of the knowledge, information and belief of
the Corporation, none of the past or present activities of the Corporation
or the products, services or assets of the Corporation infringe or
constitute an unauthorized use of any proprietary rights of others, and
the Corporation has not received any notice of infringement of, or
conflict with, asserted rights of others with respect to any patent,
trade-▇▇▇▇, service ▇▇▇▇, trade name, or copyright that, individually or
in the aggregate,
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if the subject of an unfavourable decision, ruling, or finding, would
result in a material adverse change to the Corporation or its business;
(p) the Corporation has taken reasonable measures to protect and preserve the
confidentiality of all trade secrets and other non-patented proprietary
information of the Corporation, including without limitation the
procurement of proprietary invention assignments and non-disclosure and
non-competition agreements from employees, consultants, subcontractors,
customers and other persons who have access to such information;
(q) the Corporation has filed all necessary federal, state and municipal
property, income and franchise tax returns and has paid all taxes shown as
due thereon or otherwise owed by it to any taxing authority except those
contested in good faith and for which appropriate amounts have been
reserved in accordance with generally accepted accounting principles;
there is no tax deficiency which has been, or to the best of the
knowledge, information and belief of the Corporation might be, asserted
against the Corporation which would materially affect the business or
operations of the Corporation; the Corporation has paid all applicable
federal and state payroll and withholding taxes;
(r) there is no collective bargaining or other union agreement to which the
Corporation is a party or by which it is bound, or which is currently
being negotiated; the Corporation does not sponsor, maintain or contribute
to any pension, retirement, profit sharing, incentive compensation, bonus
or other employee benefit plan, including without limitation any employee
benefit plan covered by Title 4 of the Employee Retirement Income Security
Act of 1974 ("ERISA") or any "multi-employer plan" as defined in Section
4001(a)(3) of ERISA, or any other employee benefit plan; to the best of
the knowledge, information and belief of the Corporation, (i) no employee
of the Corporation is a party to or bound by any agreement, contract or
commitment, or subject to any restrictions, particularly but without
limitation in connection with any previous employment of any such person,
which would result in a material adverse change to the Corporation and its
business, and (ii) no senior officer has any present intention of
terminating his employment with the Corporation, and the Corporation has
no present intention of terminating any such employment; and
(s) there is no adverse claim, action, proceeding or investigation pending or,
to the knowledge, information and belief of the Corporation, threatened,
which questions the validity of the issue or sale of the Units or the
issue of any Preferred Shares, Series B Warrants, Additional Warrants or
any Common Shares on conversion of the Preferred Shares or exercise of the
Series B Warrants, Additional Warrants or the validity of any action taken
or to be taken by the Corporation in connection with this Agreement or the
Investor Rights Agreement or which would result in any material adverse
change in the financial condition, results of operations, business or
prospects of the Corporation.
9. Representations, Warranties and Covenants of the Purchaser
The Purchaser hereby represents, warrants and covenants to and with the
Agent and the Corporation (which representations, warranties and covenants
shall survive the Closing) that:
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(a) in the case of the subscription by the Purchaser for Units as principal
for its own account and not for the benefit of any other person, the
Purchaser is purchasing the Purchased Units as principal for its own
account, and not for the benefit of any other person or company, and this
Subscription Agreement and the Investor Rights Agreement have been
authorized, executed and delivered by, and constitute legal, valid and
binding agreements of the undersigned;
(b) in the case of the subscription by the Purchaser for Units as agent for a
disclosed principal, each beneficial purchaser of the Purchased Units for
whom the Purchaser is acting is purchasing as principal for its own
account and not for the benefit of any other person and the Purchaser is
an agent with due and proper authority to execute this Subscription
Agreement, the Investor Rights Agreement and all other documentation in
connection with the purchase of the Purchased Units on behalf of the
beneficial purchaser and this Subscription Agreement and the Investor
Rights Agreement have been duly authorized, executed and delivered by or
on behalf of, and constitute legal, valid and binding agreements of, the
disclosed principal;
(c) in the case of the purchase by the Purchaser of Units as trustee or as
agent for a principal which is undisclosed or identified by account number
only, this Subscription Agreement and the Investor Rights Agreement have
been duly authorized, executed and delivered by, and constitute legal,
valid and binding agreements of, the undersigned acting in such capacity;
(d) if the Purchaser is a corporation, the Purchaser is a valid and subsisting
corporation, has the necessary corporate capacity and authority to execute
and deliver this Subscription Agreement and the Investor Rights Agreement
and to observe and perform its covenants and obligations hereunder and
thereunder and has taken all necessary corporate action in respect thereof
or, if the Purchaser is a partnership, syndicate or other form of
unincorporated organization, the Purchaser has the necessary legal
capacity and authority to execute and deliver this Subscription Agreement
and the Investor Rights Agreement and to observe and perform its covenants
and obligations hereunder and thereunder and has obtained all necessary
approval in respect thereof and, in either case, upon execution by the
Corporation, this Subscription Agreement and the Investor Rights Agreement
constitute legal, valid and binding contracts of the Purchaser enforceable
against the Purchaser in accordance with their respective terms;
(e) if the Purchaser is an individual, the Purchaser has attained the age of
majority and is legally competent to execute this Subscription Agreement
and the Investor Rights Agreement and to take all actions required
pursuant hereto and thereto;
(f) if required by applicable securities legislation, policy or order of a
securities regulatory authority or other regulatory authority, the
Purchaser will execute, deliver, file and otherwise assist the Corporation
in filing such reports and other documents with respect to the issue of
the Purchased Units as may be reasonably required;
(g) the Purchaser, whether acting as principal, trustee or agent, is neither a
U.S. Person (as defined in Rule 902(o) of Regulation S promulgated under
the Securities Act) nor
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purchasing the Purchased Units for the account of a U.S. Person or for
resale in the United States and the Purchaser confirms that the Purchased
Units have not been offered to the Purchaser in the United States and that
this Subscription Agreement has not been signed by the Purchaser in the
United States;
(h) the purchase of the Purchased Units by the Purchaser does not contravene
any of the applicable securities legislation in the jurisdiction in which
the Purchaser is resident and does not trigger (i) any obligation to
prepare and file a prospectus or similar document, or any other report
with respect to such purchase, and (ii) any registration or other
obligation on the part of the Corporation or the Agent;
(i) the Purchaser has had access to the Corporation's public filings with the
Securities and Exchange Commission and has had an opportunity to ask
questions of the Corporation's management;
(j) the Purchaser is capable of assessing the proposed investment as a result
of the Purchaser's financial or investment experience or as a result of
advice received from a registered person other than the Corporation or an
affiliate thereof, and is able to bear the economic loss of its
investment. The Purchaser recognizes that its purchase of Purchased Units
involves a high degree of risk in that: (i) the Corporation has incurred
losses since inception; at September 30, 2001, the Corporation had an
accumulated deficit of approximately $37,667,000; and the Corporation
requires substantial funds in addition to the proceeds of this Offering to
continue its plan of operations; (ii) an investment in the Corporation is
highly speculative and only investors who can afford the loss of their
entire investment should consider investing in the Corporation and the
Purchased Units; (iii) the Purchaser may not be able to liquidate the
Purchaser's investment; and (iv) transferability of the securities
comprising the Purchased Units is extremely limited. Furthermore, the
proceeds of this Offering are projected to last only a limited period of
time. The Purchaser has read the Risk Factors section of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 2000;
(k) the address of the Purchaser (or others for whom the Purchaser is
contracting hereunder) furnished by the Purchaser on the Purchaser's
signature page of this Subscription Agreement is such person's principal
residence if such person is an individual or its principal business
address if it is a corporation or other entity; and
(l) the Purchaser (or others for whom the Purchaser is contracting hereunder)
agrees that it will not disclose the terms of the Offering or any
information it may have acquired from the Corporation in the course of
executing this Subscription Agreement which the Corporation has identified
as material non-public information, except to the extent (i) that such
terms or other information becomes generally available to the public other
than by disclosure in violation of this Subscription Agreement, (ii) that
such information was properly within the Purchaser's possession prior to
being furnished by the Corporation, (iii) that such information becomes
available to the Purchaser on a non-confidential basis, such as through
disclosure by third parties who have the right to disclose the
information, and (iv) compelled by judicial process, provided that in the
event of compulsion by
12
judicial process the Purchaser will inform the Corporation promptly upon
its receipt of notice of judicial process compelling such disclosure.
10. Reliance Upon Representations, Warranties and Covenants
The Purchaser acknowledges that the representations and warranties and
covenants contained in this Subscription Agreement are made with the
intent that they may be relied upon by the Agent and by the Corporation
to, among other things, determine the Purchaser's eligibility or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to subscribe for the Purchased Units. The Purchaser further
agrees that by accepting the Purchased Units, the Purchaser shall be
representing and warranting that the foregoing representations and
warranties are true as at the Closing Time with the same force and effect
as if they had been made by the Purchaser at the Closing Time and that
they shall survive the purchase by the Purchaser of the Purchased Units
and shall continue in full force and effect notwithstanding any subsequent
disposition by it of any Preferred Shares, Series B Warrants or Additional
Warrants comprising the Purchased Units.
11. Agent's Commission, Fees and Expenses
The Purchaser understands that on the Closing Date, the Agent will receive
from the Corporation a commission equal to 10% of the gross proceeds of
sale of the Purchased Units (payable at the election of the Agent in cash
or Units or a combination thereof) and broker warrants to acquire that
number of Common Shares equal to 10% of the number of Purchased Units (in
each case excluding Units for which the Corporation has secured
purchasers), as more particularly described and subject to the exclusions
contained in the Agency Agreement. No other fee or commission is payable
by the Corporation in connection with the sale of the Purchased Units.
However, the Corporation will also pay on the Closing Date those expenses
of the Agent in connection with the Offering as are set out in the Agency
Agreement, as well as reasonable legal fees and expenses of the Agent's
counsel not to exceed $50,000.
12. Costs
The Purchaser acknowledges and agrees that all costs and expenses incurred
by the Purchaser (including any fees and disbursements of any counsel
retained by the Purchaser), if any, relating to the sale of the Purchased
Units shall be borne by the Purchaser.
13. Appointment of Agent
The Purchaser, on its own behalf and (if applicable) on behalf of others
for whom the Purchaser is contracting hereunder, hereby:
(a) irrevocably authorizes the Agent to negotiate and settle the form of any
agreement to be entered into in connection with this transaction and to
waive on its own behalf and on behalf of the purchasers of Units in whole
or in part, or extend the time for compliance with, any of the closing
conditions in such manner and on such terms and conditions as
13
the Agent may determine, acting reasonably, without in any way affecting
materially the Purchaser's obligations or the obligations of such others
hereunder; and
(b) acknowledges and agrees that the Agent and the Corporation may vary,
amend, alter or waive, in whole or in part, one or more of the conditions
set forth in the Agency Agreement in such manner and on such terms and
conditions as they may determine, acting reasonably, without affecting
materially in any way the Purchaser's or such others' obligations
hereunder.
14. Appointment of Proxy
The Purchaser (or others for whom the Purchaser is contracting hereunder)
hereby irrevocably constitutes and appoints ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the CEO of
the Corporation, or his successor, as its and/or their true and lawful
proxy, agent and attorney in fact with full power of substitution and
resubstitution to vote, or to execute and deliver written consents or
otherwise act with respect to the Preferred Shares now or hereafter owned
of record by it or them, and any other securities now or hereafter owned
of record by it or them with an entitlement to vote, in respect of the
Authorized Capital Increase at a meeting of shareholders of the
Corporation convened for, among other things, such purpose or pursuant to
action taken by written consent of the stockholders of the Corporation.
The Purchaser (or others for whom the Purchaser is contracting hereunder)
hereby instructs ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and/or his designee to vote such shares
(or to issue a consent with respect thereto, as the case may be) in favor
of the Authorized Capital Increase, which is expected to increase the
authorized Common Shares from 43,750,000 Common Shares to 100,000,000
Common Shares. The Purchaser (or others for whom the Purchaser is
contracting hereunder) hereby affirms that this proxy is given as a
condition of the Offering and as such is coupled with an interest and is
irrevocable. It is further understood by the undersigned that this proxy
may be exercised beginning from the date of this Agreement and ending on
the first anniversary of the date of this Agreement. The provisions of
this Section shall remain in full force and effect and be enforceable
against any donee, transferee or assignee of the shares to which this
section relates. The Purchaser (or others for whom the Purchaser is
contracting hereunder) represents and warrants that it has granted no
other proxy with respect to the Preferred Shares or other shares covered
by this proxy and agrees to the placement of a restrictive legend
referring to the provisions of this Section on any stock certificate(s)
evidencing the Preferred Shares or other shares to which this proxy
relates.
15. Governing Law
This Subscription Agreement shall be governed by the laws of the State of
New York without reference to its rules as to conflicts of laws.
16. Survival
This Subscription Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive
and continue in full force and effect and be binding upon the Purchaser
for a period of two years following the completion of the
14
Offering of Units by the Corporation, notwithstanding the completion of
the subscription for the Purchased Units by the Purchaser pursuant hereto,
and any subsequent disposition by the Purchaser of any Preferred Shares,
Series B Warrants or Additional Warrants comprising the Purchased Units.
17. Assignment
This Subscription Agreement is not transferable or assignable by the
parties hereto.
18. Counterparts
This Agreement may be exercised in counterparts, each of which shall be
deemed to be an original and all of which shall constitute one and the
same document. The Corporation and the Agent shall be entitled to rely
upon delivery by facsimile of an executed copy of this Subscription
Agreement and acceptance by the Corporation of such facsimile copies will
be legally effective to create a valid and binding agreement between the
Purchaser and the Corporation in accordance with the terms hereof.
15
19. Subscription Particulars
(a) The aggregate number of Units subscribed for is _________________________.
(b) The Preferred Shares, Series B Warrants and Additional Warrants are to be
registered in the name of:
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(if space is insufficient, attach a list)
(c) The certificates representing the Preferred Shares, Series B Warrants and
Additional Warrants are to be delivered to:
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at its office at:
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Contact Name and Number:
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(d) If the Purchaser is signing as agent for a principal and not as agent for
a fully managed account, the name and address of the beneficial purchaser
is:
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(if space is insufficient, attach a list)
DATED at ___________ this day of March, 2002.
----------------------------------------------
Name of Purchaser (please type or print)
By:
----------------------------------------
(Signature of Authorized Representative)
----------------------------------------
(Name of Person Signing)
----------------------------------------
Office or Title
--------------------------------
--------------------------------
Address of Purchaser
ACCEPTANCE
This Subscription Agreement is hereby accepted and agreed to by Life
Medical Sciences, Inc.
DATED at ______________________________________________, the
____________ day of _________________, 2002.
LIFE MEDICAL SCIENCES, INC.
By:
------------------------------
Authorized Signing Officer
Appendix I
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
LIFE MEDICAL SCIENCES, INC.
Life Medical Sciences, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors (the "Board of Directors") has adopted the
following resolutions creating a series of the Corporation's Preferred Stock,
par value $.01 per share, designated as the Series B Convertible Preferred
Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, par
value $.01 per share, of the Corporation be and hereby is created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Title of Series. The series of the Preferred Stock shall be designated
as the Series B Convertible Preferred Stock (the "Series B Preferred").
2. Number of Shares in Series; Par Value. The number of authorized shares
of Series B Preferred shall be [not more than 1,124,833] shares, par value $.01
per share.
3. Dividends. Subject to Section 6(d)(vii) hereof, the holders of the
Series B Preferred shall be entitled to receive dividends only when, as, and if
declared by the Board of Directors.
4. Liquidation Preference.
(a) Preference. In the event of any liquidation, dissolution or
winding up of the Corporation (a "Liquidation Event"), whether voluntary or
involuntary, the holders of the Series B Preferred shall be entitled to receive
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of Common Stock of the Corporation, and
after any distribution of any assets or surplus funds of the Corporation
representing preferential amounts to the holders of shares of other series of
preferred stock ranking senior to the Series B Preferred as to payment upon the
occurrence of a Liquidation Event ("Senior Securities"), and pari passu with
shares of other series of preferred stock ranking
- 2 -
on a parity with the Series B Preferred as to payment upon the occurrence of a
Liquidation Event (on the basis of the relative liquidation amounts for each
such series), an amount equal to $1.20 per share plus a further amount equal to
all declared but unpaid dividends on such shares for each share of Series B
Preferred then held by them. All of the preferential amounts to be paid to the
holders of the Series B Preferred under this Section 4 shall be paid before the
payment or setting apart for payment of any amount for, or the distribution of
any assets or funds of the Corporation to, the holders of the Common Stock or
other series of preferred stock ranking junior to the Series B Preferred as to
payment in connection with such Liquidation Event.
(b) Insufficient Assets. If upon such Liquidation Event the assets
and funds of the Corporation are insufficient to provide for the payment of the
full aforesaid preferential amount to the holders of the Series B Preferred and
all other shares of other series of preferred stock on parity therewith as to
payment upon the occurrence of a Liquidation Event, then, subject to
distribution or setting aside for distribution of assets or funds for the
payment of preferential amounts in respect of Senior Securities, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among such holders in proportion to the full preferential
amount each such holder is otherwise entitled to receive.
(c) No Participation. After the payment or the setting apart of
payment of the full preferential amounts to the holders of the Series B
Preferred, holders of Series B Preferred shall have no claim to the remaining
assets and funds of the Corporation.
(d) Deemed Liquidation. For purposes of this Section 4, unless
waived by the holders of not less than two-thirds of the outstanding shares of
Series B Preferred, (i) any acquisition of the Corporation by means of merger or
other form of corporate reorganization in which outstanding shares of the
Corporation are exchanged for securities or other consideration issued, or
caused to be issued, by the acquiring corporation or its subsidiary (other than
a mere reincorporation transaction), unless the Corporation's stockholders of
record immediately prior to such acquisition (by virtue of securities issued as
consideration for the Corporation's acquisition) hold at least 50% of the voting
power of the surviving or acquiring entity or (ii) a sale of all or
substantially all of the assets of the Corporation, shall be treated as a
Liquidation Event and shall entitle the holders of Series B Preferred to receive
at the closing of such merger, reorganization or sale, in cash, securities or
other properties (valued as provided in subsection 4(e) below), amounts as
specified in subsections (a), (b) and (c) above; provided, however, that the
Acquisition (as such term is defined in the Subscription Agreement of
approximate date herewith between the Corporation and the purchasers of Series B
Preferred (the "Subscription Agreement")) shall not be a Liquidation Event;
(e) Noncash Distributions. If any of the assets or funds of the
Corporation are to be distributed other than in cash under this Section 4 or for
any purpose, then the Board of Directors shall promptly engage an independent
appraiser to determine the value of the assets to be distributed to the holders
of the Series B Preferred. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
the Series B Preferred of the appraiser's valuation. Notwithstanding the above,
any securities to be distributed to the stockholders shall be valued as follows:
- 3 -
(i) if traded on a securities exchange or interdealer
quotation system, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the 30-day period ending three
(3) business days prior to the closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board of
Directors of the Corporation.
5. Voting Rights.
(a) General. Except as set forth herein or as otherwise required by
law, a holder of Series B Preferred shall be entitled to that number of votes
per share of Series B Preferred equal to the number of shares of the
Corporation's common stock (the "Common Stock") into which such share of Series
B Preferred would be converted if the conversion took place on the record date
for determination of the stockholders entitled to vote on such matters or, if no
such record date is established, on the date such vote is taken or any written
consent of stockholders is solicited (irrespective of whether the Series B
Preferred is then in fact, convertible, or whether there then exists sufficient
authorized and unissued shares of Common Stock to permit such conversion), such
votes to be counted together with all other shares of stock of the Corporation
having general voting power and not counted separately as a class. Except as
otherwise provided in this Certificate of Incorporation or as required by
applicable law, the holders of shares of Series B Preferred shall have full
voting rights and powers equal to the voting rights and powers of the holders of
shares of Common Stock, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the Corporation and applicable law, and
shall vote, together with the holders of shares of Common Stock (and any other
class or series of stock entitled to vote together as one class with the Common
Stock), with respect to any question upon which holders of shares of Common
Stock have the right to vote, as a single class, including, but not limited to,
actions amending the Certificate of Incorporation of the Corporation to increase
the number of authorized shares of Common Stock.
6. Conversion. The Series B Preferred shall be subject to conversion as
follows (the "Conversion Rights"):
(a) Automatic Conversion. Upon the occurrence of the first
anniversary of the date hereof and subject to the occurrence of the Authorized
Capital Increase, each share of Series B Preferred shall automatically convert
into such number of fully paid and nonassessable shares of Common Stock (the
"Conversion Rate") as is determined by dividing $1.20 by the Series B Conversion
Price, as hereinafter provided, in effect at the time of the conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series B Preferred (the "Series B Conversion Price") shall initially be
$0.12 per share. Such initial Series B Conversion Price shall be subject to
adjustment as hereinafter provided.
(b) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred, provided that whether or
not fractional shares
- 4 -
result from a conversion shall be determined on the basis of the total number of
shares of Series B Preferred the holder is at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion. In lieu of any fractional shares to which the holder would otherwise
be entitled, the Corporation shall round the number of shares of Common Stock
issuable to such holder to the nearest whole number. Before any holder of Series
B Preferred shall be entitled to receive a certificate representing shares of
Common Stock upon conversion, such holder shall surrender the certificate or
certificates representing the related shares of Series B Preferred, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series B Preferred and shall give written notice to the Corporation stating the
name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Preferred or its nominee or nominees, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. If the conversion is in connection with an underwritten offering of
securities pursuant to the Securities Act, the conversion may, at the option of
any holder tendering shares of Series B Preferred for conversion, be conditioned
upon the closing with the underwriters of the sale of securities pursuant to
such offering, in which event the holder entitled to receive the Common Stock
upon conversion of the Series B Preferred shall not be deemed to have converted
such Series B Preferred until immediately prior to the closing of such sale of
securities.
(c) Reservation of Stock Issuable Upon Conversion. The Corporation
shall use its best efforts at all times to reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series B Preferred, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series B Preferred; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then-outstanding shares of the
Series B Preferred, in addition to such other remedies as shall be available to
the holders of Series B Preferred, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.
(d) Adjustments to Conversion Price.
(i) Special Definitions. The following definitions shall apply
to this Certificate of Designations:
(1) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock, Series A
Convertible Preferred Stock, $.01 par value of the Corporation ("Series A
Preferred"), Series B Preferred or Convertible Securities.
(2) "Original Issue Date" means the first date on which
Series B Preferred was issued.
- 5 -
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to subsection 6(d)(iii), deemed to
be issued) by the Corporation after the Original Issue Date, other than
(A) shares of Common Stock issued or issuable upon
conversion of the Series A Preferred or Series B Preferred;
(B) shares of Common Stock issued or issuable as a
dividend or distribution on Series A Preferred, Series B Preferred or any event
for which adjustment is made pursuant to subsection 6(d)(vi) or 6(d)(vii)
hereof;
(C) shares of Common Stock issued or issuable
pursuant to the valid exercise of all Options and Convertible Securities
(including the Warrants, as defined in the Subscription Agreement) which are
either currently outstanding or are to be issued upon closing of the Offering,
as well as Options to purchase not more than an additional aggregate of
1,000,000 shares of common stock which may from time to time be granted by the
Corporation; and
(D) shares of Common Stock (or other securities)
issued or issuable in the Acquisition, or upon conversion or exercise of
securities issued or issuable in the Acquisition.
(ii) No Adjustment of Conversion Price. No adjustment of the
Series B Conversion Price shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be taken into account in any
subsequent adjustment to the Series B Conversion Price.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number that
would result in an adjustment pursuant to clause (2) below) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the Series B Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock
- 6 -
upon the exercise of such Options or conversion or exchange of such Convertible
Securities, or upon the receipt of payment for any such conversion or exchange;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series B Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Series B Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities whether or not converted or
exchanged, plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised;
(4) no readjustment pursuant to clause (2) or (3) above
shall have the effect of increasing the Series B Conversion Price to an amount
which exceeds the lower of (A) the Series B Conversion Price on the original
adjustment date, or (B) the Series B Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iv) Adjustment of Series B Conversion Price of Series B
Preferred Upon Issuance of Additional Shares of Common Stock. In the event that
after the Original Issue Date the Corporation shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to subsection 6(d)(iii)) without consideration or for a consideration
per share less than the Series B Conversion Price in effect on
- 7 -
the date of and immediately prior to such issue, then and in such event, such
Series B Conversion Price shall be reduced, concurrently with such issue, to a
price (subject to Section 6(d)(ii), calculated to the nearest cent) determined
by multiplying such Series B Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received or deemed received by the Corporation for the
total number of Additional Shares of Common Stock so issued or deemed issued
would purchase at such Series B Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued
or deemed issued; and provided further that, for the purposes of this subsection
(iv), all shares of Common Stock issuable upon conversion of outstanding Series
B Preferred and outstanding Convertible Securities or exercise of outstanding
Options shall be deemed to be outstanding (whether or not conversion or exercise
is then permitted), and immediately after any Additional Shares of Common Stock
are deemed issued pursuant to subsection 6(d)(iii), such Additional Shares of
Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
Section 6(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Except as provided in clause (2)
below, such consideration shall:
(A) insofar as it consists of cash, be computed as
the aggregate amount of cash received by the Corporation, before deducting any
discounts, commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the issuance
and sale thereof, and excluding amounts paid or payable for accrued interest or
accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; provided, however, that no
value shall be attributed to any services performed by any employee, officer or
director of the Corporation; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received with respect to such Additional Shares of Common
Stock, computed as provided in clauses (A) and (B) above, as determined in good
faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6(d)(iii), relating
to Options and Convertible Securities, shall initially be determined by
dividing:
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(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustments for Stock Dividends, Subdivisions,
Combinations or Consolidations of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided (by stock dividend, stock split, or
otherwise), into a greater number of shares of Common Stock, the Series B
Conversion Price then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Series B
Conversion Price then in effect shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(vii) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution (other than a distribution described in Section 6(d)(vi)),
including a distribution in cash, the holders of Series B Preferred shall be
entitled to a proportionate share of any such distribution as though their
shares of Series B Preferred were converted into Common Stock on the record date
fixed for the determination of holders of shares of Common Stock entitled to
receive such distribution.
(viii) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the Series B
Preferred shall be changed into the same or a different number of shares of any
other class or classes of stock or other securities or property of the
Corporation, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares provided for in Section
6(d)(vi), or a transaction that would constitute a deemed liquidation of the
Corporation under Section 4(d)), then and in each such event provision shall be
made so that each holder of shares of Series B Preferred shall thereafter be
entitled to receive, upon conversion of the Series B Preferred, the number of
shares of stock or other securities or property of the Corporation or otherwise,
receivable upon such reorganization, reclassification or other transaction by a
holder of the number of shares of Common Stock into which such shares of Series
B Preferred would have been converted if converted immediately prior to such
reorganization, reclassification or other transaction. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 6 with respect to the rights of the holders of shares of Series B
Preferred after the reorganization, reclassification or other transaction to the
end that the
- 9 -
provisions of this Section 6 (including adjustments of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series B
Preferred) shall be applicable after that event as nearly equivalent as may be
practicable.
(ix) No Impairment. Without the prior written consent of the
holders of a majority of the Series B Preferred, the Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying out of
all the provisions of Section 6 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series B Preferred against impairment.
(x) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to Section
6, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series B Preferred 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 B Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustments and readjustments, (B) the Series
B Conversion Price at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of Series B Preferred.
7. Redemption. The Series B Preferred are not redeemable by the
Corporation, nor may the holders of Series B Preferred require the Corporation
to redeem such shares.
8. Notices of Record Date. In the event that the Corporation shall propose
at any time:
(a) to declare any dividend or distribution upon its Common Stock,
whether in cash, property, stock or other securities, whether or not a regular
cash dividend and whether or not out of earnings or earned surplus;
(b) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series or
other rights;
(c) to effect any reclassification or recapitalization of its Common
Stock outstanding involving a change in the Common Stock; or
(d) to merge or consolidate with or into any other corporation, or
sell, lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up, then, in connection with each such event, unless
waived in writing by the holders of a majority of the outstanding shares of
Series B Preferred, the Corporation shall send to the holders of the Series B
Preferred:
- 10 -
(i) at least 20 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (c) and (d) above; and
(ii) in the case of the matters referred to in (c) and (d)
above, at least 20 days' prior written notice of the date when the same shall
take place (and specifying the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event) provided, that no such notice
shall be required in connection with the Acquisition (as defined in the
Subscription Agreement); provided, further, that notice shall be provided in the
same manner as any notice actually provided to the holders of Common Stock in
connection with the Acquisition.
Each such written notice shall be delivered personally or given by
first class mail, postage prepaid, addressed to the holders of the Preferred
Stock at the address for each such holder as shown on the books of this
Corporation.
9. Protective Provisions. In addition to any other rights provided by law,
the Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of at least a majority of the outstanding shares
of Series B Preferred, voting together as a single class, amend or repeal any
provision of the Corporation's Certificate of Incorporation or Bylaws in such a
manner as to adversely affect the rights of the holders of Series B Preferred.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by ▇▇▇▇▇▇ ▇▇▇▇▇▇, the Chairman, President and Chief Executive Officer of
the Corporation. The signature below shall constitute the affirmation or
acknowledgement, under penalties of perjury, that the facts herein stated are
true.
Dated: LIFE MEDICAL SCIENCES, INC.
--------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Chairman, President and Chief
Executive Officer
Appendix II
Warrant No:
-----------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), STATE SECURITIES LAWS IN THE UNITED STATES OR THE SECURITIES LAW OF ANY
OTHER COUNTRY AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS (A) SUCH TRANSACTION OCCURS OUTSIDE THE UNITED
STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE ACT (OR SUCH SUCCESSOR RULE OR REGULATION THEN IN EFFECT), IF
APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, (B) THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REGISTERED
UNDER THE ACT OR (C) SUCH TRANSACTION CONSTITUTES A TRANSACTION THAT OTHERWISE
DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, AND THE HOLDER PRIOR TO SUCH TRANSACTION HAS FURNISHED TO THE CORPORATION
AN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY
SATISFACTORY TO THE CORPORATION, SUBJECT IN EACH CASE TO ANY APPLICABLE UNITED
STATES FEDERAL OR STATE OR FOREIGN SECURITIES LAW RESTRICTIONS APPLICABLE TO THE
RESALE OF THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ANY PERSON EXERCISING THIS WARRANT WILL BE REQUIRED TO PROVIDE (1) WRITTEN
CERTIFICATION THAT IT IS NOT A U.S. PERSON WITHIN THE MEANING OF REGULATION S OF
THE ACT AND THAT THIS WARRANT IS NOT BEING EXERCISED WITHIN THE UNITED STATES OR
ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON OR A PERSON IN THE
UNITED STATES, OR (2) A WRITTEN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THE
EFFECT THAT THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE ACT AND UNDER ANY APPLICABLE U.S. STATE
SECURITIES LAWS OR ARE EXEMPT FROM REGISTRATION THEREUNDER.
WARRANT TO PURCHASE COMMON STOCK
_____________________ Shares of Common Stock
LIFE MEDICAL SCIENCES, INC.
THIS CERTIFIES THAT, for good and valuable consideration, the
receipt of which is hereby acknowledged, (the "Warrantholder") with an address
at ____________________________________, is the registered holder of this
Warrant and is entitled to subscribe for and purchase from Life Medical
Sciences, Inc., a Delaware corporation (herein called the "Corporation"), at any
time after the date hereof and before the later of 5:00 p.m. (Eastern Standard
Time) on March, 2004 and the date which is 18 months after the date upon
which the Corporation implements an increase to its authorized shares of common
stock of the Corporation ("Shares") to an amount sufficient to permit the
conversion or exercise of all presently outstanding securities of the
Corporation (including securities to be sold in the offering referred to in
Section 1 below) convertible into or exchangeable for Shares
2
(the "Authorized Capital Increase") (such later time referred to hereafter as
the "Time of Expiry"), up to __________ fully paid and non-assessable Shares par
value $.001 per Share of the Corporation at an exercise price of $0.24 per
Share, subject to adjustment as provided below (collectively the "Exercise
Price").
This Warrant is subject to the provisions of the Investor Rights
Agreement dated __________, 2002 among the Corporation and certain
Warrantholders, as well as to a subscription agreement entered into with the
original warrantholder in connection with the offering referred to in Section 1
below (the "Subscription Agreement"), and the following provisions, terms and
conditions:
1. Designation
This warrant certificate is one of a series of warrant certificates
(collectively, the "Warrants") issued pursuant to an offering by the Corporation
of up to 1,000,000 units, each unit consisting of one share of Series B
Convertible Preferred Stock, $.01 par value per share, of the Corporation, one
Warrant to purchase ten (10) Shares and one additional warrant to purchase ten
(10) Shares at an exercise price of $0.12 per Share.
2. Exercise of Warrants
(a) Election to Purchase. This Warrant may be exercised by the
Warrantholder prior to the Time of Expiry in whole or in part and in
accordance with the provisions hereof by delivery of an Election to
Purchase in a form substantially the same as that attached hereto as
Annex "A", properly completed and executed, together with this
Warrant and payment of the Exercise Price multiplied by the number
of Shares specified in the Election to Purchase to the Corporation
at ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇., Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as may be notified in
writing by the Corporation. Payment shall be made in U.S. dollars by
certified or bank cashier's cheque payable to the order of the
Corporation.
(b) Exercise. The Corporation shall, promptly following the date it
receives a duly executed Election to Purchase, this Warrant and
payment of the Exercise Price for the number of Shares specified in
the Election to Purchase (the "Exercise Date"), issue or cause to be
issued that number of Shares specified in the Election to Purchase
as fully paid and non-assessable Shares. Such duly executed Election
to Purchase shall constitute the Warrantholder's acknowledgement of
and undertaking to comply to the reasonable satisfaction of the
Corporation and its counsel, with all applicable laws, rules,
regulations and policies of every stock exchange upon which the
Shares of the Corporation may from time to time be listed or traded,
and any other applicable governmental or regulatory authorities.
(c) Share Certificates. As promptly as practicable after the Exercise
Date (and in any event not later than 10 days after the Exercise
Date), the Corporation shall send to the Warrantholder, registered
in such name or names as the Warrantholder may direct or if no such
direction has been given, in the name of the Warrantholder, a
certificate or certificates for the number of Shares specified in
the Election to Purchase. To the extent permitted by law, such
3
exercise shall be deemed to have been effected as of the close of
business on the Exercise Date, and at such time the rights of the
Warrantholder with respect to the number of the Warrants which have
been exercised as such shall cease, and the person or persons in
whose name or names any certificate or certificates for Shares shall
then be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the Shares represented thereby.
(d) Fractional Shares. No fractional Shares shall be issued upon
exercise of this Warrant and no payments or adjustment shall be made
upon any exercise on account of any cash dividends on the Shares
issued upon such exercise. If any fractional interest in a Share
would, except for the provisions of the first sentence of this
subsection 2(d), be deliverable upon the exercise of this Warrant,
the number of Shares to be issued to the Warrantholder upon the
exercise of this Warrant shall be rounded to the nearest whole
number.
(e) Subscription for Less than Entitlement. The Warrantholder may from
time to time subscribe for and purchase a number of Shares less than
the aggregate number which the holder is entitled to purchase
pursuant to this Warrant. In the event of a purchase of a number of
Shares less than the aggregate number which may be purchased
pursuant to this Warrant, the holder thereof shall be entitled to
receive, without charge, a new Warrant certificate in respect of the
balance of the Shares subject to this Warrant which were not
purchased by the Warrantholder.
(f) Corporate Changes. If the Corporation shall be a party to any
reorganization, merger, dissolution or sale of all or substantially
all of its assets (the "Event"), (other than a reorganization or
merger in which the Corporation is the surviving entity) then the
securities purchasable hereunder shall be the securities (the "Event
Securities") which the Warrantholder would have received or been
entitled to receive in such Event if such Warrantholder had fully
exercised this Warrant prior to the record date (or if there was no
record date, then prior to the effective date) of such Event, and
the Exercise Price shall be adjusted to be the amount determined by
multiplying the Exercise Price in effect immediately prior to the
Event by the number of Shares as to which this Warrant was
unexercised immediately prior to the Event, and dividing the product
thereof by the number of Event Securities; provided however, that
the Event shall not be carried into effect unless all necessary
steps have been taken to ensure that any surviving entity is subject
to the terms of this Warrant as adjusted.
Notwithstanding anything to the contrary contained in the
immediately proceeding paragraph, in the event of a transaction
contemplated by such paragraph in which the surviving or purchasing
corporation demands that all outstanding Warrants be extinguished
prior to the closing date of the contemplated transaction, the
Corporation shall give prior notice (the "Merger Notice") thereof to
the Holders advising them of such transaction. The Holders shall
have ten days after the date of the Merger Notice to elect to (i)
exercise the Warrants in the manner provided herein, or (ii) receive
from the surviving or purchasing corporation the same consideration
receivable by a holder of the
4
number of shares of Common Stock for which this Warrant might have
been exercised immediately prior to such consolidation, merger,
sale, or purchase reduced by such amount of the consideration as has
a market value equal to the Exercise Price, as determined by the
board of directors of the Corporation in accordance with the terms
of the Warrants. If any Holder fails to timely notify the
Corporation of its election, the Holder shall be deemed for all
purposes to have elected the option set forth in (ii) above. Any
amounts receivable by a Holder who has elected the option set forth
in (ii) above shall be payable at the same time as amounts payable
to stockholders in connection with any such transaction.
(g) Subdivision or Consolidation of Shares
(i) In the event the Corporation shall subdivide its outstanding
Shares into a greater number of Shares, the Exercise Price in
effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in the event the
outstanding Shares of the Corporation shall be consolidated
into a smaller number of Shares, the Exercise Price in effect
immediately prior to such consolidation shall be
proportionately increased.
(ii) Upon each adjustment of the Exercise Price as provided herein,
the Warrantholder shall thereafter be entitled to acquire, at
the Exercise Price resulting from such adjustment, the number
of Shares (calculated to the nearest tenth of a Share)
obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Shares
which may be acquired hereunder immediately prior to such
adjustment and dividing the product thereof by the Exercise
Price resulting from such adjustment.
(h) Change or Reclassification of Shares. In the event the Corporation
shall change or reclassify its outstanding Shares into a different
class of securities, this Warrant shall be adjusted as follows so as
to apply to the successor class of securities:
(i) the number and kind of the successor class of securities which
the Warrantholder shall be entitled to acquire shall be the
aggregate number and kind of securities which, if this Warrant
had been exercised immediately prior to such change or
reclassification, the Warrantholder would have been entitled
to receive by reason of such change or reclassification; and
(ii) the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the change or
reclassification by the number of Shares as to which this
Warrant was unexercised immediately prior to the change or
reclassification, and dividing the product thereof by the
number of the successor class of securities determined in
paragraph 2(h)(i) hereof.
5
(i) Distribution to Shareholders. If and whenever at any time prior to
the Time of Expiry the Corporation shall fix a record date or if a
date is otherwise established (any such date being hereinafter
referred to in this subsection 2(i) as the "record date") for the
issuance of rights, options or warrants to all or substantially all
the holders of the outstanding Shares of the Corporation entitling
them, for a period expiring not more than 45 days after such record
date, to subscribe for or purchase Shares of the Corporation or
securities convertible into or exchangeable for Shares at a price
per share or, as the case may be, having a conversion or exchange
price per share less than 95% of the Fair Market Value (as
hereinafter defined) on such record date, the Exercise Price shall
be adjusted immediately after such record date so that it shall
equal the price determined by multiplying the Exercise Price in
effect on such record date by a fraction, of which the numerator
shall be the total number of Shares outstanding on such record date
plus a number equal to the number arrived at by dividing the
aggregate price of the total number of additional Shares offered for
subscription or purchase or, as the case may be, the aggregate
conversion or exchange price of the convertible or exchangeable
securities so offered by the Fair Market Value, and of which the
denominator shall be the total number of Shares outstanding on such
record date plus the total number of additional Shares so offered
(or into which the convertible or exchangeable securities so offered
are convertible or exchangeable); Shares owned by or held for the
account of the Corporation or any subsidiary of the Corporation
shall be deemed not to be outstanding for the purpose of any such
computation; such adjustment shall be made successively whenever
such a record date is fixed; to the extent that any rights or
warrants are not so issued or any such rights or warrants are not
exercised prior to the expiration thereof, the Exercise Price shall
then be readjusted to the Exercise Price which would then be in
effect if such record date had not been fixed or to the Exercise
Price which would then be in effect based upon the number of Shares
or conversion or exchange rights contained in convertible or
exchangeable securities actually issued upon the exercise of such
rights or warrants, as the case may be.
(j) Additional Subscriptions. If at any time the Corporation grants to
its shareholders the right to subscribe for and purchase pro rata
additional securities of the Corporation (other than securities
described in subsection (2)(i) hereof) or of any other corporation
or entity, there shall be no adjustments made to the number of
Shares or other securities subject to this Warrant or to the
Exercise Price in consequence thereof and this Warrant shall remain
unaffected.
(k) Carry Over of Adjustments. No adjustment of the Exercise Price shall
be made if the amount of such adjustment shall be less than 1% of
the Exercise Price in effect immediately prior to the event giving
rise to the adjustment, provided however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least 1% of the Exercise
Price in effect prior to such adjustment.
6
(l) Notice of Adjustment. Upon any adjustment of the number of Shares
and upon any adjustment of the Exercise Price, then and in each such
case the Corporation shall give written notice thereof to the
Warrantholder, which notice shall state the Exercise Price and the
number of Shares or other securities into which each Warrant is
exercisable resulting from such adjustment, and shall set forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based. Upon the request of a Warrantholder there
shall be transmitted promptly to all Warrantholders a statement
prepared by the firm of independent certified public accountants
retained to audit the financial statements of the Corporation to the
effect that such firm concurs in the Corporation's calculation of
the change.
(m) Other Notices. If at any time:
(i) the Corporation shall declare any dividend upon its Shares;
(ii) the Corporation shall offer for subscription pro rata to the
holders of its Shares any additional shares of any class or
other rights;
(iii) there shall be any capital reorganization or reclassification
of the capital stock of the Corporation, or consolidation,
amalgamation or merger of the Corporation with, or sale of all
or substantially all of its assets to, another corporation
(other than the Acquisition as defined in the Subscription
Agreement); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation,
then, in any one or more of such cases, the Corporation shall give
to the Warrantholder (A) at least 20 days' prior written notice of
the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation
or winding-up and (B) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, at least 20 days' prior written notice of
the date when the same shall take place. Such notice in accordance
with the foregoing clause shall also specify (A) in the case of any
such dividend, distribution or subscription rights, the date on
which the holders of Shares shall be entitled thereto, and (B) in
the case of any transaction described in the foregoing clauses (iii)
and (iv), the date on which the holders of Shares are to be entitled
to exchange their Shares for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation
or winding-up, as the case may be.
(n) Increase to Authorized Capital. The Corporation will, as soon as
reasonably practicable, convene a meeting of shareholders of the
Corporation at which the Corporation will place before shareholders
a proposal for the Authorized Capital Increase or otherwise submit
such proposal to stockholders pursuant to a written consent.
7
(o) Shares to be Reserved. Immediately following the Authorized Capital
Increase, the Corporation will at all times keep available and
reserve out of its authorized Shares, solely for the purpose of
issue upon the exercise of this Warrant, such number of Shares as
shall then be issuable upon the exercise of these Warrants. Assuming
the implementation of the Authorized Capital Increase, the
Corporation covenants and agrees that all Shares which shall be so
issuable will, upon issuance, be duly authorized and issued, fully
paid and non-assessable. The Corporation will take all such action
as may be necessary to assure that all such Shares may be so issued
without violation of any applicable requirements of any stock
exchange upon which the Shares of the Corporation may be listed or
in respect of which the Shares are qualified for unlisted trading
privileges. The Corporation will take all such action as is within
its power to assure that all such Shares may be so issued without
violation of any applicable law.
(p) Issue Tax. The issuance of certificates for Shares upon the exercise
of these Warrants shall be made without charge to the Warrantholder
for any issuance tax in respect thereto, provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
Warrantholder.
(q) Fair Market Value. For the purposes of any computation hereunder,
unless otherwise specified, the "Fair Market Value" at any date
shall be: (i) if the Shares are listed on a stock exchange or quoted
on a similar securities market, the weighted average sale price per
share for the Shares for any 20 consecutive trading days (selected
by the Corporation) commencing not more than 25 trading days before
such date on the principal stock exchange or similar securities
market upon which the Shares are listed or quoted, as the case may
be; or (ii) if the computation is being made in connection with a
public offering of Shares, the gross distribution price per Share
under the offering; or (iii) in all other cases, the Fair Market
Value shall be determined by the Board of Directors in good faith,
which determination shall be conclusive. The weighted average sale
price shall be determined by dividing the aggregate sale price of
all Shares sold on the said exchange or market during the said 20
consecutive trading days by the total number of Shares so sold.
(r) The Shares issued upon exercise of the Warrants shall be subject to
a stop transfer order and the certificate or certificates evidencing
such Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), STATE SECURITIES LAWS IN THE UNITED STATES OR
THE SECURITIES LAWS OF ANY OTHER COUNTRY, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
(A) SUCH TRANSACTION OCCURS OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE ACT (OR SUCH SUCCESSOR RULE OR REGULATION THEN IN EFFECT),
IF APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS, (B) THE SECURITIES REPRESENTED BY THIS CERTIFICATE
8
ARE REGISTERED UNDER THE ACT OR (C) SUCH TRANSACTION CONSTITUTES A
TRANSACTION THAT OTHERWISE DOES NOT REQUIRE REGISTRATION UNDER THE
ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER PRIOR TO
SUCH TRANSACTION HAS FURNISHED TO THE CORPORATION AN OPINION OF
COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY
SATISFACTORY TO THE CORPORATION, SUBJECT IN EACH CASE TO ANY
APPLICABLE UNITED STATES FEDERAL, STATE OR FOREIGN SECURITIES LAW
RESTRICTIONS APPLICABLE TO THE RESALE OF THIS WARRANT AND THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT.
3. Transfer
Subject to compliance by the Warrantholder with any applicable
resale restrictions, the Corporation acknowledges and agrees that this Warrant
may be assigned or transferred by the Warrantholder at the Warrantholder's
option. It is the sole responsibility of the Warrantholder to ensure that all
such restrictions have been observed. Upon any permitted assignment or transfer,
the Warrantholder shall furnish the Corporation with such information regarding
the transferee as the Corporation may reasonably require to register this
Warrant in the name of the transferee.
4. Replacement
Upon receipt of evidence satisfactory to the Corporation of the
loss, theft, destruction or mutilation of this Warrant and, if requested by the
Corporation, upon delivery of a bond of indemnity satisfactory to the
Corporation (or, in the case of mutilation, upon surrender of this Warrant), the
Corporation will issue to the Warrantholder a replacement Warrant (containing
the same terms and conditions as this Warrant).
5. Expiry Date
This Warrant shall expire and all rights to purchase Shares
hereunder shall cease and become null and void at 5:00 p.m. (Eastern Standard
Time) on the later of ____________, 2004 and the date which is 18 months after
the date upon which the Corporation implements the Authorized Capital Increase.
6. Amendment
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, or by the affirmative consent in writing of holders of at least
two-thirds of the then outstanding Warrants.
7. Inability to Deliver Shares
Notwithstanding any other provision hereof, if due to the
Corporation's failure to implement the Authorized Capital Increase, the
Corporation is unable to issue and deliver the Shares as contemplated herein to
the Warrantholder upon the proper exercise by the Warrantholder of the Warrant
to purchase the Shares covered by this Warrant, at the sole option of the
Warrantholder, the Corporation shall pay to the Warrantholder, in cash, an
amount equal to the positive difference, if any, between (i) the Exercise Price
multiplied by the number of Shares for which the Warrant is exercisable; and
(ii) the Aggregate Value (as defined below) of such Shares or other securities
on the Exercise Date (the "Cash Remedy").
9
For purposes of this paragraph "Aggregate Value" means the weighted average sale
price per share for the Shares for the 20 consecutive trading days before such
date on the principal stock exchange or similar securities market upon which the
Shares are listed or quoted as the case may be, multiplied by the number of
Shares for which the Warrant is exercisable. The Cash Remedy is the
Warrantholder's sole recourse against the Corporation for failure to implement
the Authorized Capital Increase. Upon payment of the Cash Remedy, this Warrant
shall be null and void.
8. Governing Law
The laws of the State of New York and applicable federal laws of the
United States shall govern this Warrant.
9. Successors
This Warrant shall enure to the benefit of and shall be binding upon
the Warrantholder and the Corporation and their respective successors.
IN WITNESS WHEREOF the Corporation has caused this Warrant to be
signed by its duly authorised officers and its corporate seal hereto affixed.
DATED: March, 2002
LIFE MEDICAL SCIENCES, INC.
By:
--------------------------------
Annex "A" to Share Purchase Warrant
Election to Purchase
The undersigned Warrantholder hereby irrevocably elects to exercise
the Warrant issued by Life Medical Sciences, Inc. dated ____________, 2002 for
the number of common shares (or other property or securities subject thereto)
("Shares") as set forth below:
(a) Number of Shares to be Acquired:
------------
(b) Exercise Price per Share: $
-----------
(c) Aggregate Purchase Price $
[(a) multiplied by (b)] -----------
and hereby tenders a certified or cashier's cheque or bank draft for such
aggregate purchase price, and directs such Shares to be registered and a
certificate therefor to be issued as directed below.
DATED this _____________ day of ________________, ____.
----------------------- ---------------------------------
Witness Signature
Direction as to Registration
Name of Registered Holder:
---------------------------------
Address of Registered Holder:
---------------------------------
---------------------------------
---------------------------------
Annex "B"
TO: LIFE MEDICAL SCIENCES, INC.
FOR VALUE RECEIVED, the undersigned hereby sells, transfers and
assigns unto _____________________________ the within warrant (herein called the
"Warrant"). The undersigned hereby irrevocably instructs you to transfer the
Warrant on your books of registration and to issue in substitution therefor a
new warrant exercisable for the same number of shares or other securities or
property as the Warrant.
DATED the ________ day of ________________, ____.
Signature of Transferor is hereby guaranteed:
---------------------------------
Note: The signature to this Warrant transfer must correspond with the name as
set forth on the face of the Warrant in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or other
financial institution acceptable to the Corporation.
Appendix III
Warrant No:
------------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), STATE SECURITIES LAWS IN THE UNITED STATES OR THE SECURITIES LAW OF ANY
OTHER COUNTRY AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS (A) SUCH TRANSACTION OCCURS OUTSIDE THE UNITED
STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE ACT (OR SUCH SUCCESSOR RULE OR REGULATION THEN IN EFFECT), IF
APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, (B) THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REGISTERED
UNDER THE ACT OR (C) SUCH TRANSACTION CONSTITUTES A TRANSACTION THAT OTHERWISE
DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, AND THE HOLDER PRIOR TO SUCH TRANSACTION HAS FURNISHED TO THE CORPORATION
AN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY
SATISFACTORY TO THE CORPORATION, SUBJECT IN EACH CASE TO ANY APPLICABLE UNITED
STATES FEDERAL OR STATE OR FOREIGN SECURITIES LAW RESTRICTIONS APPLICABLE TO THE
RESALE OF THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ANY PERSON EXERCISING THIS WARRANT WILL BE REQUIRED TO PROVIDE (1) WRITTEN
CERTIFICATION THAT IT IS NOT A U.S. PERSON WITHIN THE MEANING OF REGULATION S OF
THE ACT AND THAT THIS WARRANT IS NOT BEING EXERCISED WITHIN THE UNITED STATES OR
ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON OR A PERSON IN THE
UNITED STATES, OR (2) A WRITTEN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THE
EFFECT THAT THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE ACT AND UNDER ANY APPLICABLE U.S. STATE
SECURITIES LAWS OR ARE EXEMPT FROM REGISTRATION THEREUNDER.
WARRANT TO PURCHASE COMMON STOCK
_____________________ Shares of Common Stock
LIFE MEDICAL SCIENCES, INC.
March, 2002
to
June 30, 2002
THIS CERTIFIES THAT, for good and valuable consideration, the
receipt of which is hereby acknowledged, _______________ (the "Warrantholder")
with an address at ________________________, is the registered holder of this
Warrant and is entitled to subscribe for and purchase from Life Medical
Sciences, Inc., a Delaware corporation
2
(herein called the "Corporation"), at any time after the date hereof and before
5:00 p.m. (Eastern Standard Time) on June 30, 2002 (the "Time of Expiry"), up to
____________ fully paid and non-assessable shares of common stock par value
$.001 per share of the Corporation ("Shares") at an exercise price of $0.12 per
Share, subject to adjustment as provided below (collectively the "Exercise
Price"). Notwithstanding the foregoing, if by May 31, 2002 the Corporation has
not implemented an increase to its authorized Shares to an amount sufficient to
permit the conversion or exercise of all presently outstanding securities of the
Corporation (including securities to be sold in the offering referred to in
Section 1 below) convertible into or exchangeable for Shares (the "Authorized
Capital Increase"), then the Time of Expiry shall be extended without further
action required on the part of the Warrantholder, to the date that is six (6)
months after the implementation of the Authorized Capital Increase.
This Warrant is subject to the provisions of the Investor Rights
Agreement dated as of March, 2002 among the Corporation and certain
Warrantholders as well as to a subscription agreement entered into with the
original Warrantholder in connection with the offering referred to in Section 1
below (the "Subscription Agreement"), and the following provisions, terms and
conditions:
1. Designation
This warrant certificate is one of a series of warrant certificates
(collectively, the "Warrants") issued to Warrantholders for value received by
the Corporation in connection with an offering by the Corporation of up to
1,000,000 units, each unit consisting of one share of Series B Convertible
Preferred Stock, $.01 par value per share, of the Corporation, one warrant to
purchase ten (10) Shares at an exercise price of $0.24 per share and one Warrant
to purchase ten (10) Shares.
2. Exercise of Warrants
(a) Election to Purchase. This Warrant may be exercised by the
Warrantholder prior to the Time of Expiry in whole or in part and in
accordance with the provisions hereof by delivery of an Election to
Purchase in a form substantially the same as that attached hereto as
Annex "A", properly completed and executed, together with this
Warrant and payment of the Exercise Price multiplied by the number
of Shares specified in the Election to Purchase to the Corporation
at ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇., Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as may be notified in
writing by the Corporation. Payment shall be made in U.S. dollars by
certified or bank cashier's cheque payable to the order of the
Corporation.
(b) Exercise. The Corporation shall, promptly following the date it
receives a duly executed Election to Purchase, this Warrant and
payment of the Exercise Price for the number of Shares specified in
the Election to Purchase (the "Exercise Date"), issue or cause to be
issued that number of Shares specified in the Election to Purchase
as fully paid and non-assessable Shares. Such duly executed Election
to Purchase shall constitute the Warrantholder's acknowledgement of
and undertaking to comply to the reasonable satisfaction of the
Corporation and its counsel, with all applicable laws, rules,
regulations and policies of every stock exchange upon which the
Shares of the
3
Corporation may from time to time be listed or traded, and any other
applicable governmental or regulatory authorities.
(c) Share Certificates. As promptly as practicable after the Exercise
Date (and in any event not later than 10 days after the Exercise
Date), the Corporation shall send to the Warrantholder, registered
in such name or names as the Warrantholder may direct or if no such
direction has been given, in the name of the Warrantholder, a
certificate or certificates for the number of Shares specified in
the Election to Purchase. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the close of
business on the Exercise Date, and at such time the rights of the
Warrantholder with respect to the number of the Warrants which have
been exercised as such shall cease, and the person or persons in
whose name or names any certificate or certificates for Shares shall
then be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the Shares represented thereby.
(d) Fractional Shares. No fractional Shares shall be issued upon
exercise of this Warrant and no payments or adjustment shall be made
upon any exercise on account of any cash dividends on the Shares
issued upon such exercise. If any fractional interest in a Share
would, except for the provisions of the first sentence of this
subsection 2(d), be deliverable upon the exercise of this Warrant,
the number of Shares to be issued to the Warrantholder upon the
exercise of this Warrant shall be rounded to the nearest whole
number.
(e) Subscription for Less than Entitlement. The Warrantholder may from
time to time subscribe for and purchase a number of Shares less than
the aggregate number which the holder is entitled to purchase
pursuant to this Warrant. In the event of a purchase of a number of
Shares less than the aggregate number which may be purchased
pursuant to this Warrant, the holder thereof shall be entitled to
receive, without charge, a new Warrant certificate in respect of the
balance of the Shares subject to this Warrant which were not
purchased by the Warrantholder.
(f) Corporate Changes. If the Corporation shall be a party to any
reorganization, merger, dissolution or sale of all or substantially
all of its assets (the "Event"), (other than a reorganization or
merger in which the Corporation is the surviving entity) then the
securities purchasable hereunder shall be the securities (the "Event
Securities") which the Warrantholder would have received or been
entitled to receive in such Event if such Warrantholder had fully
exercised this Warrant prior to the record date (or if there was no
record date, then prior to the effective date) of such Event, and
the Exercise Price shall be adjusted to be the amount determined by
multiplying the Exercise Price in effect immediately prior to the
Event by the number of Shares as to which this Warrant was
unexercised immediately prior to the Event, and dividing the product
thereof by the number of Event Securities; provided however, that
the Event shall not be carried into effect unless all necessary
steps have been taken to ensure that any surviving entity is subject
to the terms of this Warrant as adjusted.
4
Notwithstanding anything to the contrary contained in the
immediately proceeding paragraph, in the event of a transaction
contemplated by such paragraph in which the surviving or purchasing
corporation demands that all outstanding Warrants be extinguished
prior to the closing date of the contemplated transaction, the
Corporation shall give prior notice (the "Merger Notice") thereof to
the Holders advising them of such transaction. The Holders shall
have ten days after the date of the Merger Notice to elect to (i)
exercise the Warrants in the manner provided herein, or (ii) receive
from the surviving or purchasing corporation the same consideration
receivable by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to
such consolidation, merger, sale, or purchase reduced by such amount
of the consideration as has a market value equal to the Exercise
Price, as determined by the board of directors of the Corporation in
accordance with the terms of the Warrants. If any Holder fails to
timely notify the Corporation of its election, the Holder shall be
deemed for all purposes to have elected the option set forth in (ii)
above. Any amounts receivable by a Holder who has elected the option
set forth in (ii) above shall be payable at the same time as amounts
payable to stockholders in connection with any such transaction.
(g) Subdivision or Consolidation of Shares
(i) In the event the Corporation shall subdivide its outstanding
Shares into a greater number of Shares, the Exercise Price in
effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in the event the
outstanding Shares of the Corporation shall be consolidated
into a smaller number of Shares, the Exercise Price in effect
immediately prior to such consolidation shall be
proportionately increased.
(ii) Upon each adjustment of the Exercise Price as provided herein,
the Warrantholder shall thereafter be entitled to acquire, at
the Exercise Price resulting from such adjustment, the number
of Shares (calculated to the nearest tenth of a Share)
obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Shares
which may be acquired hereunder immediately prior to such
adjustment and dividing the product thereof by the Exercise
Price resulting from such adjustment.
(h) Change or Reclassification of Shares. In the event the Corporation
shall change or reclassify its outstanding Shares into a different
class of securities, this Warrant shall be adjusted as follows so as
to apply to the successor class of securities:
(i) the number and kind of the successor class of securities which
the Warrantholder shall be entitled to acquire shall be the
aggregate number and kind of securities which, if this Warrant
had been exercised immediately prior to such change or
reclassification, the Warrantholder would have been entitled
to receive by reason of such change or reclassification; and
5
(ii) the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the change or
reclassification by the number of Shares as to which this
Warrant was unexercised immediately prior to the change or
reclassification, and dividing the product thereof by the
number of the successor class of securities determined in
paragraph 2(h)(i) hereof.
(i) Distribution to Shareholders. If and whenever at any time prior to
the Time of Expiry the Corporation shall fix a record date or if a
date is otherwise established (any such date being hereinafter
referred to in this subsection 2(i) as the "record date") for the
issuance of rights, options or warrants to all or substantially all
the holders of the outstanding Shares of the Corporation entitling
them, for a period expiring not more than 45 days after such record
date, to subscribe for or purchase Shares of the Corporation or
securities convertible into or exchangeable for Shares at a price
per share or, as the case may be, having a conversion or exchange
price per share less than 95% of the Fair Market Value (as
hereinafter defined) on such record date, the Exercise Price shall
be adjusted immediately after such record date so that it shall
equal the price determined by multiplying the Exercise Price in
effect on such record date by a fraction, of which the numerator
shall be the total number of Shares outstanding on such record date
plus a number equal to the number arrived at by dividing the
aggregate price of the total number of additional Shares offered for
subscription or purchase or, as the case may be, the aggregate
conversion or exchange price of the convertible or exchangeable
securities so offered by the Fair Market Value, and of which the
denominator shall be the total number of Shares outstanding on such
record date plus the total number of additional Shares so offered
(or into which the convertible or exchangeable securities so offered
are convertible or exchangeable); Shares owned by or held for the
account of the Corporation or any subsidiary of the Corporation
shall be deemed not to be outstanding for the purpose of any such
computation; such adjustment shall be made successively whenever
such a record date is fixed; to the extent that any rights or
warrants are not so issued or any such rights or warrants are not
exercised prior to the expiration thereof, the Exercise Price shall
then be readjusted to the Exercise Price which would then be in
effect if such record date had not been fixed or to the Exercise
Price which would then be in effect based upon the number of Shares
or conversion or exchange rights contained in convertible or
exchangeable securities actually issued upon the exercise of such
rights or warrants, as the case may be.
(j) Additional Subscriptions. If at any time the Corporation grants to
its shareholders the right to subscribe for and purchase pro rata
additional securities of the Corporation (other than securities
described in subsection (2)(i) hereof) or of any other corporation
or entity, there shall be no adjustments made to the number of
Shares or other securities subject to this Warrant or to the
Exercise Price in consequence thereof and this Warrant shall remain
unaffected.
(k) Carry Over of Adjustments. No adjustment of the Exercise Price shall
be made if the amount of such adjustment shall be less than 1% of
the Exercise
6
Price in effect immediately prior to the event giving rise to the
adjustment, provided however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward
and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least 1% of the Exercise Price in effect
prior to such adjustment.
(l) Notice of Adjustment. Upon any adjustment of the number of Shares
and upon any adjustment of the Exercise Price, then and in each such
case the Corporation shall give written notice thereof to the
Warrantholder, which notice shall state the Exercise Price and the
number of Shares or other securities into which each Warrant is
exercisable resulting from such adjustment, and shall set forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based. Upon the request of a Warrantholder there
shall be transmitted promptly to all Warrantholders a statement
prepared by the firm of independent certified public accountants
retained to audit the financial statements of the Corporation to the
effect that such firm concurs in the Corporation's calculation of
the change.
(m) Other Notices. If at any time:
(i) the Corporation shall declare any dividend upon its Shares;
(ii) the Corporation shall offer for subscription pro rata to the
holders of its Shares any additional shares of any class or
other rights;
(iii) there shall be any capital reorganization or reclassification
of the capital stock of the Corporation, or consolidation,
amalgamation or merger of the Corporation with, or sale of all
or substantially all of its assets to, another corporation
(other than the Acquisition as defined in the Subscription
Agreement); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation,
then, in any one or more of such cases, the Corporation shall give
to the Warrantholder (A) at least 20 days' prior written notice of
the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation
or winding-up and (B) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, at least 20 days' prior written notice of
the date when the same shall take place. Such notice in accordance
with the foregoing clause shall also specify (A) in the case of any
such dividend, distribution or subscription rights, the date on
which the holders of Shares shall be entitled thereto, and (B) in
the case of any transaction described in the foregoing clauses (iii)
and (iv), the date on which the holders of Shares are to be entitled
to exchange their Shares for securities or other property
deliverable upon such
7
reorganization, reclassification, consolidation, merger,
amalgamation, sale, dissolution, liquidation or winding-up, as the
case may be.
(n) Increase to Authorized Capital. The Corporation will, as soon as
reasonably practicable, convene a meeting of shareholders of the
Corporation at which the Corporation will place before shareholders
a proposal for the Authorized Capital Increase or otherwise submit
such proposal to stockholders pursuant to a written consent.
(o) Shares to be Reserved. Immediately following the Authorized Capital
Increase, the Corporation will at all times keep available and
reserve out of its authorized Shares, solely for the purpose of
issue upon the exercise of this Warrant, such number of Shares as
shall then be issuable upon the exercise of this Warrant. Assuming
the implementation of the Authorized Capital Increase, the
Corporation covenants and agrees that all Shares which shall be so
issuable will, upon issuance, be duly authorized and issued, fully
paid and non-assessable. The Corporation will take all such action
as may be necessary to assure that all such Shares may be so issued
without violation of any applicable requirements of any stock
exchange upon which the Shares of the Corporation may be listed or
in respect of which the Shares are qualified for unlisted trading
privileges. The Corporation will take all such action as is within
its power to assure that all such Shares may be so issued without
violation of any applicable law.
(p) Issue Tax. The issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Warrantholder
for any issuance tax in respect thereto, provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
Warrantholder.
(q) Fair Market Value. For the purposes of any computation hereunder,
unless otherwise specified, the "Fair Market Value" at any date
shall be: (i) if the Shares are listed on a stock exchange or quoted
on a similar securities market, the weighted average sale price per
share for the Shares for any 20 consecutive trading days (selected
by the Corporation) commencing not more than 25 trading days before
such date on the principal stock exchange or similar securities
market upon which the Shares are listed or quoted, as the case may
be; or (ii) if the computation is being made in connection with a
public offering of Shares, the gross offering price per Share under
the offering; or (iii) in all other cases, the Fair Market Value
shall be determined by the Board of Directors in good faith, which
determination shall be conclusive. The weighted average sale price
shall be determined by dividing the aggregate sale price of all
Shares sold on the said exchange or market during the said 20
consecutive trading days by the total number of Shares so sold.
(r) The Shares issued upon exercise of the Warrant shall be subject to a
stop transfer order and the certificate or certificates evidencing
such Shares shall bear the following legend:
8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), STATE SECURITIES LAWS IN THE UNITED STATES OR
THE SECURITIES LAWS OF ANY OTHER COUNTRY, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
(A) SUCH TRANSACTION OCCURS OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S
UNDER THE ACT (OR SUCH SUCCESSOR RULE OR REGULATION THEN IN EFFECT),
IF APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS, (B) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
REGISTERED UNDER THE ACT OR (C) SUCH TRANSACTION CONSTITUTES A
TRANSACTION THAT OTHERWISE DOES NOT REQUIRE REGISTRATION UNDER THE
ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER PRIOR TO
SUCH TRANSACTION HAS FURNISHED TO THE CORPORATION AN OPINION OF
COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY
SATISFACTORY TO THE CORPORATION, SUBJECT IN EACH CASE TO ANY
APPLICABLE UNITED STATES FEDERAL, STATE OR FOREIGN SECURITIES LAW
RESTRICTIONS APPLICABLE TO THE RESALE OF THIS WARRANT AND THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT.
3. Transfer
Subject to compliance by the Warrantholder with any applicable
resale restrictions, the Corporation acknowledges and agrees that this Warrant
may be assigned or transferred by the Warrantholder at the Warrantholder's
option. It is the sole responsibility of the Warrantholder to ensure that all
such restrictions have been observed. Upon any permitted assignment or transfer,
the Warrantholder shall furnish the Corporation with such information regarding
the transferee as the Corporation may reasonably require to register this
Warrant in the name of the transferee.
4. Replacement
Upon receipt of evidence satisfactory to the Corporation of the
loss, theft, destruction or mutilation of this Warrant and, if requested by the
Corporation, upon delivery of a bond of indemnity satisfactory to the
Corporation (or, in the case of mutilation, upon surrender of this Warrant), the
Corporation will issue to the Warrantholder a replacement Warrant (containing
the same terms and conditions as this Warrant).
5. Expiry Date
This Warrant shall expire and all rights to purchase Shares
hereunder shall cease and become null and void at 5:00 p.m. (Eastern Standard
Time) on June 30, 2002 or, in the event that the Corporation has not by May 31,
2002 implemented the Authorized Capital Increase, on the date that is six months
after the implementation of the Authorized Capital Increase.
6. Amendment
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, or by the affirmative consent in writing of holders of at least
two-thirds of the then outstanding Warrants.
9
7. Inability to Deliver Shares
Notwithstanding any other provision hereof, if due to the
Corporation's failure to implement the Authorized Capital Increase, the
Corporation is unable to issue and deliver the Shares as contemplated herein to
the Warrantholder upon the proper exercise by the Warrantholder of the Warrant
to purchase the Shares covered by this Warrant, at the sole option of the
Warrantholder, the Corporation shall pay to the Warrantholder, in cash, an
amount equal to the positive difference, if any, between (i) the Exercise Price
multiplied by the number of Shares for which the Warrant is exercisable; and
(ii) the Aggregate Value (as defined below) of such Shares on the Exercise Date
(the "Cash Remedy"). For purposes of this paragraph "Aggregate Value" means the
weighted average sale price per share for the Shares for the 20 consecutive
trading days before such date on the principal stock exchange or similar
securities market upon which the Shares are listed or quoted as the case may be,
multiplied by the number of Shares for which the Warrant is exercisable. The
Cash Remedy is the Warrantholder's sole recourse against the Corporation for
failure to implement the Authorized Capital Increase. Upon payment of the Cash
Remedy, this Warrant shall be null and void.
8. Governing Law
The laws of the State of New York and applicable federal laws of the
United States shall govern this Warrant.
9. Successors
This Warrant shall enure to the benefit of and shall be binding upon
the Warrantholder and the Corporation and their respective successors.
IN WITNESS WHEREOF the Corporation has caused this Warrant to be
signed by its duly authorised officers and its corporate seal hereto affixed.
DATED the day of March, 2002.
LIFE MEDICAL SCIENCES, INC.
By:
--------------------------------
Annex "A" to Share Purchase Warrant
Election to Purchase
The undersigned Warrantholder hereby irrevocably elects to exercise
the Warrant issued by Life Medical Sciences, Inc. dated ____________, 2002 for
the number of common shares (or other property or securities subject thereto)
("Shares") as set forth below:
(a) Number of Shares to be Acquired:
------------
(b) Exercise Price per Share: $
-----------
(c) Aggregate Purchase Price $
[(a) multiplied by (b)] -----------
and hereby tenders a certified or cashier's cheque or bank draft for such
aggregate purchase price, and directs such Shares to be registered and a
certificate therefor to be issued as directed below.
DATED this _____________ day of ________________, ____.
------------------- ------------------------------------
Witness Signature
Direction as to Registration
Name of Registered Holder:
------------------------------------
Address of Registered Holder:
------------------------------------
------------------------------------
------------------------------------
Annex "B"
TO: LIFE MEDICAL SCIENCES, INC.
FOR VALUE RECEIVED, the undersigned hereby sells, transfers and
assigns unto __________________________ the within warrant (herein called the
"Warrant"). The undersigned hereby irrevocably instructs you to transfer the
Warrant on your books of registration and to issue in substitution therefor a
new warrant exercisable for the same number of shares or other securities or
property as the Warrant.
DATED the ________ day of ________________, ____.
Signature of Transferor is hereby guaranteed:
------------------------------------
(Signature of Transferor)
Note: The signature to this Warrant transfer must correspond with the name as
set forth on the face of the Warrant in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or other
financial institution acceptable to the Corporation.
Appendix IV
LIFE MEDICAL SCIENCES, INC.
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made and entered into as of
March, 2002 by and among Life Medical Sciences, Inc., a Delaware corporation
(the "Company") and the investors listed on the signature pages hereto (the
"Investors").
RECITALS
WHEREAS the Company desires the Investors to purchase Units of the Company
("Units"), each Unit consisting of (i) a share of Series B Convertible Preferred
Stock ("Series B Preferred"), (ii) a two-year warrant (a "Warrant") to purchase
up to ten (10) shares of Common Stock per Warrant at an exercise price of $0.24
per share and (iii) a six month warrant to purchase up to ten (10) shares of
Common Stock at an exercise price of $0.12 per share (an "Additional Warrant");
at a purchase price of $1.20 per Unit and
WHEREAS the purchase of the Units is in connection with an offering by the
Company to the Investors of up to 1,000,000 Units pursuant to a Subscription
Agreement (the "Subscription Agreement"); and
WHEREAS as an inducement for the Investors to enter into the Subscription
Agreement, the Company desires to enter into this Agreement with the Investors.
NOW THEREFORE in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. REGISTRATION RIGHTS.
1.1 Definitions.
(a) "As-Converted Basis" means assuming the conversion into Common
Stock or exercise for Common Stock of all securities directly or indirectly
convertible into, or exercisable for, Common Stock.
(b) "Common Stock" means the Company's Common Stock, par value
$0.001 per share.
(c) "Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
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(d) "Form S-3" means such form under the Securities Act as is in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(e) "Holder" means any person owning of record Registrable
Securities that have not been sold in a public offering or sold pursuant to Rule
144 promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Agreement have been duly
assigned in accordance with this Agreement.
(f) "Initiating Holder" means any Holder or Holders who in the
aggregate are Holders of not less than 30% of the then-outstanding Registrable
Securities which have not been sold in a public offering.
(g) "June 1999 Placement" means the Company's private placement of
an aggregate of 1,505,003 shares of Common Stock completed in June 1999.
(h) "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
(i) "Registrable Securities" means: (i) all shares of Common Stock
issued or issuable pursuant to the conversion of Series B Preferred or exercise
of the Warrants or Additional Warrants and (ii) any shares of Common Stock or
other securities issued in connection with any stock split, stock dividend,
recapitalization, reorganization, merger, sale of assets or similar event in
respect of the foregoing securities; excluding in all cases, however, any
securities that would otherwise be Registrable Securities that have been sold by
a person in a transaction in which rights under this Agreement are not assigned
in accordance with this Agreement, any securities that would otherwise be
Registrable Securities that have been sold in a public offering or sold pursuant
to Rule 144 promulgated under the Securities Act, and, solely for the purposes
of a registration under Section 1.2, Registrable Securities eligible for sale
pursuant to Rule 144(k) promulgated under the Securities Act.
(j) "Registration Expenses" means all expenses incurred by the
Company in complying with Sections 1.2 and 1.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, reasonable fees and
expenses of one counsel for all the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
(k) "Securities Act" means the United States Securities Act of 1933,
as amended.
(l) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
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(m) "Series A Demand Period" means the period during which holders
of Series A Placement Securities (as defined in Section 1.2(b)) are entitled to
request demand registration pursuant to Section 1.2 of the Series A Investor
Rights Agreement.
(n) "Series A Investor Rights Agreement" means the Investor Rights
Agreement dated as of December 15, 2000 among the Company and the investors
named therein in connection with the Series A Private Placement.
(o) "Series A Private Placement" mean the Company's private
placement of an aggregate of 500,000 shares of Series A Convertible Preferred
Stock ("Series A Preferred") pursuant to a Stock Purchase Agreement dated as of
December 15, 2000.
(p) "Wedbush Warrant" means the Company's Warrant No. W1 dated May
8, 1996 issued to Wedbush ▇▇▇▇▇▇ Securities, Inc.
1.2 Requested Registration.
(a) Request for Registration by Initiating Holders. If the Company
shall receive from an Initiating Holder, at any time following conversion of
Series B Preferred into Common Stock and expiration of the Series A Demand
Period, a written request that the Company effect any registration with respect
to all or a part of the Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration
to all other Holders of Registrable Securities; and
(ii) use its best efforts to effect, as soon as practicable
but in any event within 90 days of receipt of the Initiating Holder's request
for registration, such registration of the sale of the Registrable Securities
requested by the Initiating Holder, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such request as
are specified in written requests received by the Company within 30 days after
written notice from the Company is given under Section 1.2(a)(i)above; provided,
however, that the Company shall not be obligated to effect, or take any action
to effect, any such registration pursuant to this Section 1.2:
(1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder; or
(2) After the Company has effected one such registration
pursuant to this Section 1.2 and such registration has been declared or ordered
effective.
(b) Underwriting; Request by Initiating Holders. If the Initiating
Holder intends to distribute the Registrable Securities covered by its request
by means of an underwriting, it shall so advise the Company as a part of its
request and the Company shall include such information in the written notice
referred to in Section 1.2(a)(i). In such event, the right of any Holder to
include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such
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Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by the Initiating Holder and such Holder) to the extent provided herein.
All Holders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in Section 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Initiating Holder and reasonably
acceptable to the Company. Notwithstanding the foregoing, if the managing
underwriter advises the Company and the Initiating Holder in writing that
marketing factors require a limitation of the number of shares to be included in
the registration, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be included in the registration, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders who sought to include Registrable
Securities in the registration, in such proportion (as nearly as practicable)
among such Holders pro rata based on the amount of Registrable Securities owned
by each of them (calculated on an As-Converted Basis). For any Holder which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence. In connection with a registration under
this Section 1.2, the Company may include securities to be sold for its own
account, or the account of other persons; provided, however, that if a
registration under this Section 1.2 is to be effected through an underwriting,
the right of the Company and such other persons to include securities in such
registration shall be conditioned upon the Company's and such other persons'
participation in such underwriting and the inclusion of such securities in the
underwriting (unless otherwise mutually agreed by the Initiating Holder and the
Company, in the case of securities to be registered for the account of the
Company, or by the Initiating Holder and each such other person, in the case of
securities to be registered for the account of such other persons) to the extent
provided herein. Notwithstanding the foregoing, if the managing underwriter
advises the Company, such other persons and the Initiating Holder in writing
that marketing factors require a limitation of the number of shares to be
included in the registration, then (i) all securities that the Company sought to
be included in the registration shall be removed from the registration before
any Registrable Securities are removed from the registration, (ii) all
securities of any such other person that do not have registration rights
pursuant to (A) the Series A Investor Rights Agreement, (B) a subscription
agreement entered into with the Company in connection with the June 1999
Placement or (C) pursuant to the Wedbush Warrant shall be removed from the
registration before any Registrable Securities are removed from the registration
and (iii) to the extent that any such other person holds securities that have
registration rights pursuant to the Series A Placement ("Series A Placement
Securities"), the June 1999 Placement ("June 1999 Placement Securities") or the
Wedbush Warrant ("Wedbush Warrant Securities", and with the Series A Placement
Securities and June 1999 Placement Securities, "Other Registrable Securities"),
then notwithstanding anything in this Section 1.2(b) to the contrary, the number
of shares of Registrable Securities and Other Registrable Securities that may be
included in the underwriting shall be allocated among the Holders and such other
persons who sought to include their respective securities in the registration,
in such proportion (as nearly as practicable) among such Holders and such other
persons pro rata based on the amount of Registrable Securities and Other
Registrable Securities owned by each of them (calculated on an As-Converted
Basis); provided, that notwithstanding anything in the foregoing to the
contrary, the rights of the Holders of Registrable Securities to have such
Registrable
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Securities included in any such registration shall be subordinate to the rights
of the holders of Series A Placement Securities and of "Warrants" and "Warrant
Securities," as such terms are defined as of the date hereof in the Wedbush
Warrant. Any securities excluded from an underwriting under this section shall
be withdrawn from the registration.
(c) Notwithstanding the foregoing, if the Company shall furnish to
the Initiating Holder a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 60 days
after receipt of the request of the Initiating Holder; provided, however, that
the Company may not utilize this right more than once in any nine-month period.
(d) Except for registration statements on Form ▇-▇, ▇▇▇▇ ▇-▇ or
successor forms thereto, the Company will not file with the Commission any other
registration statement, whether for its own account or that of other
stockholders, from the date of receipt of a notice from the Initiating Holders
requesting registration pursuant to this Section 1.2 until three months after
the declaration of effectiveness of a registration statement filed under this
Section 1.2 (or the earlier termination of such requested registration or the
related distribution), except where the Company is contemplating a registration
solely for its own account and defers the registration requested by the
Initiating Holders under Section 1.2(c) to permit the Company to complete such
registration for its own account.
1.3. Piggyback Registrations.
(a) Notice. The Company shall notify all Holders of Registrable
Securities in writing promptly after determining to file any registration
statement under the Securities Act for purposes of effecting a public offering
of securities of the Company whether for its own account or the account of other
stockholders or both (excluding any registration statements on Form ▇-▇, ▇▇▇▇
▇-▇ or successor forms thereto, and a registration under Section 1.2) and will
include in such registration statement all of the Registrable Securities
specified in a written request or requests made by any Holder or Holders in
response to such notice from the Company. If a Holder decides not to include all
of its Registrable Securities in any registration statement thereafter filed by
the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(b) Underwriting. If a registration statement under which the
Company gives notice under Section 1.3(a) is for an underwritten offering, then
the Company shall so advise the Holders of Registrable Securities in the notice
delivered under Section 1.3(a). In such event, the right of any such Holder's
Registrable Securities to be included in a registration pursuant to this Section
1.3 shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that
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marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Company, second, to each of the Holders of
Registrable Securities requesting inclusion of their Registrable Securities in
such registration statement and to holders of Other Registrable Securities, to
be allocated among such persons pro rata based on the amount of Registrable
Securities and Other Registrable Securities (calculated on an As-Converted
Basis) owned by each person and third, to any other holders of the Company's
securities; provided, that notwithstanding anything in the foregoing to the
contrary, the rights of the Holders of Registrable Securities to have such
Registrable Securities included in any such registration shall be subordinate to
the rights of the holders of Series A Placement Securities and of "Warrants" and
"Warrant Securities," as such terms are defined as of the date hereof in the
Wedbush Warrant. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
1.4. Expenses of Registration. All Registration Expenses incurred in
connection with one demand registration (pursuant to Section 1.2) and all
piggyback registrations (pursuant to Section 1.3) shall be borne by the Company,
and all Selling Expenses shall be borne by the Holders of the securities so
registered pro rata on the basis of the number of their shares so registered.
1.5. Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective and the related prospectus current until the distribution is
completed, but not more than 180 days, provided that such 180-day period shall
be extended for a period of time equal to the period the Holder refrains from
selling any Registrable Securities included in such registration statement due
to circumstances described in Section 1.5(f).
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and all amendments and supplements thereto, and such other
documents as they may reasonably request
-7-
in order to facilitate the disposition of the Registrable Securities owned by
them that are included in such registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act or applicable rules or regulations thereunder.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act if such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and, following such notification, promptly deliver to each Holder
copies of all amendments or supplements referred to in paragraphs (b) and (c) of
this Section 1.5.
(g) Furnish, at the request of any Holder registering Registrable
Securities, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
or on the date that the registration statement becomes effective, if such
securities are not being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering addressed to the underwriters, if any, and if
there are no underwriters, to the Holders requesting registration of Registrable
Securities and (ii) a "comfort" letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and if there are no underwriters, to the Holders
requesting registration of Registrable Securities.
(h) Use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange or interdealer
quotation system on which the Common Stock is then listed or quoted.
(i) Make available for inspection by each seller of Registrable
Securities, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter (an "Advisor"), all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such
-8-
registration statement. Such seller will keep, and will cause its Advisors to
keep, such information confidential subject to Section 3.14.
1.6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 1.2 and 1.3
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of Registrable Securities.
1.7. Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 1.2 or 1.3:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, members, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained or incorporated by reference in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, member, officer or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information and expressly stated to be for use in
connection with such registration by such Holder, partner, member, officer,
director, underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling
Holder will, severally and not jointly, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement,
-9-
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter (as defined in the Securities Act) and any other
Holder selling securities under such registration statement or any of such other
Holder's partners, members, directors or officers or any person who controls
such underwriter or other Holder within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, or a member, partner, director, officer or
controlling person of such underwriter or other Holder may become subject under
the Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder by an instrument duly executed by such Holder and stated to be
specifically for use in such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, partner,
member, officer, director or controlling person of such other Holder or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided further, that the total amounts payable in indemnity by a
Holder under this Section 1.7(b) in respect of any Violation shall not exceed
the net proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party of notice
of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.7, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if the
defendants include both the indemnifying party and the indemnified party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under Section 1.7.
(d) Contribution. If the indemnification provided for in this
Section 1.7 is unavailable to a party entitled to indemnification, then the
indemnifying party shall contribute to the aggregate losses, claims, damages or
liabilities of the indemnified party as is appropriate to
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reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. The relative fault of
the indemnifying party and indemnified party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action; provided, however, that, in any such case, (1) no Holder shall be
required to contribute any amount in excess of the public offering price of all
Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (2) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Survival. The obligations of the Company and Holders under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement.
1.8. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, so long as any Registrable Securities are outstanding,
without the consent of the Holders of a majority of the Registrable Securities,
the Company shall not enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder (a) to make a demand registration to the Company at any point
in time when holders of Registrable Securities are entitled to request
registration under Section 1.2, or (b) to have registration rights superior to,
or which limit in any way (including by reducing the number of Registrable
Securities that may be included in an underwritten offering), the registration
rights of the Holders granted hereby.
2. LEGENDS. The Investors understand that the share certificates evidencing any
Registrable Securities shall be endorsed with the following legends (in addition
to any legends required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
3. MISCELLANEOUS.
3.1. Successors and Assigns. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and permitted transferees and
permitted assigns of the parties.
3.2. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York as applied to contracts made and to be
performed entirely within that state between residents of that state.
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3.3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.
3.4. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5. Stock Splits, etc. All share numbers used in this Agreement are
subject to adjustment in the case of any stock split, reverse stock split,
combination or similar events.
3.6. Notices. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective on (a) the date of delivery in person, or the date of delivery by
facsimile with confirmation receipt, (b) the business day after deposit with a
nationally-recognized courier or overnight service, for United States deliveries
or (c) five (5) business days after deposit in the United States mail by
registered or certified mail for United States deliveries. All notices not
delivered personally or by facsimile will be sent with postage and other charges
prepaid and properly addressed to the party to be notified at the address set
forth below such party's signature on this Agreement or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto. All notices for delivery outside the United States will be sent
by facsimile, or by nationally recognized courier or overnight service. Any
notice given hereunder to more than one person will be deemed to have been
given, for purposes of counting time periods hereunder, on the date given to the
last party required to be given such notice. Notices to the Company will be
marked to the attention of the President, with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇. Notices shall be sent to the addresses on the signature pages hereto, or
such other addresses as a party may provide to the other parties from time to
time.
3.7. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.8. Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the party against whom enforcement of such amendment or
waiver is sought; provided, however that with respect to any Investor, the
consent of the holders of more than sixty-six and two-thirds percent (662/3%) of
the Registrable Securities shall be sufficient to bind any and all Investors.
3.9. Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision was so excluded and shall be enforceable in accordance with its terms.
3.10. Entire Agreement. This Agreement and the Purchase Agreements
constitute the full and entire understanding and agreement between the parties
with respect to the subject
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matter hereof and supersede all prior negotiations, correspondence, agreements,
understandings, duties or obligations among the parties with respect to the
subject matter hereof.
3.11. Further Assurances. From and after the date of this Agreement, upon
the request of a party, the other parties shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
3.12. Assignment. Rights under this Agreement may be assigned in
connection with any transfer or assignment of Registrable Securities provided
that: (a) such transfer may otherwise be effected in accordance with applicable
securities laws, and (b) such other party agrees in writing with the Company to
be bound by all of the provisions of this Agreement to the same extent as the
transferor.
3.13. Changes in Stock. If, and as often as, there is any change in the
Common Stock or Series B Preferred by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made to the provisions hereof so that the rights granted
hereby shall continue with respect to the Common Stock or Series B Preferred as
so changed.
3.14. Confidentiality. Information related to the terms and conditions of
the financings covered by the Purchase Agreements, as well as all information
contained in the instruments and agreements delivered in connection therewith,
shall be deemed confidential and shall not be disclosed by the Investor to any
person unless and until such information becomes generally available to the
public other than by disclosure in violation of this Agreement. All other
information that has been designated by the Company as "confidential" shall
likewise be deemed confidential and not disclosed by the Investor to any person
unless and until such (i) is or becomes generally available to the public other
than by disclosure in violation of this Agreement, (ii) was properly within such
Investor's possession prior to its being furnished by the Company to such
Investor, or (iii) becomes available to such Investor through disclosure by
third parties who have the right to disclose such information.
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE 1
IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement as of the date first above written.
LIFE MEDICAL SCIENCES, INC.
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇
Chairman, President and CEO
Address:
-i-
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE 2
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
-ii-
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE 3
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
By:
----------------------
Name:
Title:
Address
Appendix V
CONVERSION LETTER
Life Medical Sciences, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
The undersigned holder (the "Holder") of a Convertible Promissory Note of
Life Medical Sciences, Inc. (the "Corporation") in the principal amount of
US$_________ (the "Note") and of a warrant (the "Additional Warrant") for the
purchase of up to _________ fully paid and non-assessable shares of common stock
par value $.001 per share of the Corporation ("Shares") at an exercise price of
$0.12 per Share, hereby surrenders for cancellation the Note and the Additional
Warrant against delivery by the Corporation to the Holder, as part of an
offering (the "Offering") of up to $1.2 million of units of the Corporation
("Units"), of _________ Units, each Unit consisting of (i) one share of the
Corporation's Series B Convertible Preferred Stock, par value of $0.01 per
share; (ii) one warrant to purchase up to ten Shares at an exercise price of
$0.24 per Share, exercisable at any time until the later of the date which is
two years after the date of such warrant and the date which is 18 months after
the date upon which the Corporation implements an increase to its authorized
Shares to an amount sufficient to permit the conversion or exercise of all
presently outstanding securities of the Corporation (including securities to be
sold in the Offering) convertible into or exchangeable for Shares (the
"Authorized Capital Increase"); and (iii) one additional warrant to purchase up
to ten Shares at an exercise price of $0.12 per Share, exercisable for a period
commencing on the date of issue and expiring on June 30, 2002, or in the event
that the Authorized Capital Increase has not been implemented by May 31, 2002,
on the date which is six months after the implementation of the Authorized
Capital Increase, as described in the Subscription Agreement, an executed copy
of which is attached hereto.
IN WITNESS WHEREOF, the Holder has executed this letter as of the day of
March, 2002.
NAME OF HOLDER:
By:
------------------------------
Name:
Title: