EXHIBIT 10.38
CONFIDENTIAL
SUBSCRIPTION AGREEMENT
(European Subscribers)
TO: LIFE MEDICAL SCIENCES, INC.
AND TO: XXXXX 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") 605,000 units (the "Purchased
Units") each comprised of one (1) share of Series C Convertible
Preferred Stock, par value $0.01 per share, of the Corporation (a
"Preferred Share"); one warrant (a "Short Term Warrant") to purchase up
to 10 shares of common stock of the Corporation ("Common Shares") at an
exercise price of $0.12 per Common Share (the "Short Term Warrant
Exercise Price"); and one warrant (a "Two Year Warrant") to purchase up
to 10 Common Shares at an exercise price of $0.12 per Common Share (the
"Two Year Warrant Exercise Price"). The Purchased Units are being sold
to the Purchaser in consideration for $1.20 per Unit (the "Subscription
Price"), and as part of an offering (the "Offering") of up to $726,000
of Units. The Short Term Warrants and Two Year Warrants, together with
the broker warrants referred to in Section 10 hereof, are sometimes
referred to collectively as the "Warrants". There is no minimum number
of Units being offered, and the Corporation reserves the right to
accept subscriptions as and when received.Xxxxx 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 Short Term Warrant shall be exercisable to acquire 10
Common Shares at the Short Term Warrant Exercise Price for a period
commencing on the date of issue and expiring on June 30, 2003. The
Short Term Warrants shall be issued in substantially the form attached
hereto as Appendix II. Each Two Year Warrant shall be exercisable to
acquire 10 Common Shares at the Two Year Warrant Exercise Price for a
period commencing on the date of issue. The Two Year Warrants shall be
issued in substantially the form attached hereto as Appendix III.
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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
The Purchaser must complete, sign and return two executed copies of:
(i) this Subscription Agreement, and (ii) the Investor Rights Agreement
a copy of which is attached as Appendix IV hereto, 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. 6550 8 26157
Swift Address: XXXXXX0X
Chips Member ID: 015035
ABA No. 000000000
For Further Credit To:
Canadian Imperial Bank of Commerce
Xxxx Xxxxxx, Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Transit No. 00002
Beneficiary: Blake, Xxxxxxx & Xxxxxxx LLP
Account No. 02 44414
Reference: XXXX - 65283/8
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, Xxxxxxx & Xxxxxxx LLP. In either case, such
deliveries hereinafter referred to as the "Purchaser's Closing
Deliveries."
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 31, 2003.
Certificates representing the Preferred Shares, Short Term Warrants and
the Two Year Warrants comprising the Purchased Units will be delivered
at Closing against delivery by the Purchaser of therequisite funds by
wire transfer. 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
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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. 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 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 Short Term Warrants nor the Two
Year 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, Short Term Warrants and the
Two Year 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;
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(f) the Purchaser understands that each certificate representing Preferred
Shares, Short Term Warrants and Two Year 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."
(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) during the first quarter of 2003, 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").
7. Representations, Warranties and Covenants of the Corporation
The Corporation represents, warrants and covenants to 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 any
investigation made by the Agent, the Purchaser or such others for a
period of two years after the Closing, 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;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;
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(b) 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 any such license, lease, permit, authorization or
approval would not have a material adverse effect on the Corporation
and its business;
(c) the audited financial statements of the Corporation as at and for the
year ended December 31, 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 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, 2002
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, 2002, 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;
(d) the Corporation has all requisite power and authority to carry out its
obligations under this Agreement, the Investor Rights Agreement, the
Preferred Shares, the Short Term Warrants and the Two Year Warrants;
(e) this Agreement has been, and the Investor Rights Agreement, the
Preferred Shares, the Short Term Warrants and the Two Year 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;
(f) 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;
(g) 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 Short Term Warrants and
the Two Year Warrants comprising the Purchased Units and 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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(h) the authorized capital of the Corporation consists of 100,000,000
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, 1,116,500 shares have been
designated as Series B Convertible Preferred Stock and, on or prior to
the Closing Date, not more than 605,000 shares will be designated as
Preferred Shares. As of December 31, 2002, there are 16,759,316 Common
Shares outstanding, no shares of Series A Convertible Preferred Stock
outstanding, 1,112,500 shares of Series B Convertible Preferred Stock
outstanding and no Preferred Shares outstanding (other than Preferred
Shares issued or to be issued in the Offering. 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, (ii)
outstanding a convertible note held by Polymer Technology Group, Inc.
("PTG") (the "PTG Convertible Note") in the principal amount of $70,000
which is convertible, at the holder's option, into Common Shares at a
price of $1.00 per share and (iii) available for issuance pursuant to
options which have been granted under its 1992 Stock Option Plan, 2000
Stock Option Plan and 2001 Stock Option Plan, an aggregate of
approximately 9,400,000 Common Shares and outstanding warrants to
purchase an aggregate of approximately 12,300,000 Common Shares,
(i) 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;
(j) the issue and sale of the Purchased Units and the issue of Preferred
Shares, Short Term Warrants, Two Year Warrants, any Common Shares on
the conversion of Preferred Shares or the exercise of Short Term
Warrants and Two Year 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 (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 result in any
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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;
(k) 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;
(l) 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, 2002 referred
to in clause 7(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;
(m) 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-xxxx, service xxxx, trade name, or
copyright that, individually or in the aggregate, if the subject of an
unfavourable decision, ruling, or finding, would result in a material
adverse change to the Corporation or its business;
(n) 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,
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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;
(o) 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;
(p) 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
(q) 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, Short Term Warrants, Two
Year Warrants or any Common Shares on conversion of the Preferred
Shares or exercise of the Short Term Warrants, Two Year 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.
8. 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:
(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
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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 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;
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(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, 2002,
the Corporation had an accumulated deficit of approximately
$38,217,000; 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, 2001;
(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 judicial
process the Purchaser will inform the Corporation promptly upon its
receipt of notice of judicial process compelling such disclosure.
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9. 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, Short Term Warrants or Two Year Warrants comprising the
Purchased Units.
10. 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 raised by the Agent (payable at the election of the Agent in
cash or Units (at the issue price thereof) or a combination thereof)
and broker warrants (the "Broker Warrants") to acquire that number of
Common Shares equal to 10% of the number of Purchased Units issued in
respect of proceeds raised by the Agent, 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, including
reasonable legal fees and expenses of the Agent's counsel as stipulated
in the Agency Agreement.
11. 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) relating to the sale of the
Purchased Units shall be borne by the Purchaser.
12. 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
the Agent may determine, acting reasonably, without in any way
affecting materially the Purchaser's obligations or the obligations of
such others hereunder; and
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(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 in any way the Purchaser's or such others' obligations
hereunder.
13. 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.
14. 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
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, Short Term Warrants or Two Year Warrants comprising
the Purchased Units.
15. Assignment
This Subscription Agreement is not transferable or assignable by the
parties hereto.
16. 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.
13
17. Subscription Particulars
The aggregate number of Units subscribed for is .
-------------------------
The Preferred Shares, Short Term Warrants and Two Year Warrants are to be
registered in the name of:
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(if space is insufficient, attach a list)
The certificates representing the Preferred Shares, Short Term Warrants and Two
Year Warrants are to be delivered to:
------------------------------------------------------------
------------------------------------------------------------
at its office at:
------------------------------------------------------------
------------------------------------------------------------
Contact Name and Number:
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:
------------------------------------------------------------
------------------------------------------------------------
(if space is insufficient, attach a list)
DATED at this day of , 2003.
-------------------- ----------- -------------------
------------------------------------------
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 , 2003.
-------------------- ----------- -------------------
LIFE MEDICAL SCIENCES, INC.
By:
------------------------------------
Authorized Signing Officer
Appendix I
----------
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES OF
SERIES C 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 C
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 C Convertible Preferred Stock (the "Series C
Preferred").
2. Number of Shares in Series; Par Value. The number of authorized
shares of Series C Preferred shall be [not more than 605,000] shares, par value
$.01 per share.
3. Dividends. Subject to Section 6(d)(vii) hereof, the holders of the
Series C 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 C 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 C Preferred as to payment upon the occurrence of a
Liquidation Event ("Senior Securities"), and pari passu with shares of Series B
Convertible Preferred Stock,
- 2 -
$.01 par value per share (the "Series B Preferred"), and other series of
preferred stock ranking on a parity with the Series C 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 C Preferred then held by them. All of the preferential
amounts to be paid to the holders of the Series C 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
C 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, Series C
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 C Preferred,
holders of Series C 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 C
Preferred and other series of preferred stock ranking on a parity with the
Series C Preferred as to payment upon the occurrence of a Liquidation Event, (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 C 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 C 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 C Preferred. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
the Series C
- 3 -
Preferred of the appraiser's valuation. Notwithstanding the above, any
securities to be distributed to the stockholders shall be valued as follows:
(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 C Preferred shall be entitled to that number of votes
per share of Series C Preferred equal to the number of shares of the
Corporation's common stock (the "Common Stock") into which such share of Series
C 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 C
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 C 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 C Preferred shall be subject to conversion as
follows (the "Conversion Rights"):
(a) Automatic Conversion. Upon the occurrence of the first anniversary
of the Original Issue Date (as defined in Section 6(d)(i)(2) below) each share
of Series C 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 C 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 C Preferred (the
"Series C Conversion Price") shall initially be $0.12 per share. Such initial
Series C Conversion Price shall be subject to adjustment as hereinafter
provided.
- 4 -
(b) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of Series C Preferred, provided that whether or not
fractional shares result from a conversion shall be determined on the basis of
the total number of shares of Series C 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 C 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 C Preferred, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series C 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 C 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 C 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 C Preferred shall not be deemed to have converted
such Series C 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 C 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 C 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 C Preferred, in addition to such other remedies as shall be available to
the holders of Series C 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, Series C Preferred or Convertible Securities.
(2) "Original Issue Date" means the first date on which Series C
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, Series B Preferred or Series C Preferred;
(B) shares of Common Stock issued or issuable as a dividend or
distribution on Series A Preferred, Series B Preferred, Series C 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 in the
Acquisition, or upon conversion or exercise of securities issued in the
Acquisition.
(ii) No Adjustment of Conversion Price. No adjustment of the Series
C 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 C 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 C Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
Stock 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;
- 6 -
(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 C 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 C 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 C Conversion Price to an amount which
exceeds the lower of (A) the Series C Conversion Price on the original
adjustment date, or (B) the Series C 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 C Conversion Price of Series C 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 C Conversion Price in effect on the date of and immediately
prior to such issue, then and in such event, such Series C 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
C Conversion Price by a
- 7 -
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 C 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 C 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:
(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
- 8 -
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 C 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 C 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 C Preferred shall be
entitled to a proportionate share of any such distribution as though their
shares of Series C 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 C 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 C Preferred shall thereafter be entitled to receive, upon
conversion of the Series C 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 C 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 C Preferred after the
reorganization, reclassification or other transaction to the end that the
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 C
Preferred) shall be applicable after that event as nearly equivalent as may be
practicable.
- 9 -
(ix) No Impairment. Without the prior written consent of the holders
of a majority of the Series C 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 C Preferred against impairment.
(x) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series C 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 C 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 C Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustments and readjustments, (B) the Series
C 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 C Preferred.
3. Redemption. The Series C Preferred are not redeemable by the
Corporation, nor may the holders of Series C Preferred require the Corporation
to redeem such shares.
4. 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 C Preferred, the Corporation shall send to the holders of the Series C
Preferred:
(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
- 10 -
(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 Series C
Preferred at the address for each such holder as shown on the books of this
Corporation.
5. 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 C 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 C Preferred.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Xxxxxx Xxxxxx, 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: , 2003 LIFE MEDICAL SCIENCES, INC.
---------------------
--------------------------------------------
By: Xxxxxx Xxxxxx
Chairman, President and Chief Executive
Officer
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 AND NO
SECURITIES MAY BE DELIVERED IN THE UNITED STATES UPON EXERCISE OF THIS WARRANT
UNLESS THE EXERCISE IS 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. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
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 , 2005
referred to hereafter as the "Time of Expiry"), up to fully paid and
non-assessable shares of Common Stock, par value
2
$.001 per share (the "Shares"), of the Corporation at an exercise price of $0.12
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 , 2003 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 605,000 units, each unit consisting of one share of Series C
Convertible Preferred Stock, $.01 par value per share, of the Corporation, one
Warrant to purchase ten (10) Shares and one short term Warrant scheduled to
expire June 30, 2003 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 X.X. Xxx 000, Xxxxxx Xxxxxx,
Xxx Xxxxxx 00000, X.X.X., Attention: Xxxxxx X. Xxxxxx, 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
exercise shall be deemed to have been effected as of the close
of business on
3
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 preceding 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
4
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.
(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
5
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.
(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
6
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) Shares to be Reserved. 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. 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
7
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.
(o) 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.
(p) 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.
(q) 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 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.
8
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. The Corporation shall be obliged to refuse to
register any proposed transfer of this Warrant or underlying Shares unless made
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an exemption from registration.
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)
__________, 2005.
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. Governing Law
The laws of the State of New York and applicable federal laws of the
United States shall govern this Warrant.
8. 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 .
--------------------
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 , 2003 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 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 AND NO
SECURITIES MAY BE DELIVERED IN THE UNITED STATES UPON EXERCISE OF THIS WARRANT
UNLESS THE EXERCISE IS 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. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
WARRANT TO PURCHASE COMMON STOCK
______________ Shares of Common Stock
LIFE MEDICAL SCIENCES, INC.
_____________ , 2003
to
June 30, 2003
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 5:00 p.m. (Eastern Standard Time) on June 30, 2003 (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"). This Warrant is subject to the provisions
of the Investor Rights Agreement dated as of __________________, 2003 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
605,000 units, each unit consisting of one share of Series C Convertible
Preferred Stock, $.01 par value per share, of the Corporation, one two year
warrant to purchase ten (10) Shares at an exercise price of $0.12 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 X.X. Xxx 000, Xxxxxx Xxxxxx,
Xxx Xxxxxx 00000, X.X.X., Attention: Xxxxxx X. Xxxxxx, 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
3
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.
Notwithstanding anything to the contrary contained in the
immediately preceding 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
4
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
(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
5
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 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
6
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
reorganization, reclassification, consolidation, merger,
amalgamation, sale, dissolution, liquidation or winding-up, as
the case may be.
7
(n) Shares to be Reserved. 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. 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.
(o) 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.
(p) 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.
(q) 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:
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
8
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. The Corporation shall be obliged to refuse to
register any proposed transfer of this Warrant or underlying Shares unless made
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from
registration.
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, 2003.
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. Governing Law
The laws of the State of New York and applicable federal laws of the
United States shall govern this Warrant.
9
8. 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 , 2003.
---------------- ------------------
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 , 2003 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
This Investor Rights Agreement (the "Agreement") is made and entered into as of
January , 2003 by and among Life Medical Sciences, Inc., a Delaware corporation
(the "Corporation") and the investors listed on the signature pages hereto (the
"Investors").
RECITALS
WHEREAS the Corporation desires the Investors to purchase Units of the
Corporation ("Units"), each Unit consisting of (i) one share of the
Corporation's Series C Convertible Preferred Stock ("Series C Preferred"), par
value of $0.01 per share, (ii) one warrant to purchase up to ten (10) shares of
Common Stock at an exercise price of $0.12 per share exercisable at any time
until the second anniversary of the original issuance date (a "Two Year
Warrant"), and (iii) one warrant to purchase up to ten (10) shares of Common
Stock at an exercise price of $0.12 per share exercisable at any time until June
30, 2003 (a "Short Term Warrant), at a purchase price of $1.20 per Unit; and
WHEREAS the purchase of the Units is in connection with an offering (the
"Offering") by the Corporation to the Investors of up to 605,000 Units pursuant
to a subscription agreement dated ______ , 2003 (the "Subscription Agreement");
and
WHEREAS as an inducement for the Investors to enter into the Subscription
Agreement, the Corporation desires to enter into this Agreement with the
Investors.
NOW THEREFOR 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 Corporation's Common Stock, par value
$0.001 per share.
-2-
(c) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
(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 Corporation
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 Corporation'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 C Preferred or exercise
of the Short Term Warrants, Two Year Warrants or Broker Warrants (as defined in
the Subscription Agreement) 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. Notwithstanding
the foregoing, shares of Common Stock issued or issuable pursuant to exercise of
the Broker Warrants shall be deemed Registrable Securities only for so long, and
for such purposes, as shares of Common Stock issued or issuable pursuant to
exercise of the Two Year Warrants continue to be Registrable Securities.
(j) "Registration Expenses" means all expenses incurred by the
Corporation 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 Corporation, 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
Corporation, which shall be paid in any event by the Corporation).
(k) "Securities Act" means the United States Securities Act of 1933, as
amended.
-3-
(l) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
(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 Corporation and the investors
named therein in connection with the Series A Private Placement.
(o) "Series A Private Placement" mean the Corporation's private
placement of an aggregate of 500,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share ("Series A Preferred") pursuant to a Stock
Purchase Agreement dated as of December 15, 2000.
(p) "Series B Demand Period" means the period during which holders of
Series B Placement Securities (as defined in Section 1.2 (b) are entitled to
request demand registration pursuant to Section 1.2 of the Series B Investor
Rights Agreement.
(q) "Series B Investor Rights Agreement" means the Investor Rights
Agreement dated as of March 21, 2002, among the Corporation and the investors
named therein in connection with the Series B Private Placement.
(r) "Series B Private Placement" means the Corporation's private
placement of an aggregate of 1,112,500 shares of Series B Convertible Preferred
Stock, par value $.01 per share ("Series B Preferred") contemplated by a
Subscription Agreement dated as of March 21, 2002.
1.2 Requested Registration.
(a) Request for Registration by Initiating Holders. If the Corporation
shall receive from an Initiating Holder, at any time following conversion of
Series C Preferred into Common Stock and expiration of the Series A Demand
Period and Series B Demand Period, a written request that the Corporation effect
any registration with respect to all or a part of the Registrable Securities,
the Corporation 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 Corporation within 30 days
after written notice from the Corporation is given under Section 1.2(a)(i)above;
provided, however, that the Corporation shall not be obligated to effect, or
take any action to effect, any such registration pursuant to this Section 1.2:
-4-
(1) In any particular jurisdiction in which the Corporation would
be required to execute a general consent to service of process in effecting such
registration, unless the Corporation 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 Corporation 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 Corporation as a part of its
request and the Corporation 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 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 Corporation 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 Corporation. Notwithstanding the
foregoing, if the managing underwriter advises the Corporation 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 Corporation 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 Corporation 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 Corporation and such other
persons to include securities in such registration shall be conditioned upon the
Corporation'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 Corporation, in the case of securities
to be registered for the account of the Corporation, 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 Corporation, 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 Corporation 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
-5-
Agreement, (B) a subscription agreement entered into with the Corporation in
connection with the June 1999 Placement or (C) the Series B Investor Rights
Agreement 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 Series B Placement ("Series B
Placement 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
Securities included in any such registration shall be subordinate to the rights
of the holders of Series A Placement Securities and of Series B Placement
Securities. Any securities excluded from an underwriting under this section
shall be withdrawn from the registration.
(c) Notwithstanding the foregoing, if the Corporation shall furnish to
the Initiating Holder a certificate signed by the President or Chief Executive
Officer of the Corporation stating that in the good faith judgment of the Board
of Directors of the Corporation, it would be seriously detrimental to the
Corporation 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 Corporation 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 Corporation may not utilize this right more than
once in any nine-month period.
(d) Except for registration statements on Form X-0, Xxxx X-0 or
successor forms thereto, the Corporation 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 Corporation 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 Corporation to
complete such registration for its own account.
1.3. Piggyback Registrations.
(a) Notice. The Corporation 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 Corporation whether for its own account or the account of
other stockholders or both (excluding any registration statements on Form X-0,
Xxxx X-0 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 Corporation. If a Holder decides not to include
all of its Registrable Securities in any registration statement thereafter filed
by the Corporation, such Holder shall nevertheless continue
-6-
to have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the
Corporation 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
Corporation gives notice under Section 1.3(a) is for an underwritten offering,
then the Corporation 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 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 Corporation, 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 Corporation'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 Series B
Placement Securities. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Corporation 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
Corporation, 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 Corporation. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Corporation
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
-7-
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 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 Corporation 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 Corporation 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 Corporation 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 Corporation, 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
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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 Corporation, and cause the
Corporation's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such 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 Corporation to take any action pursuant to Sections 1.2 and
1.3 that the selling Holders shall furnish to the Corporation 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 Corporation. To the extent permitted by law, the Corporation
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 Corporation 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 Corporation 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
-9-
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Corporation (which consent
shall not be unreasonably withheld), nor shall the Corporation 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 Corporation, each of its directors,
each of its officers who have signed the registration statement, each person, if
any, who controls the Corporation 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 Corporation 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
Corporation 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
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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 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 Corporation 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 Corporation shall not enter into any agreement with any holder or
prospective holder of any securities of the Corporation that would allow such
holder or prospective holder (a) to make a demand registration to the
Corporation 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 CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
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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.
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 Corporation will be
marked to the attention of the President, with a copy to Xxxxx Xxxxxxxxx,
Xxxxxxxxxx, Xxxxxxxxx & Xxxxxx LLP, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
XX 00000. 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
-12-
(662/3%) of the Registrable Securities (other than the Broker Warrants) 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 Subscription Agreements
constitute the full and entire understanding and agreement between the parties
with respect to the subject 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 Corporation
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 C 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 C Preferred as
so changed.
3.14. Confidentiality. Information related to the terms and conditions
of the Offering, as well as all information contained in the Subscription
Agreement (except information relating solely to an Investor) and 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 Corporation 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 Corporation 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:
-----------------------------------------
Xxxxxx Xxxxxx
Chairman, President and CEO
Address:
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INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE 2
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
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INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE 3
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
By:
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Name:
Title:
Address
Confidential Offering Supplement
--------------------------------
March 21, 2003
----------------------------
Series C Unit Offering
of
Life Medical Sciences, Inc.
-----------------------------
This Offering Supplement amends and supplements the Securities Purchase
Agreement (the "Purchase Agreement"), a form of which has been distributed by
Life Medical Sciences, Inc. (the "Company"), in connection with an offering of
up to 550,000 units ("Units"), each Unit comprised of (i) one share of Series C
Convertible Preferred Stock, (ii) one warrant exercisable for two years from the
original issue date to purchase up to ten (10) shares of Common Stock at an
exercise price of $0.12 per share and (iii) one warrant exercisable until June
30, 2003 to purchase up to 10 shares of Common Stock at an exercise price of
$0.12 per share, such Units to be offered and sold at a price of $1.20 per Unit,
resulting in maximum gross proceeds of $660,000 (the "Series C Financing").
Each of the items referred to below shall be deemed to modify the
representations and warranties of the Company contained in, and other terms and
conditions of, the Purchase Agreement and related transaction documents to the
extent relevant. Acceptance by investors of certificates evidencing the
securities purchased in the Series C Financing shall be deemed approval by the
investors of this Offering Supplement.
Recent Developments
-------------------
1. On March 21, 2003, each share of then outstanding Series B
Convertible Preferred Stock of the Company automatically
converted by its terms into 10 shares of common stock of the
Company, resulting in the issuance of an aggregate of
11,125,000 shares of common stock.
2. On March 18, 2003, the Company consummated the purchase of
certain polymer related assets of Phairson Medial Limited and
Phairson Medical Inc. in exchange for the issuance of
6,895,561 shares of restricted common stock of the Company. In
connection with the acquisition, the Company granted an
option, exercisable for 7 years, to purchase up to 100,000
shares of the Company's common stock at $.09 per share to Xx.
Xxxx X. xxXxxxxx, who has served as a medical consultant to
Phairson and the Company and who assisted in identifying the
acquisition opportunity.
3. Effective March 1, 2003, the Company hired Xx. Xxx Xxxxx to
serve as the Company's Vice President of Research and Chief
Scientific Officer. Dr. Pines had previously served in that
capacity for five years until July 2000, after which he
continued his relationship in a consulting capacity. The
Company entered into an employment agreement with Dr. Pines,
pursuant to which Dr. Pines currently receives an annual base
salary of $180,000 subject to adjustments for cost-of-living
increases and other increases as determined by the Board. The
term of Dr. Pines' employment agreement is for a period of
three years and is automatically renewed on an annual basis
absent three months prior written notice. The Company also
extended the provisions of Dr. Pines' prior indemnification
agreement to cover the present employment as well.
Over-allotment Option
---------------------
The Company has granted an over-allotment option, exercisable at any time until
5:00 p.m. on April 10, 2003, in favor of the placement agent for the Series C
Financing, Xxxxx BioCapital Limited, to solicit qualified investors to purchase
up to an additional 55,000 Units in the Series C Financing; it being understood
that if the full over-allotment option is exercised, an additional $66,000 in
gross proceeds would be received by the Company in the Series C Financing; it
being further understood that Xxxxx BioCapital Limited is entitled to
compensation with respect to Units placed in the over-allotment option as and to
the same extent provided for with respect to Units otherwise placed by it in the
Series C Financing.
Broker Warrant Correction
-------------------------
The Purchase Agreement inaccurately describes the number of shares of common
stock underlying a broker warrant that comprises part of Xxxxx BioCapital
Limited's compensation in connection with the Series C Financing. Consistent
with an agency agreement executed by the Company and Xxxxx BioCapital Limited in
January 2003, the number of shares of common stock underlying the broker warrant
shall be equal to 10% of the aggregate number of shares of common stock issuable
upon conversion of the shares of Series C Convertible Preferred Stock sold to
investors secured by Xxxxx BioCapital Limited.
Schedule 4.05(b)
Life Medical Sciences, Inc.
Options, Warrants and Other Convertible Instruments
Equivalent Shares
Exercise Price Common Stock
-------------- ------------
Stock Options (see attached ledger) Various 9,360,493
Series B Preferred Stock $0.12 11,125,000
Series B Warrants $0.24 11,125,000
Broker Warrants $0.24 916,670
Convertible Promissory Note - Polymer Technology
Group, Inc. $1.00 70,000
Convertible Promissory Note - Dimotech, $1.00
Ltd. 40,000
----------
TOTAL 32,637,163
Schedule 4.05(e)
Life Medical Sciences, Inc.
Plans and Agreements Providing for Acceleration or Other Changes in the Vesting
Provisions or Other Terms of such Securities, as the Result of Any Merger, Sale
of Stock or Assets, Change of Control or Other Similar Transaction by Life
Medical Sciences, Inc.:
1992 Stock Option Plan
2000 Non-Qualified Stock Option Plan
2001 Non-Qualified Stock Option Plan
Stock Options Issued Under Other Agreements
Certificate of Designations, Rights and Preferences of Series B Convertible
Preferred Stock
Series B Warrants
Series B Broker Warrants
Convertible Promissory Note--Polymer Technology Group, Inc.
Convertible Promissory Note--Dimotech, Ltd.
CONFIDENTIAL
------------
Schedule 4.10(a)
Life Medical Sciences, Inc.
Patents, Trademarks and Copyrights
INFORMATION OMITTED
