(FORM OF FACE OF DEBENTURE)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS"
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY,
BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE DATE OF
ORIGINAL ISSUANCE HEREOF EXCEPT (A) TO DERMA SCIENCES, INC., (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS CONFIRMED
IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM AND SUBSTANCE TO THE ISSUER OF THIS
SECURITY AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (III)
IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT
OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (II)(D) IS SUBJECT TO
THE RIGHT OF THE ISSUER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND
SUBSTANCE.
DERMA SCIENCES, INC.
(Incorporated in the Commonwealth of Pennsylvania)
CONVERTIBLE DEBENTURES DUE 1998
No. R-_______________ U.S. $____________
Derma Sciences, Inc., a corporation duly incorporated and
existing under the laws of the Commonwealth of Pennsylvania (the "Company"), for
value received, hereby promises to pay to , or registered assigns, the principal
sum of United States Dollars on March 15, 1998 (the "Stated Maturity"), subject
to extension as described herein. The Stated Maturity shall be extended through
the date on which the Company obtains authorization for the issuance of the
Series A Convertible Preferred Stock (such date, the "Authorization Date"). The
Debentures will be convertible on or after the Authorization Date. The
Debentures will accrue interest beginning 120 days from the date hereof at a
rate of 6% per annum, payable quarterly, with additional interest becoming due
each 90-day period following such initial 120-day period during which the
Company has failed to obtain authorization for the issuance of the Series A
Convertible Preferred Stock. Interest hereon shall be calculated on the basis
of a 365/366 day year.
Reference is hereby made to the further provisions of this
Debenture set forth under the Terms and Conditions of the Debentures on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed in its corporate name by the manual or facsimile signature of a
duly authorized signatory, as attested to by another duly authorized signatory
of the Company.
Dated: ______________, 1997
DERMA SCIENCES, INC.
By:________________________________
Xxxxxx X. Xxxxxx
Chairman
ATTEST:
By:__________________________________
Name:
Title:
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[Form of Reverse]
Terms and Conditions of the Debentures
1. General.
(a) This Debenture is one of a duly authorized issue of Debentures of
the Company designated as its Convertible Debentures due 1998 (herein called the
"Securities").
(b) The Securities are issuable, without coupons, in denominations of
U.S. $20 and integral multiples thereof. The Securities, and transfers thereof,
shall be in registered form as provided in Section 6 hereof. The registered
holder of a Security shall (to the fullest extent permitted by applicable law)
be treated at all times, by all persons and for all purposes as the absolute
owner of such Security, regardless of any notice of ownership, theft or loss or
of any writing thereon.
(c) The Securities are direct obligations of the Company. Without the
approval of the holders of the Securities or except as otherwise provided
herein, the Company may not incur or issue any other indebtedness or securities
which ranks senior or pari passu to the Securities.
(d) The Company has agreed, subject to shareholder approval, to amend
its Certificate of Incorporation pursuant to that certain Purchase Agreement
dated November 10, 1997 by and between the Company and certain Purchasers named
therein ("Purchase Agreement") to allow for the issuance of the shares of Series
A Preferred Stock, $.01 par value, set forth in the Purchase Agreement within
120 days of the date hereof (the "Authorization Date"). The Company has agreed
to reserve for issuance the shares of the Company's common stock, $.01 par value
per share, underlying the shares of Series A Convertible Preferred Stock and the
warrants set forth in the Purchase Agreement (the "Warrants") (shares issuable
upon conversion of the Series A Preferred Stock and exercise of the Warrants are
collectively referred to as the "Underlying Common Stock"). On or after the
Authorization Date, the Securities shall be convertible into units (the
"Units"), each of which consists of one share of Series A Convertible Preferred
Stock and one Warrant. Each Debenture shall be convertible into such number of
Units as shall result by dividing the principal amount of Debentures by the
purchase price per Unit. The Company has agreed to file and use its best efforts
to cause to become effective not later than 90 days after the Closing Date (the
"Registration Date") a registration statement on Form S-3 (the "Registration
Statement") covering the resale of the shares of the Underlying Common Stock
issuable upon conversion of the shares of the Series A Preferred Stock or the
exercise of the Warrants, as the case may be.
2. Conversion.
(a) Subject to and upon compliance with the provisions hereof, a holder
of Securities is entitled, at its option, at any time on or after the
Authorization Date, to convert such Security into Units, as calculated above, by
surrender of the Security, together with instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder or by his
duly authorized attorney and the conversion notice hereon duly executed at the
office of the Company or such other office as may be designated by it for such
purpose in Princeton, New Jersey or the City of New York.
(b) No payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Securities surrendered for conversion or
on account of any dividends on the Underlying Common Stock. No fractions of
shares or scrip representing fractions of shares will be issued or delivered on
conversion, but instead of any fractional interest the Company shall pay a cash
adjustment as provided herein.
3. Events of Default.
In the event that any of the following ("Events of Default") shall
occur and be continuing:
(a) the Company shall fail to have sufficient shares of Common Stock
authorized and reserved for issuance no later than 120 days after the Closing
Date to permit conversion of the Securities; or
(b) the Company shall fail to maintain the Registration Statement
effective from the date of registration and for one year thereafter; or
(c) the Company shall fail duly to perform or observe any other term,
covenant or agreement contained in any of the Securities for a period of 60 days
after the date on which written notice of such failure, requiring the Company to
remedy the same, shall first have been given to the Company by the holders of at
least 25% in aggregate principal amount of the Securities at the time
outstanding; provided, however, that in the event the Company shall within the
aforesaid period of 60 days commence legal action in a court of competent
jurisdiction seeking a determination that the Company had not failed to duly
perform or observe the term or terms, covenant or covenants or agreement or
agreements specified in the aforesaid notice, such failure shall not be an Event
of Default unless the same continues for a period of 10 days after the date of
any final determination to the effect that the Company had failed to duly
perform or observe one or more of such terms, covenants or agreements; or
(d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar law
now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for any
substantial part of the property of it or ordering the winding-up or liquidation
of the affairs of it and such decree or order shall remain unstayed and in
effect for a period of 30 consecutive days; or
(e) the Company shall commence a voluntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or shall make any general assignment for the benefit of creditors,
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or shall admit in writing its inability to pay its debts as they become due or
shall take any corporate action in furtherance of any of the foregoing; or
(f) an event of default, as defined in any indenture or instrument
evidencing or under which the Company shall have outstanding at least $200,000
(or its equivalent in another currency), in aggregate principal amount of
indebtedness for borrowed money, shall have occurred and be continuing and such
default shall involve the failure to pay the principal of such indebtedness (or
any part thereof), when due and payable after the expiration of any applicable
grace period with respect thereto, or such indebtedness shall have been
accelerated so that the same shall be or become due and payable prior to the
date on which the same would otherwise have become due and payable, and failure
to pay shall not have been cured by the Company within 30 days after such
failure or such acceleration shall not be rescinded or annulled within 60 days
after notice thereof shall have first been given to the Company; provided that
if such event of default under such indenture or instrument shall be remedied or
cured by the Company or waived by the holders of such indebtedness, then the
Event of Default hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action upon the part of
any of the holders of Securities;
then the holder of this Security may, at such holder's option, declare the
principal of this Security and the interest accrued hereon to be due and payable
immediately in cash by written notice to the Company. Upon payment of such
amount of principal and interest in cash, all of the Company's obligations in
respect of payment of principal of and interest on this Security shall
terminate.
If an Event of Default, as defined in this Section 3, with respect to
the Securities, or an event which would, with the passing of time or the giving
of notice, or both be an Event of Default, shall occur and be continuing, the
Company shall within two business days of becoming aware thereof notify the
holders in writing, of such Event of Default.
The Company shall provide to the holders on each anniversary of the
date hereof, a certificate to the effect that there is then existing no default
with respect to the Securities, as defined in this Section.
4. Merger, Consolidation, Sale, Conveyance or Assumption.
(a) The Company will not merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other corporation, unless (i)
either (A) the Company shall be the surviving corporation in the case of a
merger or (B) the surviving, resulting or transferee corporation shall expressly
assume the due and punctual payment of all the Securities, according to their
tenor, and the due and punctual performance of all of the covenants and
obligations of the Company under the Securities, by supplemental agreement
reasonably satisfactory to the holders of the Securities, (ii) the surviving,
resulting or transferee corporation, if not organized and validly existing under
the laws of the United States, shall expressly agree to make payments under the
Securities free of any deduction or withholding for or on account of taxes,
levies, imposts and charges whatsoever imposed by or for the account of the
jurisdiction where such successor corporation is generally subject to taxation
(or any political subdivision or taxing authority thereof or therein) in a
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manner equivalent to that set forth herein, subject to the exceptions contained
in such forms of the Securities, and (iii) the Company or such successor
corporation, as the case may be, shall not, immediately after such merger,
consolidation, sale or conveyance, be in default in the performance of any
covenants or obligations of the Company under the Securities.
(b) Upon any merger, consolidation, sale, conveyance or assumption as
provided in Section 4(a), the successor or assuming corporation shall succeed to
and be substituted for, and may exercise every right and power of and be subject
to all the obligations of, the Company under the Securities, with the same
effect as if such successor or assuming corporation had been named as the
Company therein and herein and the Company shall be released from its liability
as obligor under the Securities; provided that any successor or assuming
corporation shall have the obligation to purchase the Securities only as a
result of circumstances which occur subsequent to such merger, consolidation,
sale, conveyance or assumption and as a result of which the Company would have
had such obligation if the Company had remained the obligor on the Securities.
In case of any such merger, consolidation, sale, conveyance or
assumption, such successor or assuming corporation shall succeed to and be
substituted for the Company with the same effect, subject to (in the case of a
merger to which the Company is a party) Section 4(b) of the Securities, as if it
had been named in the Securities as the Company; the Company shall thereupon be
relieved of any further obligation or liability hereunder or upon the
Securities, and the Company, as the predecessor corporation may thereupon or at
any time thereafter be dissolved, wound up or liquidated. Subject to all the
terms, conditions and limitations in the Securities prescribed, the successor or
assuming corporation shall deliver any Securities which previously shall have
been signed and delivered by the officers of the Company. All the Securities so
issued shall in all respects have the same legal rank and benefit as the
Securities theretofore or thereafter issued as though all of such Securities had
been issued at the date of the execution hereof.
In case of any merger, consolidation, sale, conveyance or
assumption, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
5. Replacement, Transfer and Exchange of Securities.
(a) In case any Security shall at any time become mutilated, destroyed,
stolen or lost and such Security or evidence of the loss, theft or destruction
thereof (together with the indemnity hereinafter referred to and such other
documents or proof as may be required) shall be delivered to the Company, a new
Security of like tenor and date with appropriate interest coupons, if any, will
be issued by the Company in exchange for the Security so mutilated, or in lieu
of the Security so destroyed, stolen or lost, but, in the case of a destroyed,
stolen or lost Security only upon receipt of evidence satisfactory to the
Company that such Security was destroyed, stolen or lost, and if required by the
Company, upon receipt also of indemnity satisfactory to the Company. All
expenses and reasonable charges associated with procuring such indemnity and
with the preparation, authentication and delivery of a new Security shall be
borne by the owner of the Security so mutilated, destroyed, stolen or lost.
(b) Securities are exchangeable at the office of the Company in
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Princeton, New Jersey or as designated by the Company for such purpose, for an
equal aggregate principal amount of Securities of authorized denominations as
required by the holder surrendering the same. In the event of conversion of a
Security in part only, a new Security or Securities for the unredeemed or
unconverted portion hereof will be issued in the name of the holder thereof.
(c) The costs and expenses of effecting any exchange or registration of
transfer pursuant to the foregoing provisions, except for the expenses of
delivery by other than regular mail (if any) and except, if the Company shall so
require, the payment of a sum sufficient to cover any tax or other governmental
charge or insurance charges that may be imposed in relation thereto, will be
borne by the Company.
(d) For purposes of the provisions of this Security, any Security
authenticated and delivered pursuant hereto shall, as of any date of
determination, be deemed to be "outstanding," except for:
(i) Securities previously converted, or canceled by the
Company or delivered to the Company for cancellation;
(ii) Securities which have become due and payable at maturity
or otherwise and with respect to which monies or shares of Common
Stock, as applicable, sufficient to pay the principal thereof and
interest thereon shall have been made available to the Company; or
(iii) Securities in lieu of or in substitution for which other
Securities have been authenticated and delivered pursuant hereto;
provided, however, that in determining whether the holders of the requisite
principal amount of outstanding Securities are present at a meeting of holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any subsidiary thereof shall be disregarded and deemed not to
be outstanding.
6. Modifications and Amendments.
(a) Without the consent of any holders of Securities, modifications of
or amendments to the Securities may be made for any of the following purposes:
(i) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants
of the Company in the Securities;
(ii) to add to the covenants of the Company for the benefit of
the holders of Securities, or to surrender any right or power herein
conferred upon the Company;
(iii) to make provision with respect to the conversion rights
of holders of Securities pursuant to Section 2 hereof;
(iv) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein; and
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(v) to make any other provisions with respect to matters or
questions arising under this Security;
No such action pursuant to this paragraph (a) may adversely
affect the interests of the holders of Securities.
(b) Modifications and amendments to these Securities may be made, and
future compliance with or past default by the Company under any of the
provisions thereof may be waived, with the written consent of the holders of at
least a majority in aggregate principal amount of the Securities at the time
outstanding, provided, that no such modification, amendment or waiver may,
without the consent of the holder of each such Security affected thereby:
(i) waive a default in the payment of the principal of or
interest on any Security;
(ii) change the Stated Maturity (except as contemplated
herein) of the principal of or any installment of interest on, any
Security, or reduce the principal amount thereof or the rate of
interest thereon, or change the coin or currency in which any Security
or the interest thereon is payable, or adversely affect the right to
convert any Securities as provided in Section 2 or modify the
provisions of the Securities with respect to subordination of the
Securities in a manner adverse to the holders;
(iii) reduce the requirements of Section 6 hereof for quorum
or voting, or reduce the percentage in principal amount of the
outstanding Securities the consent of whose holders is required for any
amendment or modification of the Terms and Conditions of the
Securities;
(iv) change the obligation of the Company to maintain an
office or agency in Princeton, New Jersey or the City of New York; or
(v) modify any of the provisions of this Section except to
increase any such percentage or to provide that certain other
provisions of the Securities cannot be modified or waived without the
consent of the holder of each outstanding Security affected thereby.
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7. Non-Business Days.
In any case where the date of maturity of the principal of or interest
on the Securities or the date fixed for redemption of any Security shall be at
any place of payment a Saturday, Sunday, a legal holiday or a day on which
banking institutions in Princeton, New Jersey or the City of New York are
authorized or obligated by law or executive order to close, then payment of
principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place of payment which is not a
Saturday, Sunday, a legal holiday or a day on which banking institutions in
Princeton, New Jersey or the City of New York are authorized or obligated by law
or executive order to close, with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest shall accrue
for the period after such date.
8. Security Register.
The Company shall cause to be kept at its principal office a register
(the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities.
As provided herein and subject to certain limitations therein set forth
and compliance by the holder with applicable state and federal securities laws,
the transfer of Securities is registrable on the Security Register upon
surrender of a Security for registration of transfer at the office or agency of
the Company, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company duly executed by, the holder
thereof or his attorney duly authorized in writing, and thereupon one or more
new Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
9. Notices.
All notices to the holders of Securities will be mailed to registered
holders of Securities at their registered addresses as the same shall appear in
the Security Register on the day fifteen days prior to such mailing.
10. Governing Law.
The Securities shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to principles of
conflicts of law.
11. Countersignature and Registration.
This Security shall not become valid or obligatory for any purpose
until the certificate representing this Security shall have been duly executed
by the Company and such signature attested to by an authorized Officer thereof.
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12. Warranty of the Company.
The Company hereby certifies and warrants that all acts, conditions and
things required to be done and performed and to have happened precedent to the
creation and issuance of this Security, and to constitute the same legal, valid
and binding obligations of the Company enforceable in accordance with their
terms, have been done and performed and have happened in due and strict
compliance with all applicable laws.
13. Accounting Terms.
All accounting terms not otherwise defined herein shall have the
meanings assigned to them in accordance with generally accepted accounting
principles as applied in the United States.
14. Descriptive Headings.
The descriptive headings appearing herein are for convenience of
reference only and shall not alter, limit or define the provisions hereof.
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TRANSFER NOTICE
Only if a Security or Unit issued upon conversion of any Security is
transferred (if no registration statement covering the securities comprising the
Units is effective):
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and
transfer(s) unto ________________________________________________ whose taxpayer
identification number is ________________ and whose address including postal/zip
code is_________________________________________________________________________
___________________________________________________________ the within Security
and all rights thereunder, hereby irrevocably constituting and appointing
_________________ attorney-in-fact to transfer said Security on the books of the
Company with full power of substitution in the premises.
In connection with the transfer of this Security, the undersigned
Holder certifies that:
(Check one)
[ ] (a) This Security is being transferred with the consent of the
Company to a sophisticated institutional investor which is an
"accredited investor" (within the meaning of Rule 501(a) under the
Securities Act of 1933, as amended) in a transaction not involving any
general solicitation or advertising.
[ ] (b) This Security is being transferred pursuant to any other
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended, as confirmed
in an attached opinion of U.S. counsel.
Dated:_____________ Name:______________________________
By:________________________________
Title:_____________________________
NOTICE: The signature of the Holder
to this assignment must correspond
with the name as written upon the
face of the within instrument in
every particular, without
enlargement or any change
whatsoever.
SIGNATURE GUARANTEED
-----------------------------------
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TO BE COMPLETED BY A BROKER OR DEALER IF (b) ABOVE IS CHECKED:
The undersigned represents and warrants that (i) it is a broker or
dealer registered under Section 15 of the Securities Exchange Act of 1934, as
amended; (ii) each person which will become a beneficial owner of this Security
upon transfer is a sophisticated institutional investor which is an "accredited
investor" (within the meaning of Rule 501(a) under the Securities Act of 1933,
as amended); (iii) no general solicitation or advertising was made or used by it
in connection with the offer and sale of this Security to such person(s); and
(iv) each such person has been notified that this Security has not been
registered under the Securities Act of 1933, as amended, and is subject to the
restrictions on transfer of the Security set forth herein.
Dated:______________ _____________________________
By: _________________________
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE HOLDERS SHALL NOT BE
OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE
CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE
HEREOF SHALL HAVE BEEN SATISFIED.
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CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably exercises
the option to convert this Security, or portion hereof (which is U.S. $20 or an
integral multiple thereof) below designated, into Units of Derma Sciences, Inc.
in accordance with the terms of this Security, and directs that such shares,
together with a check in payment for any fractional share and any Securities
representing any unconverted principal amount hereof, be delivered to and be
registered (if a Security) in the name of the undersigned unless a different
name has been indicated below. If shares or Securities are to be registered in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Dated:______________ ____________________________
Signature
[MUST BE GUARANTEED]
If Securities are to be registered in the name of, or a check in payment of the
purchase amount of any fractional share is to be to, a Person other than the
holder, please print such person's name and address:
------------------------------
------------------------------
------------------------------
If only a portion of the Securities is to be converted please indicate:
1. Principal Amount to be converted: U.S. $____________
2. Kind, amount and denomination of Securities representing unconverted
principal amount to be issued:
U.S. $_____________________
Denominations: U.S. $_______
(U.S. $20 or an integral multiple thereof)
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