SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 31, 2005
PHASE III MEDICAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-10909 22-2343568
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Commission File Number IRS Employer
Identification No.
330 SOUTH SERVICE ROAD, SUITE 120, MELVILLE, NEW YORK 11747
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(Address of principal executive offices) (Zip Code)
631-574-4955
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Registrant's Telephone Number
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below): N/A
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Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
On December 31, 2005, January 6, 2006 and January 13, 2006, the Registrant,
entered into Subscription Agreements (the "Agreement") with certain accredited
investors and consummated the sale of Units consisting of Convertible Promissory
Notes and detachable warrants under Regulation D under the Securities Act of
1933, as amended. Gross proceeds raised were $250,000 on December 31, 2005,
$137,500 on January 6, 2006 and $50,000 on January 13, 2006, totaling to date an
aggregate of $437,500 in gross proceeds.
Each Unit was comprised of: (a) a nine month note in the principal amount
of $25,000 bearing 9% simple interest, payable semi-annually, with the 2nd
payment paid upon maturity, convertible into shares of the Company's common
stock, $.001 par value (the "Common Stock") at a conversion price of $.06 per
share; and (b) 416,666 detachable three year Warrants, each for the purchase of
one share of Common Stock at an exercise price of $.12 per share.
The Notes are subject to mandatory conversion by the Company if the closing
price of the Common Stock has been at least $.18 for a period of at least 10
consecutive trading days prior to the date on which notice of conversion is sent
by the Company to the holders of the Promissory Notes, and if the underlying
shares are then registered for resale with the SEC.
Holders of the Units are entitled to certain registration rights. The
Company will, promptly following the last closing date, endeavor to file a
Registration Statement with the SEC to include the shares of Common Stock
underlying the Promissory Notes, the shares of Common Stock underlying the
Warrants, the shares of Common Stock issued to the Placement Agent as its fee
(the "Placement Agent Shares") and the shares of Common Stock underlying the
warrants (the "Placement Agent Warrants") issued to the Placement Agent in
payment of its fee. In the event that the Registration Statement is not declared
effective by the SEC as of the six-month anniversary of the last closing date,
the conversion price of the Promissory Notes and the exercise price of the
Warrants shall be decreased by five percent for each 30-day period that the
Registration Statement is not declared effective by the SEC; provided, however,
that in no event shall the conversion price of the Promissory Notes and the
exercise price of the Warrants be decreased pursuant to the operation of this
provision to an amount that is less than $.04 and $.10 respectively
The Company paid to WestPark Capital, Inc. (the "Placement Agent") a
commission (i) in cash equal to 10% of the aggregate principal amount of the
Promissory Notes sold ($43,750); (ii) 437,500 shares of common stock; and (iii)
a warrant to purchase 729,166 shares of the Company's common stock. The
Placement Agent was also reimbursed for certain expenses.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 10.1 Form of Convertible Promissory Note.
Exhibit 99.1 Form of Warrant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHASE III MEDICAL, INC.
By: /s/ Mark Weinreb
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Mark Weinreb
President
Dated: January 18, 2006
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EXHIBIT 10.1
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CONVERTIBLE PROMISSORY NOTE
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New York, New York
US$__________ December [__], 2005
FOR VALUE RECEIVED, PHASE III MEDICAL, INC., a Delaware corporation (the
"Maker"), unconditionally, subject to the terms hereof, hereby promises to pay
to the order of [______________________________________], a
[_____________________] corporation, or its successor or assigns (the "Holder"),
at such place as the Holder may from time to time designate in writing to the
Maker, in lawful money of the United States of America, the principal sum of
_________________ Thousand and No/100 Dollars ($__________), together with
interest as herein provided, subject to the terms set forth in this Convertible
Promissory Note (the "Note"). Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Subscription Agreement or the Notes.
Section 1. Term. The principal balance of this Note, together with all
accrued interest, shall be payable on the earlier of (i) the "Maturity Date" (as
defined in Section 2, below) or (ii) the occurrence of any of the "Events of
Default" (as defined in Section 6, below). Upon the payment in full of the
outstanding principal and all accrued interest thereon, this Note shall be
surrendered to the Maker for cancellation.
Section 2. Maturity Date. The "Maturity Date" is September [__], 2006.
Section 3. Interest; Prepayment. The unpaid principal balance of this Note
shall bear interest at the rate of nine percent (9%) per annum payable
semi-annually on June __, 2006 and the Maturity Date. Interest shall commence to
accrue as of the date hereof and shall be calculated on the basis of a 365-day
year. Any interest not paid shall be capitalized as principal and compounded
semiannually. In no event shall the Holder be entitled to interest exceeding the
maximum rate permitted by the laws of the State of Delaware. If any excess of
interest is provided for or shall be adjudicated to be so provided for in this
Note, then in such event: (i) the provisions of this paragraph shall govern and
control; (ii) the Maker shall not be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount permitted by
the laws of the State of Delaware; and (iii) any such excess which may have been
collected or attributed shall be subtracted from the then unpaid principal
amount hereof, or refunded to the Maker. For so long as any Event of Default is
continuing, and until such default has been cured, interest shall accrue at a
rate of 14% per annum on the unpaid portion of principal and interest on this
Note.
Subject to the Maker's providing not less than 10 days' written notice to
the Holder to provide the Holder with the opportunity to exercise any or all of
his conversion rights, the Maker may prepay this Note at any time, in whole or
in part, without premium or penalty. All such payments shall be applied first to
accrued but unpaid interest and the remainder to principal.
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Section 4. Conversion.
(a) Optional Conversion. All or any portion of the principal amount
of this Note then outstanding, together with any accrued and
unpaid interest hereunder, may be converted at the option of the
Holder at any time and from time to time into shares of the
Maker's common stock, $.001 par value (the "Common Stock") at a
conversion price (the "Conversion Price") of $.06 per share of
Common Stock (a "Conversion Share"), with the number of
Conversion Shares subject to adjustment from time to time
pursuant to Section 11, at the sole discretion of the Holder, at
any time through and including the Maturity Date. The Holder may
effect conversions under this Section 4, by delivering written
notice in the form attached hereto as Exhibit A (the "Conversion
Notice") to the Maker. Holder may convert the principal amount of
this Note and if the Holder is converting less than all of the
principal amount, together with any accrued and unpaid interest
hereunder, represented by this Note, the Maker shall honor such
conversion to the extent permissible hereunder and shall promptly
deliver to the Holder a schedule in the form of Schedule 1
attached hereto (the "Conversion Schedule") indicating the
principal amount which has not been converted.
(b) Mandatory Conversion. On the day that written notice is given to
the Holder by the Company, this Note shall be automatically
converted into Conversion Shares at the then effective Conversion
Price if (a) the closing price for a share of Common Stock as
reported on the Over the Counter Bulletin Board (or the principal
market for the Company's Common Stock at the time if other than
the Over the Counter Bulletin Board) has been at least $.18 per
share (subject to adjustment consistent with any adjustment in
the Conversion Price hereunder) for the period of 10 consecutive
trading days prior to the date on which such notice is sent by
the Company, and (b) the Conversion Shares to be issued upon
conversion and the shares underlying the Unit Warrant Shares have
been registered for resale pursuant to a registration statement
declared and remaining effective pursuant to the Securities Act
of 1933, as amended (the "Securities Act").
Section 5. Mechanics of Conversion.
(a) Number of Issuable Conversion Shares. The number of Conversion
Shares issuable upon conversion of the Note and any interest thereunder shall
equal the outstanding principal amount of this Note and any interest thereon to
be converted, divided by the Conversion Price on the "Conversion Date,". The
Conversion Date is the date of the Conversion Notice.
(b) Effective Date of Conversion; Certificate. Each and every
conversion hereunder shall be effective on the Conversion Date. The Maker shall,
by the fifth business day following each Conversion Date, issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder and
in such name or names as the Holder may designate a certificate for the
Conversion Shares. The Holder, or any Person so designated by the Holder to
receive Conversion Shares, shall be deemed to have become holder of record
thereof as of such Conversion Date.
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(c) Effect of Conversion Notice. The Holder shall deliver this
original Note to the Maker to effect a conversion hereunder or an affidavit of
loss and indemnity agreement in form and substance reasonably acceptable to the
Maker and in accordance with Section 12.1. Notwithstanding any failure to
deliver the original Note, execution and delivery of the Conversion Notice by
the Holder shall have the same effect as cancellation of the Note and issuance
of a New Note representing the remaining outstanding principal amount.
(d) The Maker's Obligations. The Maker's obligations to issue and
deliver Conversion Shares upon conversion of this Note in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation,
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Maker or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Maker to the
Holder in connection with the issuance of such Conversion Shares.
Section 6. Events of Default. Upon the occurrence of any of the following
"Events of Default," all principal and accrued and unpaid interest shall
immediately become due and payable:
(a) Bankruptcy, etc. The Company shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Company, and
the petition is not controverted within 20 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Company, or the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company, or there is
commenced against the Company any such proceeding which remains undismissed for
a period of 60 days, or the Company is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Company suffers any appointment of any custodian or the like for it or
any substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or the Company makes a general assignment for the benefit of
creditors; or any corporate action is taken by the Company for the purpose of
effecting any of the foregoing;
(b) Breach of Covenants. The breach of any of the covenants of the
Maker set forth in this Note and the Warrant To Purchase Shares of Common Stock
of the Maker issued to Holder as of the date hereof, subject to a thirty
calendar day period to cure following written notice thereof from Holder.
(c) Nonpayment of Principal and Interest. If any of the principal or
accrued and unpaid interest shall not be paid when due, subject to a thirty day
period to cure.
Section 7. Charges, Taxes, and Expenses. Issuance of certificates for
Conversion Shares upon conversion of (or otherwise in respect of) this Note
shall be made without charge to the Holder for any issue or transfer tax,
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withholding tax, transfer agent fee or other incidental tax or expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Maker; provided, however, that the Maker shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the registration of any certificates for Conversion Shares or Note in a name
other than that of the Holder.
Section 8. Reservation of Common Stock. The Maker covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Conversion Shares as required hereunder, the number of
shares of Common Stock that are then issuable and deliverable upon the
conversion of (and otherwise in respect of) this entire Note (taking into
account the adjustments of Section 10), free from preemptive rights or any other
contingent purchase rights of persons other than the Holder. The Maker covenants
that all Conversion Shares so issuable and deliverable shall, upon issuance in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
Section 9. Certain Adjustments. The Conversion Price is subject to
adjustment from time to time as set forth in this Section 10.
(a) Stock Dividends and Splits. If the Maker, at any time while this
Note is outstanding: (i) pays a stock dividend on its Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of
Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, or (iii) combines outstanding shares of Common Stock into a
smaller number of shares, then in each such case the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
subsection shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this subsection shall
become effective immediately after the effective date of such subdivision or
combination.
(b) Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Maker shall (a) effect a reorganization, (b)
consolidate with or merge with or into any other person, (c) reclassify its
shares of capital stock in such a manner as would effect its Common Stock, or
(d) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the Maker,
then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Maker whereby
the Holder of the Note, on the conversion hereof as provided in Section 4, at
any time after the consummation of such reorganization, consolidation, merger,
or reclassification or the effective date of such dissolution, as the case may
be, shall receive, in lieu of the Conversion Shares and Conversion Warrants
issuable on such conversion prior to such consummation or such effective date,
the stock and other securities and property (including cash) to which such
Holder would have been entitled upon such consummation or in connection with
such dissolution, as the case may be, if such Holder had so converted this Note,
immediately prior thereto, all subject to further adjustment thereafter as
otherwise provided in this Section 10.
(c) Calculations. All calculations under this Section 10 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
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number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Maker, and the disposition of
any such shares shall be considered an issue or sale of Common Stock.
(d) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 11, the Maker at its expense will compute such
adjustment in accordance with the terms hereof. Upon written request by a
Holder, Maker will deliver to any Holder so requesting a certificate describing
in reasonable detail such adjustment and the transactions giving rise thereto,
Section 10. Fractional Shares. The Maker shall not be required to issue or
cause to be issued fractional Conversion Shares on conversion of this Note. If
any fraction of a Conversion Share would, except for the provisions of this
Section 10, be issuable upon conversion of this Note or payment of interest
hereon, the number of Conversion Shares to be issued will be rounded up to the
nearest whole Conversion Share.
Section 11. Miscellaneous.
(a) Exchange; Lost, Stolen, Destroyed, or Mutilated Note. Upon receipt of
evidence reasonably satisfactory to the Maker of the ownership of and the loss,
theft, destruction, or mutilation of this Note and (in the case of loss, theft,
or destruction) upon delivery of an indemnity agreement in an amount and by a
person or an entity reasonably satisfactory to the Maker, or (in the case of
mutilation) upon surrender and cancellation of the mutilated Note, the Maker
will execute and deliver, in lieu thereof, a new Note containing the same terms
and conditions, as adjusted for unpaid principal and interest on this Note.
(b) Successors and Assigns. The terms and conditions of this Note shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Note, express or implied, is intended to
confer upon any party, other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Note, except as expressly provided in this Note.
(c) Notices. Any notice required or permitted under this Note shall be
given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or by telex or confirmed facsimile, or one delivery day
after deposit with a recognized overnight express delivery service or courier
(for FedEx Express Overnight [or equivalent] delivery to and from an address
within the United States of America) or three delivery days after deposit with a
recognized overnight express delivery service or courier (for FedEx Express
International Priority [or equivalent] delivery to and from an address outside
the United States of America), and addressed to the party to be notified at the
address indicated for such party below, or at such other address as such party
may designate by ten days' advance written notice to the other party:
(a) If to the Maker: Phase III Medical, Inc.
330 South Service Road
Suite 120
Melville, NY 11747
Attention: Mark Weinreb, Chief Executive Officer
Facsimile: 631.574.4955
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With a copy to: (which shall not constitute notice)
Lowenstein Sandler PC
65 Livingston Ave.
Roseland, NJ 07068
Fax 973.597.2565
(b) If to the Holder: [____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
Facsimile: [_________________________]
With a copy to: Meister Seelig & Fein LLP
(which shall not 140 East 45th Street, 19th Floor
constitute notice) New York, NY 10017
Attention: Ronniel Levy, Esq.
Facsimile: 646.539.3622
(d) Severability. If one or more provisions of this Note are held to be
unenforceable under applicable law, such provisions shall be excluded from this
Note and the balance of this Note shall be interpreted as if such provisions
were so excluded and shall be enforceable in accordance with its terms.
(e) Consents, Waivers, and Modifications. No consent, waiver or
modification of any nature relating to this Note, or the obligations of the
Maker hereunder, shall be effective unless the same is in writing and signed by
an authorized representative of the Holder.
(f) Entire Agreement. This Note and the other documents delivered pursuant
hereto, or referenced herein, constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof.
(g) Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Delaware and the venue for any dispute
resolution process shall be New York County, New York. Subject to the terms of
this Note, this Note is an instrument representing an unconditional obligation
of the Maker for payment of money only and is enforceable by summary proceeding
and without a jury pursuant to New York C.P.L.R. 3213, in the Supreme Court of
the State of New York, County of New York.
(h) Further Assurances. At any time or from time to time upon request of a
party hereto (the "Requesting Party"), the other party hereto will execute and
deliver such further documents and do such other acts and things as the
Requesting Party may reasonably request in order fully to effectuate the purpose
of this Note and to provide for the payment of the principal and interest due
hereunder.
(i) No Stockholder Rights. No provision of this Note shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
dividends or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Maker or any other matter
whatsoever as a stockholder of the Maker. No provision hereof, in the absence of
conversion referred to in Section 4 hereof, and no mere enumeration herein of
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the rights or privileges of the Holder, shall give rise to any liability of
Holder for the purchase price of such shares or as a stockholder of the Maker,
whether such liability is asserted by the Maker, creditors of the Maker, or
others.
(j) Amendments. This Note may not be amended without the prior, written
consent of the Holder (which consent shall not be unreasonably withheld,
delayed, or denied), if such amendment would materially and adversely
disadvantage the Holder or one or more of such holders vis-a-vis any of such
other holders.
(k) Headings. The titles and subtitles used in this Note are used for
convenience only and are not to be considered in construing or interpreting this
Note.
IN WITNESS WHEREOF, the undersigned has executed or caused a duly
authorized officer or representative to execute this Note, all as of the date
first above written.
PHASE III MEDICAL, INC.
a Delaware corporation
By:
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Mark Weinreb, Chief Executive Officer
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EXHIBIT A
CONVERSION NOTICE
(To be Executed by the Registered Holder in order to convert Note)
The undersigned hereby elects to convert the principal amount of Note and
any accrued interest thereon indicated below, into Units, as of the date written
below. If shares are to be issued in the name of a Person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Maker in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any. All terms
used in this notice shall have the meanings set forth in the Note.
Conversion calculations:
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Date to Effect Conversion
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Principal amount of Note owned prior to conversion
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Principal amount of Note to be Converted
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Principal amount of Note remaining after Conversion
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Accrued Interest to be Converted
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Number of shares of Common Stock to be Issued
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Applicable Conversion Price
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Name of Holder
By:
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Name:
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Title:
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Schedule 1
PHASE III MEDICAL, INC.
CONVERTIBLE NOTE DUE SEPTEMBER [__], 2006
CONVERSION SCHEDULE
This Conversion Schedule reflects conversions made under the
above-referenced Note.
- ------------------------------ -------------------------- --------------------- ---------------------------------
Aggregate Principal
Amount Remaining
Subsequent to
Date of Conversion Amount of Conversion Conversion Applicable Conversion Price
- ------------------------------ -------------------------- --------------------- ---------------------------------
- ------------------------------ -------------------------- --------------------- ---------------------------------
- ------------------------------ -------------------------- --------------------- ---------------------------------
- ------------------------------ -------------------------- --------------------- ---------------------------------
- ------------------------------ -------------------------- --------------------- ---------------------------------
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EXHIBIT 99.1
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant No. __________
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
PHASE III MEDICAL, INC.
THIS CERTIFIES that, in consideration of the receipt of ____________
($___________) and other value received, [______________] is entitled to
purchase from PHASE III MEDICAL, INC., a Delaware corporation (the
"Corporation"), subject to the terms and conditions hereof, _______________
shares (the "Warrant Shares") of common stock, $.001 par value (the "Common
Stock"). This warrant, together with all warrants hereafter issued in exchange
or substitution for this warrant, is referred to as the "Warrant" and the holder
of this Warrant is referred to as the "Holder." The number of Warrant Shares is
subject to adjustment as hereinafter provided. Notwithstanding anything to the
contrary contained herein, this Warrant shall expire at 5:00 p.m. (Eastern Time)
on December [__], 2008 (the "Termination Date").
1. Exercise of Warrants.
(a) The Holder may, at any time prior to the Termination Date, exercise
this Warrant in whole or in part at an exercise price per share equal to $.12
per share, subject to adjustment as provided herein (the "Exercise Price"), by
the surrender of this Warrant (properly endorsed) at the principal office of the
Corporation, or at such other agency or office of the Corporation in the United
States of America as the Corporation may designate by notice in writing to the
Holder at the address of such Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Exercise Price in lawful money of the
United States by check or wire transfer for each share of Common Stock being
purchased. Upon any partial exercise of this Warrant, there shall be executed
and issued to the Holder a new Warrant in respect of the shares of Common Stock
as to which this Warrant shall not have been exercised. In the event of the
exercise of the rights represented by this Warrant, a certificate or
certificates for the Warrant Shares so purchased, as applicable, registered in
the name of the Holder, shall be delivered to the Holder hereof as soon as
practicable after the rights represented by this Warrant shall have been so
exercised.
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(b) If, but only if, at any time after six months from the date of the
Final Closing, there is no effective registration statement registering the
resale of the Common Stock underlying this Warrant, other than during an Allowed
Delay as defined in the Subscription Agreement dated of even day herewith, this
Warrant may also be exercised at such time by means of a "cashless exercise" in
which, at any time prior to the Termination Date, the Holder of this Warrant
may, at its option, elect to have the Company reduce the number of Warrant
Shares otherwise issuable by a number of shares of Common Stock delivered to the
Company by the Holder having a fair market value equal to the exercise price of
the Warrant Shares being purchased. For purposes hereof, "fair market value"
shall mean Fair Market Value of one share of Company Common Stock shall mean the
average closing price (the "Price") of one share of Company Common Stock on the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board
(the "Bulletin Board") (or other similar exchange or association on which the
Company Common Stock is then listed or quoted) for the five (5) consecutive
trading days immediately preceding the date for which such Fair Market Value is
being determined. If the Company Common Stock is not then quoted on the Bulletin
Board or otherwise listed or quoted on an exchange or association, the Price
shall be the fair market value of one share of Company Common Stock as of the
date for which such Fair Market Value is being determined as determined in good
faith by the Board of Directors of the Company.
2. Reservation of Warrant Shares. The Corporation agrees that, prior to
the expiration of this Warrant, it will at all times have authorized and in
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the number of Warrant Shares as from time to time
shall be issuable by the Corporation upon the exercise of this Warrant.
3. No Stockholder Rights. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Corporation.
4. Transferability of Warrant. Prior to the Termination Date and subject
to compliance with applicable Federal and State securities and other laws, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
office or agency of the Company by the Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed for transfer. Any registration rights to which
this Warrant may then be subject shall be transferred together with the Warrant
to the subsequent purchaser.
5. Certain Adjustments. With respect to any rights that Holder has to
exercise this Warrant and convert into shares of Common Stock, Holder shall be
entitled to the following adjustments:
(a) Merger or Consolidation. If at any time there shall be a merger
or a consolidation of the Corporation with or into, or if the Corporation shall
enter into an agreement providing for the transfer or sale of all or
substantially all of its assets to, another entity (the "Surviving Entity") when
the Corporation is not the surviving corporation, then, as part of such merger
or consolidation or transfer of assetslawful provision shall be made so that the
holder hereof shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the aggregate
Exercise Price then in effect, the number of shares of stock or other securities
or property (including cash) of the Surviving Entity resulting from such merger,
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consolidation or transfer of assets, to which the holder hereof as the holder of
the stock deliverable upon exercise of this Warrant would have been entitled in
such merger,consolidation or transfer of assets, if this Warrant had been
exercised immediately before such transaction. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the holder hereof as the holder of
this Warrant after the merger.consolidation, or transfer of assets. Under no
circumstances may the Corporation into any agreement or instrument providing for
the merger, consolidation or transfer of its assets or similar transaction
without first assuring Warrant is fully enforceable and exercisable with respect
to the Surviving Entity as contemplated by this Warrant.
(b) Reclassification, Recapitalization, etc. If the Corporation at
any time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding shares of Common Stock, or otherwise, change
any of the securities as to which purchase rights under this Warrant exist into
the same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change.
(c) Split or Combination of Common Stock and Stock Dividend. In case
the Corporation shall at any time subdivide, redivide, recapitalize, split
(forward or reverse) or change its outstanding shares of Common Stock into a
greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Exercise Price shall be proportionately
reduced and the number of Warrant Shares proportionately increased. Conversely,
in case the outstanding shares of Common Stock of the Corporation shall be
combined into a smaller number of shares, the Exercise Price shall be
proportionately increased and the number of Warrant Shares proportionately
reduced.
6. Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act, upon exercise of any part of the
Warrant, the Corporation shall instruct its transfer agent to enter stop
transfer orders with respect to such Warrant Shares, and all certificates or
instruments representing the Warrant Shares shall bear on the face thereof
substantially the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
7. Miscellaneous. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York. All the covenants and
provisions of this Warrant by or for the benefit of the Corporation shall bind
and inure to the benefit of its successors and assigns hereunder. Nothing in
this Warrant shall be construed to give to any person or corporation other than
the Corporation and the holder of this Warrant any legal or equitable right,
remedy, or claim under this Warrant. This Warrant shall be for the sole and
exclusive benefit of the Corporation and the Holder. The section headings herein
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are for convenience only and are not part of this Warrant and shall not affect
the interpretation hereof. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction, or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Corporation, if lost, stolen, or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Corporation shall execute and deliver to the Holder a new Warrant of like
date, tenor, and denomination.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officers under its seal, this [__] day of December 2005.
PHASE III MEDICAL, INC.
Mark Weinreb, President & Chief Executive Officer
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WARRANT EXERCISE FORM
To Be Executed by the Holder in Order to Exercise Warrant
To: Phase III Medical, Inc. Dated: ________________ __, 200_
330 South Service Road
Suite 120
Melville, New York 11747
Attn: President and CEO
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. ______, hereby irrevocably elects to purchase (check applicable
box):
|_| ____________ shares of the Common Stock of Phase III Medical, Inc.
covered by such Warrant; or
|_| the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in subsection
1(b) (if applicable).
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant. Such payment takes
the form of (check applicable box or boxes):
|_| $__________ in lawful money of the United States; and/or
|_| if the provisions of subsection 1(b) of this Warrant are in effect,
the cancellation of such portion of the attached Warrant as is
exercisable for a total of _________ Warrant Shares (using a Fair
Market Value of $_______ per share for purposes of this calculation);
and/or
|_| if the provisions of subsection 1(b) of this Warrant are in effect,
the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 1(b), to exercise
this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in
subsection 1(b).
The undersigned hereby requests that certificates for the Warrant Shares
purchased hereby be issued in the name of:
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(please print or type name and address)
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(please insert social security or other identifying number)
and be delivered as follows:
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(please print or type name and address)
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(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant for the balance of
such shares be registered in the name of, and delivered to, Holder.
--------------------------------
Signature of Holder
SIGNATURE GUARANTEE:
--------------------------------
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
whose address is
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Dated: ________ __, 200_
Holder's Signature:
-------------------------
Holder's Address:
--------------------------
Signature Guaranteed:
--------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust Corporation.
Officers of corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.