-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VSBP8EawtYUsFZZ2sNJdbpnOMbvvm2XPPEchO4LLj/ePtOmLzzAt5SbshYG+i7AL jS3UUgjOn3eoL4URiapZzQ== /in/edgar/work/20000727/0001104659-00-000358/0001104659-00-000358.txt : 20000921 0001104659-00-000358.hdr.sgml : 20000921 ACCESSION NUMBER: 0001104659-00-000358 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000718 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DERMA SCIENCES INC CENTRAL INDEX KEY: 0000892160 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 232328753 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13070 FILM NUMBER: 679621 BUSINESS ADDRESS: STREET 1: 214 CARNEGIE CENTER, SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6095144744 MAIL ADDRESS: STREET 1: 214 CARNEGIE CENTER, SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 8-K 1 0001.txt CURRENT REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- 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): July 18, 2000 DERMA SCIENCES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 1-31070 23-2328753 (State or other jurisdiction (Commission (IRS employer of incorporation) File Number) identification number) 214 Carnegie Center, Suite 100 Princeton, NJ 08540 (609) 514-4744 (Address including zip code and telephone number, of principal executive offices) ================================================================================ ITEM 5. OTHER EVENTS Derma Sciences, Inc. (the "Registrant") on July 18, 2000 concluded subscription agreements with its President, Edward J. Quilty, and three investment firms for the sale of a total of $400,000 in dollar amount of Registrant's series E units ("Unit(s)") at the rate if $0.75 per Unit. The Units each consist of one share of common stock, par value $0.01 per share, ("Common Stock") and one warrant to purchase one share of Common Sock at $0.75 per share ("Warrant(s)"). The Warrants will expire at the close of business on July 17, 2010. The Registrant has agreed to file a registration statement with the Securities and Exchange Commission relative to the Common Stock component of the Units and the Common Stock issuable upon exercise of the Warrants. All subscriptions for the Units have been fully funded. The investors and the amounts invested are set forth in the table below: INDIVIDUAL/INSTITUTION AMOUNT INVESTED Edward J. Quilty Princeton, New Jersey $ 50,000 Kensington Capital Management LLC New York, New York 300,000 Redwood Asset Management Oslo, Norway 50,000 -------- Total subscriptions $400,000 ======== Concurrently with Registrant's receipt of the foregoing investments, Galen Partners III, L.P., Galen Partners International III, L.P. and Galen Employee Fund III, L.P. converted a total of $375,000 in principal amount of the Registrant's convertible bonds into Units at the rate of $0.75 per Unit. The Purchase Agreement relative to the Units is attached hereto as Exhibit 10.1. The Registration Rights Agreement governing the registration of the Common Stock component of the Units and Common Stock issuable upon exercise of the Warrants is attached hereto as Exhibit 10.2. The form of Warrant Agreement governing the terms and conditions of the Warrants is attached hereto as Exhibit 10.3. The Registrant's balance sheet at June 30, 2000 (unaudited) with pro forma adjustments reflecting the foregoing investments and bond conversions is attached hereto as Exhibit 99.1. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Not applicable (b) Not applicable (c) Exhibits: 10.1 - Purchase Agreement 10.2 - Registration Rights Agreement 10.3 - Form of Warrant Agreement 99.1 - Balance sheet at June 30, 2000 with pro forma adjustments 3 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DERMA SCIENCES, INC. Date: July 26, 2000 By: /s/ Edward J. Quilty ---------------------------------------- Edward J. Quilty President and Chief Executive Officer EX-10.1 2 0002.txt PURCHASE AGREEMENT PURCHASE AGREEMENT THIS PURCHASE AGREEMENT ("Agreement") is made as of the 18th day of July, 2000, by and among Derma Sciences, Inc., a Pennsylvania corporation with offices located at 214 Carnegie Center, Suite 100, Princeton, New Jersey, 08540 ("Derma Sciences" or "the Company"), Kensington Management Group, LLC, 200 Park Avenue, New York, New York, 10016, Redwood Asset Management, Ovre Ullorn Terrasse No. 32, 0358, Oslo, Norway and Edward J. Quilty, 214 Carnegie Center, Suite 100, Princeton, New Jersey, 08540 (these latter individually, "Purchaser" and collectively, "Purchasers"). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and each of the Purchasers agree as follows: 1. DESIGNATION AND AUTHORIZATION OF SALE OF THE UNITS. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of $500,000 in dollar amount of the Company's series E units (the "Unit(s)") at the price of $0.75 per Unit. The Units shall provide, and shall be in the form, described below: 1.1. UNITS. Each Unit consists of one share of common stock, par value $.01 per share, ("Common Stock ") and one and one tenth (1.1) warrants to purchase one share of Common Stock at a price of $0.85 per whole share ("Warrant(s)"). The provisions governing the Warrants are set forth in the Form of Warrant Agreement attached hereto as Exhibit 1. 1.2. REGISTRATION RIGHTS. The Common Stock comprising the Units and the Common Stock issuable upon exercise of the Warrants ("Underlying Common Stock") will be registered by the Company for public sale. Terms and conditions governing registration of the Underlying Common Stock are set forth in the Registration Rights Agreement attached hereto as Exhibit 2. 2. AGREEMENT TO SELL AND PURCHASE THE UNITS. At the Closing (as defined in Section 3), the Company will sell and deliver to each Purchaser, and each Purchaser will buy from the Company and accept delivery of, the Units at the price of $0.75 per Unit and upon the terms and conditions hereinafter set forth: 2.1. DOLLAR AMOUNTS OF THE UNITS. The dollar amounts of the Units to be purchased by each Purchaser are as follows: PURCHASER AMOUNT Kensington Management Group, LLC $300,000 Redwood Asset Management $ 50,000 Edward J. Quilty $ 50,000 2.2. DOCUMENTS. This Agreement and the agreements executed by the Company and the Purchasers relative to the Units are hereinafter sometimes collectively referred to as the "Documents." The term Documents shall mean this Agreement, 1 the Form of Warrant Agreement and the Registration Rights Agreement together with any schedules or exhibits thereto. 3. DELIVERY OF THE UNITS AT THE CLOSING. The completion of the purchase and sale of the Units (the "Closing") shall occur at a place and time (the "Closing Date") to be determined by the Company and of which the Purchasers will be notified by facsimile transmission or otherwise; provided, however, that the Closing shall not occur later than July 28, 2000. At the Closing, the Company shall deliver to each Purchaser one or more certificates registered in the name of the Purchaser, or in such nominee name(s) as designated by the Purchaser, representing the Common Stock and Warrants comprising the Units purchased by such Purchaser as set forth in section 2.1 hereof. Fractional shares of Underlying Common Stock shall be rounded to the next higher number of whole shares. The Company's obligation to complete the purchase and sale of the Units at the Closing shall be subject to receipt of Federal Reserve (same-day) funds in the full amount of the purchase price for the Units being purchased hereunder by such Purchaser. Each Purchaser's obligation to accept and to pay for the Units shall be subject to the condition that the Company shall have (a) entered into a Registration Rights Agreement in the form of Exhibit 2 hereto (the "Registration Rights Agreement") and (b) the accuracy in all material respects of the representations and warranties made by the Company herein and the fulfillment in all material respects of those undertakings of the Company to be fulfilled prior to Closing. The parties agree that there may be more than one Closing; provided, that all Closings for the sale of Units must be held not later than July 28, 2000. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company hereby represents and warrants to, and covenants with, each Purchaser as follows: 4.1. ORGANIZATION AND QUALIFICATION. Each of the Company and its subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to conduct its business as currently conducted and to own its assets wherever located. Each of the Company and its subsidiary is qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the operations of the Company and its subsidiary, taken as a whole. 4.2. DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENT. The Company has full power and authority to enter into this Agreement and each of the Documents. This Agreement has been, and each Document and the Units will be, duly authorized, executed and delivered by the Company. The Company's execution, delivery and performance of this Agreement and each Document will not violate (i) any law, rule or regulation applicable to the Company or its subsidiary or (ii) the Certificate of Incorporation or Bylaws of the Company or its subsidiary or (iii) any provision of any indenture, mortgage, agreement, contract or other instrument to which the Company or its subsidiary is a party or by which the Company or its subsidiary or any of their properties or assets is bound as of the date hereof, or result in a breach of or constitute (upon notice or lapse of time or both) a default under any such indenture, mortgage, agreement, contract or other instrument or result in the creation or imposition of any lien, security interest, mortgage, pledge, charge or other encumbrance upon any properties or assets of the Company or its subsidiary, except, in the case of such clause (iii), where such violation, breach or default would not have a 2 material adverse effect on the business, properties, prospects, condition (financial or otherwise), net worth or results of operations of the Company and its subsidiary taken as a whole (a "Material Adverse Effect"). Upon their execution and delivery (assuming the valid execution thereof by the respective parties thereto other than the Company), this Agreement and the Documents will constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.3. ISSUANCE OF THE COMMON STOCK AND WARRANTS. Upon issuance, the Warrants and Underlying Common Stock will be duly authorized and validly issued and, upon payment therefor, will be non-assessable. 4.4. LITIGATION. There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company or its subsidiary which might result in any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiary, taken as a whole, or which might materially and adversely affect their property or assets or which might materially and adversely affect the consummation of this Agreement and the other Documents. All pending legal or governmental proceedings to which the Company or its subsidiary is a party or of which any of their property or assets is the subject, including ordinary routine litigation incidental to the business, are, considered in the aggregate, not material to the business of the Company and its subsidiary. 4.5. EXCHANGE ACT REPORTS; NO MATERIAL MISSTATEMENT OR OMISSION. The Company has timely filed all periodic reports required to be filed under the Securities Exchange Act of 1934 ("Exchange Act Reports"). As of their respective dates, the Company's Exchange Act Reports do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4.6. NO MATERIAL CHANGE. Save as disclosed in the Company's Exchange Act Reports, the Company has not incurred any material liabilities or obligations, direct or contingent, nor has the Company or its subsidiary purchased any of their outstanding capital stock, nor paid or declared any dividends or other distributions on their capital stock; and there has been no change in the capital stock or consolidated long-term debt or any increase in the consolidated short-term borrowings (other than in the ordinary course of business) of the Company or any material adverse change to the business, properties, assets, net worth, condition (financial or other), results of operations or prospects of the Company and its subsidiary, taken as a whole. 4.7. LEGAL OPINION. Prior to closing, Hedger & Hedger, counsel to the Company, will deliver its legal opinion to the Company in the form of Appendix II hereto and stating that each of the Purchasers may rely thereon as though such opinion were addressed directly to such Purchaser. 3 4.8. ISSUANCE OF COMMON STOCK UPON WARRANT EXERCISE. The Company shall issue its Common Stock upon exercise of the Warrants in accordance with the terms of the Warrant Agreement, which shall be legended as provided therein. After the Registration Statement (as defined in the Registration Rights Agreement) is declared effective by the Securities and Exchange Commission, if any holder of Underlying Common Stock shall deliver to the Company 's transfer agent (i) the certificate representing such Underlying Common Stock and (ii) a letter of representations to the effect of Sections 5(b) and (c) herein, then the Company's transfer agent shall within 3 business days after receipt of the foregoing issue new Underlying Common Stock in exchange for the aforementioned legended Underlying Common Stock which new Underlying Common Stock shall be legended as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES MAY BE SOLD PURSUANT TO THE REGISTRATION STATEMENT PROVIDED THAT THE HOLDER COMPLIES WITH THE PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SALE IS IN COMPLIANCE WITH THE PLAN OF DISTRIBUTION SET FORTH IN THE PROSPECTUS. 4.9. CERTIFICATE. The Company shall deliver a certificate of the Company executed by the Chairman of the Board or President and the chief financial or accounting officer of the Company, to be dated the Closing Date, in form and substance satisfactory to the Purchasers to the effect that the representations and warranties of the Company set forth in this Section 4 are true and correct as of the date of this Agreement and as of the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to such Closing Date. 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. (a) Each Purchaser represents and warrants to, and covenants with, the Company that: (i) the Purchaser is know-ledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments presenting an investment decision like that involved in the purchase of the Units, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Units; (ii) the Purchaser is acquiring the Units set forth in Section 2 above in the ordinary course of its business and for its own account for investment (as defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the regulations thereunder) only and with no present intention of distributing any of such Units, Warrants or Underlying Common Stock or any arrangement or understanding with any other persons regarding the distribution or purchase of such Units, Warrants or Underlying Common Stock; (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Units, Warrants or Underlying Common Stock except in compliance with the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations promulgated thereunder and the Exchange Act, and the rules and regulations promulgated thereunder, and the terms and conditions of this Agreement; (iv) the Purchaser has, in connection with its decision to purchase the principal amount of Units set forth in Section 2 above, relied solely upon the representations and 4 warranties of the Company contained in writing herein, and has not relied upon any other statements, representations, warranties, covenants or assurances of the Company, (v) the Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act ("Regulation D"); and (vi) the Purchaser understands that the Units and, except as provided in Section 4.8 hereof, the Warrants and the Underlying Common Stock will contain a legend to the following effect (provided that certificates for the Warrants shall omit the last sentence thereof): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. THESE SECURITIES ARE SUBJECT TO CERTAIN REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. (b) Each Purchaser hereby covenants with the Company that it will not directly or indirectly make any offer, sale, pledge, transfer or other disposition of the Units, the Warrants or the Underlying Common Stock other than in accordance with all applicable federal and state securities laws and the terms and conditions of this Agreement, including, but not limited to, the other representations, warranties and covenants of the Purchaser in this Section 5. (c) Each Purchaser hereby covenants with the Company not to make any public sale of the Underlying Common Stock without effectively causing any applicable prospectus delivery requirement under the Securities Act to be satisfied, and the Purchaser acknowledges and agrees that the Underlying Common Stock is not transferable on the books of the Company unless the certificate submitted to the transfer agent evidencing the Underlying Common Stock is accompanied by a separate officer's certificate: (i) in the form of Appendix I hereto, (ii) executed by an officer of, or other authorized person designated by, the Purchaser, and (iii) to the effect that (A) the Underlying Common Stock has been sold in accordance with a Registration Statement and (B) the requirement of delivering a current prospectus has been satisfied or does not apply. (d) Each Purchaser further represents and warrants to, and covenants with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) upon the execution and delivery of this Agreement, this Agreement shall constitute a valid and binding obligation of the Purchaser enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5 (e) Each Purchaser acknowledges that it has had such access to financial and other information concerning the Company, the Units, and the Warrants as it deemed necessary in connection with its decision to purchase same, including an opportunity to ask questions and request information from the Company and its management, and all such questions have been answered and all information requested has been provided to the satisfaction of the Purchaser. (f) If a Purchaser proposes to sell, pledge, assign or otherwise transfer or convey, directly or indirectly, any of the Underlying Common Stock prior to the date that the Registration Statement becomes effective, then the Purchaser shall provide the Company, prior to the sale of any such Underlying Common Stock, with a legal opinion in form and substance satisfactory to the Company that such sale, pledge, assignment, transfer or conveyance is exempt from the registration requirements under the Securities Act and any applicable state securities and blue sky laws. 6. NOMINATION TO BOARD OF DIRECTORS. In the event the Company is delisted from the Nasdaq SmallCap Market, Kensington Management Group, LLC ("Kensington") shall have the option of nominating one individual for election to the board of directors of the Company. Upon any such nomination, the Company shall cause its board of directors to (i) expand the board of directors by one member and (ii) elect the nominee of Kensington to fill the vacancy on the board of directors thereby created. Thereafter, during the pendency of the Company's delisting from the Nasdaq SamllCap Market, the Company shall cause its board of directors to nominate the nominee of Kensington for election to the Company's board of directors upon the occasion of each of the Company's annual meetings of shareholders. 7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding any representation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchasers in writing herein and in the closing certificates delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the Purchasers of the Units being purchased and the payment therefor. 8. NOTICES. All notices, requests, consents and other communications hereunder shall be in writing, shall be by telecopier with the original being forwarded by a nationally recognized overnight express courier, shall be deemed given when receipt is acknowledged by transmit confirmation report and shall be addressed as set forth at the head of this Agreement or to such other address as may hereafter be furnished in writing. 9. CHANGES. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and each Purchaser. 10. HEADINGS. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 11. SEVERABILITY. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 6 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania (without reference to its rules as to conflicts of law) and the federal law of the United States of America. 13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. Facsimile signatures are considered to be originals and shall have the same effect. 14. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signatures on next page] 7 IN WITNESS WHEREOF, the Purchasers and the Company have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. COMPANY: DERMA SCIENCES, INC. By:_________________________________________ Edward J. Quilty, President and CEO PURCHASERS: KEINSINGTON MANAGEMENT GROUP, LLC By:_________________________________________ REDWOOD ASSET MANAGEMENT By:_________________________________________ Morten Hornness, Analyst EDWARD J. QUILTY ____________________________________________ 8 APPPENDIX I PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE The below named institution, by the undersigned duly authorized, hereby certifies that: 1. It is the purchaser of the shares evidenced by the attached certificate; 2. It sold such shares on ___________________________________ in accordance with the registration statement dated ____________________________ and numbered ______________________________; and 3. The requirement of delivering a current prospectus and current annual and quarterly reports of the Company has been complied with in connection with such sale. Name of Institution: _______________________________________________ Name of Individual representing Institution: _______________________________________________ Title of Individual representing Institution: _______________________________________________ Signature:_____________________________________ APPENDIX II [HEDGER & HEDGER LETTERHEAD] July 18, 2000 Board of Directors Derma Sciences, Inc. 214 Carnegie Center, Suite 100 Princeton, NJ 08540 Re: Offer and Sale of Series E Units Members of the Board: We are counsel to Derma Sciences, Inc. (the "Company") in connection with the offer and sale of those certain series E units ("Unit(s)") consisting of one share of common stock, par value $.01 per share ("Common Stock") and one and one tenth (1.1) warrants to purchase one share of Common Stock at $0.85 per whole share ("Warrant(s)"). We have examined the originals, or certified, conformed or reproduction copies, of all records, agreements, instruments and documents relative to the Units as we have deemed relevant or necessary as the basis for the opinion hereinafter expressed. Our examination included review of the purchase agreement, form of warrant agreement, registration rights agreement and certificate of compliance ("Document(s)"). In all such examinations, we have assumed the genuineness of all signatures on original or certified copies and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to our opinion, we have relied upon, and assumed the accuracy of, certificates and oral or written statements and other information of or from public officials, officers or representatives of the Company and others. Based upon the foregoing, we are of opinion as follows: 1. The Company and its subsidiary are corporations duly organized, validly existing and in good standing under the laws of their jurisdictions of incorporation and have all requisite corporate power and authority to conduct their business as currently conducted. 2. As of the date hereof, the authorized capital stock of the Company consists of: (a) 30,000,000 shares of Common Stock of which 1,325,938 shares are outstanding, (b) 1,750,000 shares of Series A Convertible Preferred Stock of which 272,500 shares are outstanding, (c) 3,333,340 shares of Series B Convertible Preferred Stock of which 666,668 shares are outstanding, (d) 795,457 shares of Series C Convertible Preferred Stock of which 431,818 shares are Board of Directors July 18, 2000 Page 2 outstanding, (e) 592,597 shares of Series D Convertible Preferred Stock of which 148,149 are outstanding, (f) 5,278,606 shares of undesignated preferred stock of which none are outstanding, and, (g) $850,000 aggregate principal amount of convertible bonds due January 7, 2001. 3. Each of the Documents, upon their execution and delivery (assuming the valid execution thereof by the respective parties thereto other than the Company), will constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon payment therefor, the Common Stock, together with all Common Stock issuable upon exercise of the Warrants, will be validly issued and nonassessable. 4. The Company has full corporate power and authority to enter into each Document. Each Document has been duly authorized, executed and delivered by the Company. The Company's execution, delivery and performance under each Document will not violate (i) any statute, rule or regulation applicable to the Company or its subsidiary, (ii) to the best of our knowledge, any order, judgment, ruling or decree of any court or any governmental, regulatory or administrative body applicable to the Company or its subsidiary, (iii) the Articles of Incorporation or Bylaws of the Company, or (iv) to our knowledge, any provision of any indenture, mortgage, agreement, contract or other instrument to which the Company or its subsidiary is bound or constitute (upon notice or lapse of time or both) a default under any thereof, or result in the creation or imposition of any lien, security interest, mortgage, pledge, charge or other encumbrance upon any properties or assets of the Company or its subsidiary, except in the case of the foregoing clauses (i), (ii) and (iv) for those violations, breaches or defaults which would not, singly or in the aggregate, have a material adverse effect upon the Company's operations, prospects or financial condition ("Material Adverse Effect"). 5. To our knowledge (without independent investigation), there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or threatened, against or affecting the Company or its subsidiary which might, singly or in the aggregate, have a Material Adverse Effect, or which might materially and adversely affect the consummation of the Documents; to our knowledge (without independent investigation) all pending legal or governmental proceedings to which the Company or its subsidiary is a party or of which any of their property or assets is the subject, including ordinary routine litigation incidental to the business, are, considered in the aggregate, not material to the business of the Company and its subsidiary. 6. Except for compliance with Rule 506 of Regulation D under the Securities Act of 1933 and applicable state securities laws in connection with the offer and sale of the Units, and except for compliance with applicable federal and Board of Directors July 18, 2000 Page 3 state securities laws in connection with the resale by purchasers of the Underlying Common Stock (as defined in the purchase agreement), no consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental, or regulatory agency or body having jurisdiction over the Company or its subsidiary or any of their respective properties or assets is required for the execution, delivery and performance under the Documents or the consummation of the transactions contemplated hereby. ____________________ We hereby authorize the Purchasers to rely upon this opinion as if it were addressed individually to each Purchaser. Very truly yours, HEDGER & HEDGER Raymond C. Hedger, Jr. RCH:JMH EX-10.2 3 0003.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of the 18th day of July, 2000, by and among Derma Sciences, Inc., a Pennsylvania corporation with offices located at 214 Carnegie Center, Suite 100, Princeton, New Jersey, 08540 ("Derma Sciences" or "the Company"), Kensington Management Group, LLC, 200 Park Avenue, New York, New York, 10016, Redwood Asset Management, Ovre Ullorn Terrasse No. 32, 0358, Oslo, Norway and Edward J. Quilty, 214 Carnegie Center, Suite 100, Princeton, New Jersey, 08540 (these latter individually, "Purchaser" and collectively, "Purchasers"). This Agreement is made pursuant to the Purchase Agreement of even date herewith between the Company and the Purchasers (the "Purchase Agreement"). In order to induce the Purchasers to enter into the Purchase Agreement, the Company has agreed to provide for the benefit of the Purchasers of the Units (as defined below), and any subsequent holders of Registrable Securities (as defined below), the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the following capitalized terms shall have the following meanings: CLOSING DATE: Has the meaning such term is given in the Purchase Agreement. COMMON STOCK: The shares of common stock, par value $.01 per share, of the Company. EFFECTIVE DATE: The date that the Resale Registration Statement is declared effective by the SEC. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended from time to time. HOLDER: Each beneficial holder from time to time of Registrable Securities. INDEMNIFIED HOLDER: See Section 6(a). NASD: National Association of Securities Dealers, Inc. PERSON: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. 1 PROSPECTUS: The prospectus included in any Registration Statement, as supplemented by any prospectus supplement and as amended by all amendments, including post-effective amendments and all material incorporated by reference in such prospectus. REGISTRABLE SECURITIES: The Underlying Common Stock; provided that Underlying Common Stock ceases to be a Registrable Security when it (i) has been effectively registered under Section 5 of the Securities Act and disposed of in accordance with any Registration Statement, (ii) has been distributed to the public pursuant to Rule 144 under the Securities Act ("Rule 144") (or any similar provisions then in force) or (iii) is eligible for distribution to the public by the Holder pursuant to Rule 144(k) (or any similar provisions then in force). REGISTRATION EXPENSES: See Section 5. REGISTRATION STATEMENT: Any registration statement of the Company which, in accordance with Section 3 hereof, covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement. SECURITIES ACT: The Securities Act of 1933, as amended from time to time. SEC: The Securities and Exchange Commission. UNDERLYING COMMON STOCK: The Common Stock comprising the Units together with the Common Stock issuable upon exercise of the Warrants. UNITS: The Company's series E units, each consisting of one share of Common Stock, $.01 par value, and one and one tenth (1.1) warrants to purchase one share of Common Stock at a price of $0.85 per whole share. WARRANT AGREEMENT: The Warrant Agreement between the Company and StockTrans, Inc., as warrant agent, attached as Exhibit 1 to the Purchase Agreement. WARRANT PRICE: Has the meaning such term is given in the Warrant Agreement. WARRANTS: The warrants to purchase Common Stock issued pursuant to the Warrant Agreement and pursuant to the Purchase Agreement. 2 WARRANT SHARES: The shares of Common Stock issuable upon exercise of the Warrants. 2. SECURITIES SUBJECT TO THIS AGREEMENT. Each Holder from time to time shall be entitled to the benefits of this Agreement. A Person is deemed to be a Holder whenever such Person is the beneficial owner of Registrable Securities. The Company is entitled to treat the record holder of Registrable Securities as beneficial owner of Registrable Securities unless otherwise notified by the Holder thereof. 3. RESALE REGISTRATION; TIMING OF FILING, EFFECTIVENESS AND PERIOD OF USABILITY. Subject to the provisions of Section 4 hereof, the Company shall file not later than 60 days after the date hereof, and use its best efforts to cause to be declared effective not later than 90 days after the date hereof, a Registration Statement on any appropriate form under the Securities Act for all the Registrable Securities such as to permit the public resale of the Registrable Securities. The Company agrees to use its best efforts to keep the Registration Statement continuously effective and usable for resale of Registrable Securities until the date which is two (2) years (the "Effectiveness Period") after the date upon which the Commission declares the Registration Statement effective or such shorter period which shall terminate when all the Registrable Securities covered by such Registration Statement have been sold pursuant to such Registration Statement or when all Registrable Securities otherwise have been sold pursuant to Rule 144 or are freely tradeable in essentially the same manner as contemplated in Section 4 below. The Effectiveness Period shall be extended, day for day, by the length of any "black out" periods declared pursuant to section 4(l) hereof. In the event the Registration Statement has not been declared effective within 90 days of the date hereof, the Company shall remit to each Purchaser a penalty equal to .05479% of such Purchaser's investment in the Units for each day beyond 90 days that the Registration statement has not been declared effective; provided, however, if the Company files the Registration Statement within 60 days of the date hereof and responds to all comments of the SEC relative to the Registration Statement within 15 days of the receipt thereof, then the foregoing penalty shall not apply. 4. REGISTRATION PROCEDURES. In connection with the Company's obligation to file a Registration Statement as provided in Section 3 hereof, the Company will as expeditiously as possible: (a) before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Holders covered by such Registration Statement a copy of all such documents proposed to be filed, which documents will be subject to the review of such Holders, and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto to which the Holders of a majority of the Registrable Securities covered by such Registration Statement shall reasonably object (provided that the Company may assume, for the purposes of the foregoing that any Holder has no objection if the Company has not received notice from such Holder within five business days after delivery of such documents to such Holder); (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be required by the rules, 3 regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or rules and regulations thereunder or otherwise necessary to keep the Registration Statement effective for the applicable period and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (c) notify each Purchaser and the Holders promptly, and confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, and (3) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) furnish, without charge, to each Purchaser and, upon request, each Holder, at least one conformed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (f) deliver to each Purchaser and each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of the Prospectus or any amendment or supplement thereto by each Purchaser and each Holder in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (g) use its reasonable efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such governmental agencies or authorities as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Securities in such jurisdictions as the Holders may reasonably specify in response to inquiries to be made by the Company, provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to 4 take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (h) if any event shall occur as a result of which it is necessary, in the opinion of counsel for the Company, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered by a Holder, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the Holders, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (i) obtain a CUSIP number for all Registrable Securities (unless already obtained), not later than the Effective Date; (j) make available for inspection during normal business hours by a representative of the Holders of a majority of the Registrable Securities and any attorney or accountant retained by such representative, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by such Holders or any such attorney or accountant in connection with the Registration Statement; provided that all such records, information or documents shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order or is generally available to the public other than as a result of disclosure in violation of this Section 4(j); (k) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act (in accordance with Rule 158 thereunder or otherwise), no later than 45 days after the end of the 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the Effective Date, which statements shall cover said 12-month period; (l) if at any time an event of the kind described in Section 4(h) shall occur, notify each Purchaser and the Holders that the use of the Prospectus must be discontinued (the Company will not declare any such "black-out" periods in excess of twenty business days during any twelve month period, unless otherwise required); and (m) on or prior to the date the Registration Statement is declared effective by the SEC, cause all of the Underlying Common Stock to be listed for trading on the Boston Stock Exchange (or on any other national securities exchange) and the Nasdaq SmallCap Market. Each Holder as to which any registration is being effected agrees, as a condition to the registration obligations with respect to such Holder provided herein, to furnish to the Company such information 5 regarding the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing. Each Holder agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company described in Section 4(l), such Holder will forthwith discontinue disposition of Registrable Securities until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(f) hereof, or until it is advised in writing by the Company (which notice the Company shall give as promptly as possible), that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. 5. REGISTRATION EXPENSES. All of the following expenses ("Registration Expenses") incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether the Registration Statement becomes effective: (a) all registration, filing and listing fees; (b) fees and expenses of counsel acceptable to the Holders of a majority of the Registrable Securities for compliance with securities or blue sky laws; (c) the Company's printing, messenger, telephone and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent certified public accountants of the Company (including the expenses of any special audit necessary to satisfy the requirements of the Securities Act); and (f) fees and expenses associated with any NASD filing required to be made in connection with the Registration Statement. The Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on the Boston Stock Exchange and the Nasdaq SmallCap Market. 6. INDEMNIFICATION AND CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Holder, its officers, directors, employees and agents and each Person who controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an "Indemnified Holder") from and against 6 all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or alleged untrue statement or omission or alleged omission thereof based upon information furnished in writing to the Company by such Holder or its agent expressly for use therein; provided further, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in the Prospectus, if such untrue statement or alleged untrue statement, omission or alleged omission was completely corrected in an amendment or supplement to the Prospectus and if, having previously been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, such Holder thereafter fails to deliver such Prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable Security to the person asserting such loss, claim, damage, liability or expense who purchased such Registrable Security which is the subject thereof from such Holder. This indemnity will be in addition to any liability which the Company may otherwise have. If any action or proceeding (including any governmental investigation or inquiry) shall be brought or asserted against any Indemnified Holder in respect of which indemnity may be sought from the Company, such Indemnified Holder shall promptly notify the Company in writing (but the omission to so notify the Company shall not relieve it of any liability that it may have against any Indemnified Holder otherwise than under this subsection), and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Holder and the payment of all expenses. Indemnified Holders shall have the right, collectively, to employ their own counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of the Indemnified Holders unless (a) the Company has agreed to pay such fees and expenses or (b) the Company shall have failed to assume the defense of such action or proceeding and have failed to employ counsel reasonably satisfactory to the Indemnified Holders in any such action or proceeding or (c) the named parties to any such action or proceeding (including any impleaded parties) include the Indemnified Holders and the Company, and the Indemnified Holders shall have been advised by counsel that there may be one or more legal defenses available to the Indemnified Holders which are different from or additional to those available to the Company (in which case, if the Indemnified Holders notify the Company in writing that they elect to employ their own counsel at the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of the Indemnified Holders, it being understood, however, that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for the Indemnified Holders which firm shall be designated in writing by the Indemnified Holders representing at least a majority of the aggregate 7 principal amount of the outstanding Registrable Securities). Any such fees and expenses payable by the Company shall be paid to the Indemnified Holders entitled thereto as incurred by the Indemnified Holders. The Company shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Company agrees to indemnify and hold harmless the Indemnified Holders from and against any loss or liability by reason of such settlement or judgment. (b) INDEMNIFICATION BY HOLDER. Each Holder agrees to indemnify and hold harmless the Company, its respective directors and officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Holder, but only with respect to information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement or Prospectus, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its respective directors or officers or any such controlling person, in respect of which indemnity may be sought against a Holder, such Holder shall have the rights and duties given the Company, and the Company or its respective directors or officers or such controlling person shall have the rights and duties given to each holder by the preceding paragraph. In no event shall the liability of any Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) CONTRIBUTION. If the indemnification provided for in this Section 6 is unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company from the sale of the Units to each Purchaser pursuant to the Purchase Agreement on the one hand and each Holder from the offering of the Registrable Securities by such Holder, on the other hand, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and each Holder on the other in connection with the statements or omissions that resulted in such losses, claims, damages, or liabilities, as well as the other relevant equitable considerations. The relative benefits received by the Company on the one hand and each Holder on the other shall be deemed to be in the same proportion as the aggregate amount paid by each Purchaser to the Company pursuant to the Purchase Agreement for the Registrable Securities purchased by such Holder that were sold pursuant to the Registration Statement bears to the difference (the "Difference") between the amount such Holder paid for the Registrable Securities that were sold pursuant to the Registration Statement and the amount received by such Holder from such sale. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company 8 or the particular Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 6(c) were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable consideration referred to in the first sentence of this Section 6(c). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 6(c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or defending against any action or claim that is the subject of this Section 6(c). Notwithstanding the provisions of this Section 6(c), each Holder shall not be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. 7. RULE 144 AND RULE 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the Exchange Act, the Company covenants that it will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder. If the Company is not subject to the reporting requirements of Section 13 or 15 of the Exchange Act, the Company also covenants that it will provide the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any Holder which continue to be "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act and it will take such further action as any holder of such Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell its Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, so long as such provision does not require the public filing of information relating to the Company which the Company is not otherwise required to file, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rule or regulation hereafter adopted by the SEC that does not require the public filing of information relating to the Company. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 8. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of this Agreement enter into any agreement with respect to their securities which is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any such agreements. (b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take any action, or permit any change to occur, with respect to the Registrable Securities which would adversely affect the ability of the Holders to include 9 such Registrable Securities in a registration undertaken pursuant to this Agreement. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the Registrable Securities. (d) NOTICES. All notices, requests, consents and other communications hereunder shall be by telecopier, with a copy being mailed by a nationally recognized overnight express courier, and shall be deemed given when receipt is acknowledged by transmit confirmation report, and shall be delivered as addressed as follows: (1) if to a Purchaser, at the most current address given by the Purchaser to the Company in accordance with the provisions of this Section 8(d) which address initially is as set forth at the head of this Agreement; (2) if to a Holder, at its address of record as indicated on the books of the transfer agent and registrar for the Registrable Securities; and (3) if to the Company, initially at its address set forth at the head of this Agreement and thereafter at such other addresses notice of which is given in accordance with the provisions of this Section 8(d). (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (without reference to its rules as to conflicts of law) and the federal law of the United States of America. (i) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 10 (j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the securities sold pursuant to the Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (k) CALCULATION OF MAJORITY. For purposes of determining whether the Holders of a majority of the Registrable Securities have taken action pursuant thereto, any Warrants then outstanding shall be deemed to have been converted into Underlying Common Stock which shares shall be treated as outstanding for purposes hereof. 9. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. Facsimile signatures are considered to be originals and shall have the same effect. IN WITNESS WHEREOF, the Purchasers and Company have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. COMPANY: DERMA SCIENCES, INC. By:_________________________________________ Edward J. Quilty, President and CEO PURCHASERS: KEINSINGTON MANAGEMENT GROUP, LLC By:__________________________________________ 11 REDWOOD ASSET MANAGEMENT By:__________________________________________ Morten Hornness, Analyst EDWARD J. QUILTY _____________________________________________ 12 EX-10.3 4 0004.txt FORM OF WARRANT AGREEMENT WARRANT AGREEMENT WARRANT AGREEMENT dated July __, 2000 between Derma Sciences, Inc. (the "Company") and StockTrans, Inc. (the "Warrant Agent"). The Company proposes to issue common stock purchase warrants to be known as series E warrants (the "Warrant(s)"). Each Warrant entitles the holder thereof to purchase one share of Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $0.85 per whole share. The Warrant Agent, at the request of the Company, has agreed to act as the agent of the Company in connection with the issuance, registration, transfer, exchange, and exercise of Warrants. Each Warrant shall be exchangeable at the holder's request pursuant to the terms of Section 6 hereof. NOW, THEREFORE, in consideration of the mutual agreements herein set forth: 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Warrant Agents as it may deem necessary or desirable. The Company shall promptly notify the Warrant Agent from time to time in writing of the number of Warrants to be issued and furnish written instructions in connection therewith. 2. FORM OF WARRANT CERTIFICATES. The Warrant Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially of the tenor and purport recited in Exhibit A hereto and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Warrant Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may from time to time be listed, or to conform to usage. The Warrant Certificates shall be dated as of the date of issuance thereof by the Warrant Agent, either upon initial issuance or upon transfer or exchange, and initially shall entitle the holders thereof to purchase one share of Common Stock, but the number of such shares and the purchase price per share of Common Stock shall be subject to adjustments as provided herein. 3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Certificates shall be executed on behalf of the Company by the President or Chief Executive Officer and shall be attested by a Vice President or the Secretary of the Company. The Warrant Certificates shall be countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any of the Company's officers who shall have signed any of the Warrant Certificates shall cease to be such before countersignature by the Warrant Agent and issuance and delivery by the Company, such Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be such officer of the Company; and any Warrant Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificates, shall be a proper officer of the Company to sign such 1 Warrant Certificates, although at the date of the execution of this Warrant Agreement any such person was not such an officer. The Warrant Agent will keep or cause to be kept, at one of its offices in the City of Ardmore, Commonwealth of Pennsylvania books for registration and transfer of the Warrant Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Warrant Certificates, the number of Warrants evidenced on its face by each of the Warrant Certificates, and the date of each of the Warrant Certificates. The Warrant Agent shall countersign a Warrant Certificate only (a) upon initial issuance of the Warrants in accordance with the written order signed by the President and Chief Executive Officer or the Vice President and Chief Financial Officer, or (b) upon exchange, transfer or substitution for one or more previously countersigned Warrant Certificates as hereinafter provided. 4. TRANSFER AND EXCHANGE. Subject to Section 6 hereof, the Warrant Agent shall, from time to time, register the transfer of any outstanding Warrant Certificate upon the books to be maintained by the Warrant Agent for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instruments of transfer and written instructions for transfer. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee and the surrendered Warrant Certificate shall be canceled by the Warrant Agent. Any Warrant Certificate may be exchanged at the option of the holder thereof, upon surrender at the office of the Warrant Agent specified in Section 21 hereof, for another Warrant Certificate, or other Warrant Certificates of different denominations, representing in the aggregate the right to purchase a like number of shares of Common Stock. 5. COMMON STOCK AND WARRANT COMMON STOCK. As hereinafter used in this Agreement, Common Stock shall mean stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the distribution of either earnings or assets of the Company without limit as to amount or percentage, and Warrant Common Stock shall mean only Common Stock, and stock of any other class into which such presently authorized Common Stock may hereafter be changed, issuable upon exercise or exchange of the Warrant. In case, by reason of the operation of Section 7, the Warrants shall entitle the registered holders thereof to purchase any other shares of stock or other securities or property of the Company or of any other corporation, any reference in this Agreement to the exercise of Warrants shall be deemed to refer to and include the purchase of such other shares of stock or other securities or property upon such exercise. 6. WARRANT PRICE; CONVERSION DATE OF WARRANTS; EXCHANGE OF WARRANTS. The registered holder of any Warrant Certificate may exercise or exchange the Warrants evidenced thereby in whole or in part at any time on or after the date hereof upon surrender of the Warrant Certificate with the form of election to purchase or exchange on the reverse side thereof duly executed, to the Warrant Agent at the principal office of the Warrant Agent in the City of Ardmore, Commonwealth of Pennsylvania, together with payment of the purchase price for each one share of Common Stock as to which the Warrants are exercised, at or prior to 3:30 p.m. Eastern Standard Time on July 18, 2005 (the "Exercise Date"). The purchase price for each share of Common Stock pursuant to the exercise of a Warrant (the "Warrant Price") shall be as specified in the first 2 paragraph of this Warrant Certificate, as adjusted pursuant to Section 7 hereof, and shall be payable in lawful money of the United States of America. The Warrants may be exchanged, in whole or in part, at the holder's option, for that number of shares of Common Stock obtained by dividing the value of the Warrant (determined by subtracting the aggregate exercise price of the Warrant from the aggregate fair market value of the number of shares of Common Stock issuable upon exercise of the Warrant), by the fair market value of one share of Common Stock prior to the exchange. 7. WARRANT ADJUSTMENTS. The Warrant Price and the number of shares purchasable upon exercise of a Warrant shall be subject to adjustment as follows: (a) STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS AND RECLASSIFICATIONS. In case the Company shall at any time after the date of this Agreement (i) declare a dividend on the Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), the Warrant Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and/or the number and kind of shares of capital stock issuable upon exercise of the Warrants on such date shall be proportionately adjusted so that the holder of any Warrant exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Warrant had been exercised immediately prior to such date and at a time when the Common Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) SUBSCRIPTIONS. If at any time after the date hereof the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or to purchase shares of Common Stock (or securities convertible into shares of Common Stock) or having a conversion price per share of Common Stock (if a security is convertible into Common Stock) at a price per share less than the Current Market Price per share of Common Stock on such record date (as determined in the manner prescribed in Section 8 hereof) the Warrant Price shall be decreased to an amount determined by multiplying such Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which is the sum of the total number of shares of Common Stock outstanding immediately prior to such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a statement filed with the Warrant Agent. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such 3 rights or warrants are not so issued, the Warrant Price shall again be adjusted to be the price which would then be in effect if such record date had not been fixed. (c) DISTRIBUTIONS. If at any time after the date hereof the Company shall fix a record date for the making of a distribution to all holders of its Common Stock of evidences of its indebtedness or assets (excluding cash distributions made as a dividend payable out of earnings or out of surplus legally available for dividends under the laws of the jurisdiction of the Company) or rights to subscribe (excluding those referred to in subsection (b) above), then in each case the Warrant Price in effect immediately prior to such record date shall be decreased to an amount determined by multiplying such Warrant Price by a fraction, the numerator of which is the Current Market Price on such record date less the then fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a statement filed with the Warrant Agent) of the assets or evidences of indebtedness so distributed or of such subscription rights and the denominator of which is the Current Market Price at such date. The number of shares purchasable on such record date shall be increased to a number of shares equal to (i) the number of shares purchasable at the date of such distribution multiplied by the Warrant Price in effect immediately prior to the adjustment required by the preceding sentence, divided by (ii) the adjusted Warrant Price computed pursuant to the preceding sentence. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Warrant Price shall again be adjusted to the Warrant Price which would then be in effect if such record date had not been fixed. (d) CONSOLIDATION, MERGER OR SALE OF ASSETS. If, prior to the exercise of any Warrants, the Company shall at any time consolidate with or merge into another corporation, the holder of any Warrants will thereafter receive, upon the exercise thereof in accordance with the terms of this Agreement, the securities or property to which the holder of the number of shares of Common Stock then deliverable upon the exercise or conversion of such Warrants would have been entitled upon such consolidation or merger, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of the Warrants. The Company or the successor corporation, as the case may be, shall execute and deliver to the Warrant Agent a supplemental agreement so providing. A sale of all or substantially all the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. The provisions of this subsection (d) shall similarly apply to successive mergers or consolidations or sales or other transfers. (e) CALCULATIONS TO THE NEAREST CENT AND ONE-HUNDREDTH OF A SHARE. No adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 7(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent and to the nearest one-hundredth of a share as the case may be. Notwithstanding the first sentence of this subsection (e), any adjustment required by this Section 7 shall be made no later than the earlier of six months from the date of the transaction which mandates such adjustment or the expiration of the right to exercise any Warrant. 4 (f) NOTICE OF WARRANT ADJUSTMENT. Whenever the Warrant Price or the number of shares purchasable upon exercise of a Warrant shall be adjusted as provided in this Section 7, the Company shall forthwith file with the Warrant Agent a certificate, signed by a firm of independent public accountants, showing in detail the facts requiring such adjustment and the Warrant Price and number of shares so purchasable that will be effective after such adjustment. The Company shall also cause a notice setting forth any adjustments to be sent by mailing first class, postage prepaid, to each registered holder of a Warrant or Warrants at its address appearing on the Warrant register and, at its option, may cause a copy of such notice to be published once in an English language newspaper of general circulation in the City of Ardmore, Pennsylvania. The Warrant Agent shall have no duty with respect to any certificate filed with, it except to keep the same on file and available for inspection by registered holders of Warrants during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of a Warrant to determine whether any facts exist which may require any adjustment of the Warrant Price, or with respect to the nature of any adjustment of the Warrant Price when made, or with respect to the method employed in making such adjustment. (g) OTHER NOTICES. In case the Company after the date hereof shall propose to take any action of the type described in subsections (b), (c) and (d) of this Section 7, the Company shall file with the Warrant Agent a certificate, signed by the President or Chief Executive Officer of the Company and by its Secretary or Assistant Secretary specifying, in the case of any action of the type specified in subsection (d), the date on which such action shall take place and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such facts may be known on the date of such notice) on the Warrant Price and the number, or kind, or class of shares or other securities or property which shall be purchasable upon exercise of Warrants. Such notice shall be given in the case of any action of the type specified in subsections (b) and (c), at least 10 days prior to the record date with respect thereto and in the case of any action of the type specified in subsection (d) at least 10 days prior to the taking of such proposed action. The Company shall also cause a notice setting forth any adjustments to be sent by mailing first class, postage prepaid, to each registered holder of a Warrant Certificate or Warrant Certificates at its address appearing on the Warrant register and, at its option, may cause a copy of such notice to be published once in an English language newspaper of general circulation in the City of Princeton, New Jersey. Failure to give such notice or any defect therein shall not affect the legality or validity of such action. (h) NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any of the adjustments in the Warrant Price or the number of shares of Warrant Common Stock, Warrant Certificates theretofore or thereafter issued may continue to express the same prices and number of shares as are stated in a similar Warrant Certificate issuable initially, or at some subsequent time, pursuant to this Agreement and such number of Shares specified therein shall be deemed to have been so adjusted. (i) TREASURY SHARES. Shares of Common Stock at any time owned by the Company shall not be deemed to be outstanding for purposes of any computation under this Section 7. (j) OPTIONAL REDUCTION IN WARRANT PRICE. Anything in this Section 7 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Warrant Price, in addition to those adjustments required by this Section 7, as it in its sole discretion shall determine to be necessary in order that any consolidation or subdivision of the Common Stock, issuance 5 wholly for cash of any Common Stock at less than the Current Market Price, issuance wholly for cash of Common Stock or securities which by their terms are convertible into or exchangeable for Common Stock, stock dividend, issuance of rights, options or warrants referred to hereinabove in this Section 7, hereinafter made by the Company to its common stockholders, shall not be taxable to them. The Company may, at its option, at any time during the term of the Warrants, reduce the then current Exercise Price to any amount deemed appropriate by the Board of Directors of the Company, for any length of time. 8. CURRENT MARKET PRICE. For all purposes of this Agreement, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the thirty consecutive business days commencing before such date. The closing price for each day shall be (a) if the Common Stock shall be listed or admitted to trading on the New York Stock Exchange, the closing price on the NYSE-Consolidated Tape (or any successor composite tape recording transactions on the New York Stock Exchange) or, if such a composite tape shall not be in use or shall not report transactions in the Common Stock, or if the Common Stock shall be listed on a stock exchange other than the New York Stock Exchange, the last reported sales price regular way on the principal national securities exchange on which the Common Stock shall be listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of the Common Stock has been traded during such thirty consecutive business days), or, in either case, if there is no transaction on any such day, the average of the bid and asked prices regular way on such day, or (b) if the Common Stock shall not be listed or admitted to trading on any national securities exchange, the closing price, if reported, or, if the closing price is not reported, the average of the closing bid and asked prices, as reported by the National Association of Securities Dealers Automated Quotation (Nasdaq) National Market or a similar source selected from time to time by the Company for the purpose. If on any such date the shares of Common Stock are not quoted by any such source, the fair value of such shares on such date, as determined by the Board of Directors of the Company, shall be used. 9. EXERCISE OF WARRANTS. Subject to the provisions of this Agreement, each registered holder of Warrants shall have the right, which may be exercised as in such Warrant Certificates expressed, to purchase from the Company (and the Company shall issue and sell to such registered holders of Warrants) all or part of the number of fully paid and nonassessable shares of Warrant Common Stock specified in such Warrant Certificates (subject to the adjustments as herein provided), upon surrender to the Company at the office of the Warrant Agent specified in Section 21 hereof, of such Warrant Certificates with the exercise form on the reverse thereof duly filled in and signed, and upon payment to the Warrant Agent to the account of the Company of the Warrant Price for the number of shares of Warrant Common Stock in respect of which such Warrants are then exercised. The date of exercise of any Warrant shall be deemed to be the date of its receipt by the Warrant Agent duly filled in and signed and accompanied by proper funds as hereinafter provided. Payment of such Warrant Price may be made in cash, or by certified or official bank check. No adjustment shall be made for any cash dividends on shares of Warrant Common Stock issuable upon exercise of a Warrant. Upon such surrender of Warrants, and payment of the Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the registered holder of such Warrants and in such name or names as such registered holder may designate, a certificate or certificates for the number of full shares of Warrant Common Stock so 6 purchased upon the exercise of such Warrants together with cash as provided in Section 11 of this Agreement, in respect of any fraction of a share of such stock issuable upon such surrender. Each person in whose name any certificate for shares of Common Stock is issued upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record of the Common Stock represented thereby on, and such certificate shall be dated, the date upon which the Warrant Certificate evidencing such Warrants was duly surrendered and payment of the Warrant Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding business day on which the Common Stock transfer books of the Company are open. 10. UNEXERCISED WARRANTS. To the extent that any Warrant Certificates remain outstanding at the expiration of the period during which the Warrants are exercisable, the unexercised Warrants represented thereby shall be deemed null and void. 11. ELIMINATION OF FRACTIONS. The Company shall not be required to issue fractional shares of stock upon any exercise of Warrants. As to any final fraction of a share which the same registered holder of one or more Warrants, the rights under which are exercised in the same transaction or series of related transactions, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price (as determined in the manner prescribed in Section 8 hereof) on the business day which next precedes the day of exercise. 12. ISSUE TAXES. The Company will pay documentary stamp taxes, if any, attributable to the initial issuance of shares of Warrant Common Stock upon the exercise of any Warrant; provided, however, that neither the Company nor the Warrant Agent shall be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any certificates for shares of Warrant Common Stock in a name other than that of the registered holder of Warrants, in respect of which such shares are initially issued. 13. RESERVATION OF SHARES. The Company shall at all times reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the issuance of stock upon exercise of Warrants, such number of shares of its duly authorized Warrant Common Stock as shall from time to time be sufficient to effect the issuance of shares of Warrant Common Stock upon exercise of all Warrants at the time outstanding. 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In the case of Warrants which have been countersigned by the Warrant Agent, but not delivered at the time any such successor to the Warrant Agent succeeds to the agency created by this Agreement, any such successor may adopt the countersignature of the original Warrant Agent and deliver such Warrants so countersigned; and in case at that time any of the Warrants shall not have been countersigned, any successor to the Warrant Agent 7 may countersign such Warrants either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrants shall have the full force and effect provided in the Warrants and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrants shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrant Certificates so countersigned, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. 15. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS, ETC. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement available for inspection by holders of Warrants during normal business hours at its office specified in Section 21 hereof. 16. SUPPLEMENTS AND AMENDMENTS. The parties hereto may from time to time supplement or amend this Agreement without the approval of any holders of Warrants to cure any ambiguity or to correct or supplement any provision contained in this Agreement which may be defective or inconsistent with any other provision contained herein, or to make such other provisions with respect to any change or any supplemental agreement as the parties may deem necessary or desirable and which shall not materially adversely affect the interests of the registered holders of the Warrants. 17. MUTILATED OR MISSING WARRANT CERTIFICATES. If any Warrant shall be mutilated, lost, stolen or destroyed the Warrant Agent shall deliver a new Warrant Certificate of like tenor and denomination in exchange and substitution therefor upon surrender and cancellation of the mutilated Warrant Certificate or, in the case of a lost, stolen or destroyed Warrant Certificate, upon receipt of evidence satisfactory to the Company and the Warrant Agent of the loss, theft or destruction of such Warrant Certificate and, in either case, upon receipt of such indemnity as the Company and the Warrant Agent may reasonably require. Applicants for substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent or the Company may prescribe. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time enforceable by anyone. 18. DUTIES OF THE WARRANT AGENT. The Warrant Agent undertakes the duties and obligations imposed by this Warrant Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Warrant Certificates (except its countersignature thereof and except such as describes the Warrant Agent or action taken or to be taken by it) or be required to verify the same, but all such statements and recitals are and shall be deemed to have 8 been made by the Company only. The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof or in respect of the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant Certificate to be complied with by the Company; nor shall it be responsible for the making of any adjustment in the Warrant Price or the number of shares issuable upon the exercise of a Warrant required under the provisions of Section 7 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such change; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares to be issued pursuant to this Agreement or any Warrant or as to whether any shares will, when issued, be validly issued and fully paid and non-assessable. The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys, agents or employees or for any loss to the Company resulting from such neglect or misconduct, provided reasonable care had been exercised in the selection and continued employment thereof. The Warrant Agent may consult at any time with legal counsel satisfactory to it (who may be legal counsel for the Company) and the advice of such counsel shall provide complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such advice. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of a Warrant Certificate for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Warrant Agreement, to reimburse the Warrant Agent for all expenses (including reasonable counsel fees), taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Warrant Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent's negligence, willful misconduct or bad faith. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. The Warrant Agent shall act hereunder solely as agent for the Company and in a ministerial capacity, and its duties shall be determined solely by the 9 provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence, willful misconduct or bad faith. 20. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company by registered or certified mail, and to the holders of the Warrant Certificates by first-class mail. The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days' notice in writing, mailed to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Warrant Certificates by first-class mail. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in of such resignation by the resigning or incapacitated Warrant Agent or by the holder of a Warrant Certificate (who shall, with such notice, submit such holder's Warrant Certificate for inspection by the Company), then the registered holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent. 21. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of any subsequent Transfer Agent for shares of the Common Stock, the Company will file with the Warrant Agent a statement setting forth the name and address of such Transfer Agent. 22. NOTICES. Any notice pursuant to this Agreement to be given by the Warrant Agent or by the registered holder of any Warrant to the Company shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: Derma Sciences, Inc. 214 Carnegie Center, Suite 100 Princeton, New Jersey 08540 Attention: Edward J. Quilty, President and CEO Any notice pursuant to this Agreement to be given by the Company or by the registered holder of any Warrant to the Warrant Agreement shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) as follows: StockTrans, Inc. 7 East Lancaster Avenue Ardmore, Pennsylvania 19003 23. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 24. GOVERNING LAW. This Agreement and each Warrant issued hereunder shall be deemed to be a contract made under the laws of the Commonwealth of Pennsylvania, and for all purposes shall be construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to principles of conflict of laws. 10 25. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates. 26. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 27. REGISTRATION OF SHARES OF COMMON STOCK. The Company will furnish to the Warrant Agent, upon request, an opinion of counsel to the effect that (a) a Registration Statement under the Securities Act of 1933, as amended, is then in effect with respect to the shares of Warrant Common Stock issuable upon exercise of the Warrants and the Prospectuses hereinafter referred to comply as to form in all material respects with the requirements of said Act and the rules and regulations of the Securities and Exchange Commission thereunder; or (b) a Registration Statement under said Act with respect to said shares is not required. In the event that said opinion states that such a Registration Statement is in effect the Company will, from time to time, furnish the Warrant Agent with current Prospectuses meeting the requirements of said Act and all rules and regulations thereunder in sufficient quantity to permit the Warrant Agent to deliver a Prospectus to each transferee of a Warrant Certificate and each holder of a Warrant Certificate upon exercise or conversion thereof. The Company further agrees to pay all fees, costs and expenses in connection with the preparation and delivery to the Warrant Agent of the foregoing opinions and Prospectuses. If any shares of Warrant Common Stock issuable upon the exercise of the Warrants or the issuance thereof requires registration or approval of any governmental authority, including, without limitation, the filing of necessary amendments, supplements or post-effective amendments to a Registration Statement of the Company under the Securities Act of 1933, or the taking of any other action under the laws of the United States of America or any political subdivision hereof or under the laws of any state of the United States of America before such shares may be validly and legally issued, then the Company covenants that it will in good faith and as expeditiously as possible endeavor to secure and keep effective such registration or approval or to take such other action, as the case may be. [Signatures on next page] 11 IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed and delivered as of the day and year first above written. DERMA SCIENCES, INC. By:______________________________________ Edward J. Quilty President and Chief Executive Officer STOCKTRANS, INC. By:______________________________________ Jonathan A. Miller President 12 EXHIBIT A WARRANT CERTIFICATE DERMA SCIENCES, INC. EXERCISABLE AT ANY TIME AT OR PRIOR TO 3:30 P.M. NEW YORK EASTERN STANDARD TIME ON JULY 18, 2005 =============================================================================== XXX THOUSAND (XXX) WARRANTS No. WE-000 =============================================================================== This certifies that _________________________________ or registered assigns is the registered holder of the number of Warrants set forth above, and is entitled, upon surrender of this Warrant Certificate at the office of StockTrans, Inc., Warrant Agent (or any successor as such Warrant Agent), in the city of Ardmore, Pennsylvania, at any time on or after the date of the Warrant Agreement (as defined) and at or prior to 3:30 p.m. Eastern Standard Time July 18, 2005, to purchase one share of Common Stock, par value $.01, of Derma Sciences, Inc., a Pennsylvania corporation (the "Company"), at the price of $0.85 per whole share. The applicable per share purchase price shown above and the number of shares issuable upon exercise of the Warrants represented by this Warrant Certificate are subject to adjustment for the occurrence of certain events, including stock dividends and split-ups, combinations, reorganizations, reclassifications, consolidations, mergers or sales of properties and assets and upon the issuance of certain rights or warrants to holders of Common Stock or the distribution to such holders of assets or indebtedness, as set forth in the Warrant Agreement hereinafter referred to. A complete statement with respect to such adjustments and to other terms and conditions pertaining to the Warrants is contained in the Warrant Agreement between the Company and StockTrans, Inc., Warrant Agent (the "Warrant Agreement"), a copy of which may be examined by the registered holder hereof at the office of the Warrant Agent. The Warrants may be exchanged, in whole or in part, at the holder's option, for that number of shares of Common Stock obtained by dividing (x) the value of the Warrant (determined by subtracting, the aggregate exercise price of the Warrant from the aggregate fair market value of the number of shares of Common Stock issuable upon exercise of the Warrant), by (y) the fair market value of one share of Common Stock prior to the exchange. To exercise the Warrants represented by this Warrant Certificate the form of election to purchase on the reverse hereof must be duly executed and the accompanying instructions for the registration and delivery of the stock must be filled in. The Warrants represented by this Warrant Certificate are transferable (subject to the conditions set forth in the preceding paragraphs) at the office in the City of Ardmore, Pennsylvania of the Warrant Agent (or of its successor as Warrant Agent) by registered holder thereof in person or by attorney duly authorized in writing, upon surrender of this Warrant Certificate. Upon any such transfer, a new Warrant Certificate, representing the right to purchase a like number of shares of the Company's Common Stock, will be issued to the transferee in exchange for this Warrant Certificate. This Warrant Certificate when surrendered at the office in the City of Ardmore, Pennsylvania of the Warrant Agent (or of its successor as Warrant Agent) by the registered holder hereof in person or by attorney duly authorized in writing may be exchanged for another Warrant Certificate or Warrant Certificates, representing in the aggregate the right to purchase a like number of shares of the Company's Common Stock. If the Warrants evidenced by this Warrant Certificate remain outstanding at the expiration of the period during which Warrants are exercisable, as set forth in the first paragraph of this Warrant Certificate, such Warrants shall thereupon be deemed null and void. No fractional shares of Common Stock will be issued upon the exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof, a cash payment will be made, as provided in the Warrant Agreement. No holder of this Warrant Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Warrant Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or, except as provided in the Warrant Agreement, to receive notice of meetings, or to receive dividends or subscription rights or otherwise, until the Warrant or Warrants evidenced by this Warrant Certificate shall have been exercised as provided in the Warrant Agreement. IN WITNESS WHEREOF, THE Company has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunder affixed this ___ day of July, 2000. DERMA SCIENCES, INC. _______________________________________ Edward J. Quilty President and Chief Executive Officer ATTEST __________________________________________ Stephen T. Wills, CPA, MST Vice President and Chief Financial Officer This Warrant Certificate is not valid until countersigned by the Warrant Agent. COUNTERSIGNED: STOCKTRANS, INC. _______________________________________ Jonathan A. Miller President NOTIFICATION OF EXERCISE To StockTrans, Inc. or its successor as WARRANT AGENT: The undersigned, holder of the within Warrant Certificate, hereby (1) irrevocably exercises the undersigned's right to purchase ________ shares of Common Stock, par value $0.01 per share, as Derma Sciences, Inc. (the "Company") which the undersigned is entitled to purchase under the terms of the within Warrant Certificate, or such other securities as the undersigned shall be entitled to purchase under the terms of the Warrant Agreement referred to in such Warrant Certificate by reason of the occurrence of certain events specified therein, and (2) elects to make payment in full for the number of shares of Common Stock so purchased by payment of $____ in cash or by certified or official bank check. Please issue the certificate of shares of Common Stock in the name of, and pay any cash for any fractional share to: - -------------------------------------------------------------------------------- Print or type name - -------------------------------------------------------------------------------- Social Security or other Identifying Number - -------------------------------------------------------------------------------- Street Address - -------------------------------------------------------------------------------- State Zip Code - -------------------------------------------------------------------------------- If such number of shares shall not be all the shares purchasable upon the exercise of the Warrants evidenced by this Warrant Certificate, a new Warrant Certificate for the balance of such Warrants remaining unexercised shall be registered in the name of and delivered to: Please insert social security or other identifying number: - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- Dated: ___________________ ____________________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face if the Warrant Certificate) (Signature Medallion Guaranteed): __________________ Date: ___________________ (If the Common Stock, cash in lieu of fractional shares, or Warrants for any unexercised balance are to be issued or paid to a person other than the person in whose name the within Warrant is registered, or if otherwise requested by the Company or the Warrant Agent, a signature Medallion guarantee is required.) ASSIGNMENT FOR VALUE RECEIVED, _____________________________________ hereby sells, assigns, and transfer unto ______________________ this Warrant Certificate together with all right, title or interest therein and does hereby irrevocably appoint ______________________ attorney to transfer the within Warrant Certificate on the books of the Warrant Agent with full power of substitution in the premises. Dated: ___________________ ____________________________________________ Signature (Signature must conform in all respects to name of holder as specified on the face if the Warrant Certificate) (Signature Medallion Guaranteed): _________________ Date: ___________________ EX-99.1 5 0005.txt BALANCE SHEET EXHIBIT 99-1 DERMA SCIENCES, INC. BALANCE SHEETS June 30, 2000
* ACTUAL ADJUSTMENTS PROFORMA ---------------------------------------------- Current Assets Cash and cash equivalents 870,511 400,000 1,270,511 Accounts Receivable, net 1,867,298 1,772,990 Inventories 1,299,750 1,327,789 Current portion of officer's note receivable 19,330 19,330 Prepaid expenses and other current assets 420,427 445,449 --------------- ------------- ------------ Total Current Assets 4,477,316 400,000 4,836,069 Property and equipment, net 330,637 340,651 Long-term Assets Goodwill and other intangibles, net 1,485,601 1,496,042 Officer's note receivable 76,034 76,034 --------------- ------------- ------------ 6,369,588 400,000 6,748,796 --------------- ------------- ------------ Current Liabilities Accounts payable 1,038,258 1,139,980 Accrued expenses 413,496 431,443 Bank Line of credit 950,000 1,000,000 --------------- ------------- ------------ Total Current Liabilities 2,401,754 - 2,571,423 Long-term Liabilities Convertible Bonds 850,000 (375,000) 475,000 --------------- ------------- ------------ 3,251,754 (375,000) 3,046,423 --------------- ------------- ------------ Stockholders Equity Common Stock 14,092 5,667 19,759 Convertible Preferred Stock 14,809 3,750 18,559 Additional Paid-in Capital 11,416,947 765,583 12,182,530 Accumulated Deficit (8,328,014) (8,322,450) --------------- ------------- ------------ Total Stockholders Equity 3,117,834 775,000 3,898,398 --------------- ------------- ------------ 6,369,588 400,000 6,944,821 --------------- ------------- ------------ TOTAL STOCKHOLDERS' EQUITY 3,117,834 3,898,398 Less: Net Goodwill at June 30, 2000 1,301,058 1,301,058 ---------------- -------------- Net Tangible Assets 1,816,776 2,597,340 ================ ==============
* PROFORMA ADJUSTMENTS REFLECT THE PURCHASE OF 533,333 SHARES ($400,000) OF COMMON STOCK AT $0.75 PER SHARE AND CONVERSION OF $375,000 IN PRINCIPAL AMOUNT OF CONVERTIBLE BONDS. DERMA SCIENCES, INC. SCHEDULE OF GOODWILL - NET BALANCE LESS BALANCE BEGINNING AMORTIZATION ENDING ------------------------------------------------ Balance as of: 31-Mar-00 $1,354,690 $ 26,816 $1,327,874 30-Jun-00 1,327,874 26,816 1,301,058 30-Sep-00 1,301,058 26,816 1,274,242 31-Dec-00 1,274,242 26,816 1,247,426 -----END PRIVACY-ENHANCED MESSAGE-----