Exhibit 10.40

 

BOSTON LIFE SCIENCES, INC.

Restructuring Agreement

 

This Restructuring Agreement (this “Agreement”) is dated as of February 4, 2005,
by and among Boston Life Sciences, Inc., a Delaware corporation (the “Company”)
and the holders of outstanding Series E Cumulative Convertible Preferred Stock,
$0.01 par value per share (the “Series E Preferred Stock”) of the Company set
forth on the signature pages hereto (each a “Series E Holder” and collectively
the “Series E Holders”).

 

W I T N E S S E T H:

 

WHEREAS, as of the date hereof there are outstanding: (i) 561.3 shares of Series
E Preferred Stock, and (ii) warrants to purchase 2,880,000 shares of common
stock, $0.01 par value per share (the “Common Stock”) of the Company initially
issued in December 2003 (collectively, the “Common Stock Warrants”), 2,020,680
of such Common Stock Warrants being held by the holders of Series E Preferred
Stock (the “Series E Warrants”) (the shares of Common Stock underlying the
outstanding shares of Series E Preferred Stock and the shares of Common Stock
issuable upon exercise of the Series E Warrants referred to collectively herein
as the “Shares”); and

 

WHEREAS, the Series E Holders agree to convert their shares of Series E
Preferred Stock into Common Stock pursuant to the terms and conditions more
fully set forth in this Agreement and in consideration therefor the Company has
agreed to, among other things, reduce the exercise price of the Series E
Warrants to $0.01 per share.

 

NOW, THEREFORE, in consideration of the conditions and mutual covenants set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the Company
and the Series E Holders agree as follows:

 

1. Election to Convert. Subject to the terms and conditions hereof and the
approval of (i) any one or more of Proposal No. 1, Proposal No. 2 or Proposal
No. 3, and (ii) Proposals No. 4 and No. 5 at the Special Meeting of Shareholders
to be held on or about February 1, 2005 (the “Special Meeting”), the undersigned
holder of the Series E Preferred Stock, hereby agrees, and hereby elects, to
convert its outstanding shares of Series E Preferred Stock into shares of the
Company’s Company Stock at the current conversion price of $1.2464.

 

2. Dividend. Within three (3) business day following the conversion of the
shares of Series E Preferred Stock discussed in Section 1 above, the Company
shall pay to each of the Series E Holders a cash payment of $564.44 for each
share of Series E Preferred Stock converted, which represents the dividend
payment that would be due to the holders of Series E Preferred Stock for the
twelve-month period following the dividend payment made to the holders of Series
E Preferred Stock on October 31, 2004.

 

3. Adjustment to Series E Warrants. Subject to the terms and conditions hereof,
and upon receipt of requisite stockholder approval in accordance with applicable
Nasdaq regulations at the Special Meeting, the Company agrees to reduce the
exercise price of the Series E Warrants from $1.5421 per Share to $0.01 per
Share.

 

4. Right of Participation. In connection with each private placement of equity
securities (“New Securities”) effected by the Company after the date of this
agreement pursuant to an exemption from registration under the Securities Act of
1933, as amended, up to an aggregate amount of $16.9 million (each a “Private
Placement” and collectively the “Private Placements”), the Company shall give
each of the Series E Holders written notice (the “Rights Notice”) of each
applicable Private Placement describing the New Securities, the price, the
general terms upon which the Company proposes to issue such New Securities, and
the number of New Securities that such Series E Holder has the right to purchase
in each Private Placement under this Section 4. Each such Series E Holder shall
have five (5) calendar days from delivery of the Rights Notice to agree to
purchase all or any part of its pro rata share (as defined below) of such New
Securities to be issued in the applicable Private Placement by giving written
notice to the Company setting forth the quantity of New Securities to be
purchased. A failure to provide the Company with written notice setting forth
the quantity of New Securities to be purchased by any such Series E Holder in
accordance with this Section 4 shall be deemed to be a waiver by such Series E
Holder of its right to purchase any portion of its pro rata portion of such New
Securities in the applicable Private Placement. For purposes of this Section 4,
each Series E Holder’s “pro rata share” of New Securities to be issued in each
Private Placement shall be (i) a fraction, the numerator of which shall be the
number of shares of Series E Preferred Stock held by such Series E Holder as of
the date hereof, and the denominator of which shall be 561.3, times (ii) one
third of the aggregate dollar amount of the New Securities to be issued in the
applicable Private Placement. For purposes of clarification, once the Series E
Holders have collectively been offered the right to purchase 33 1/3% of New
Securities issued by the Company after the date hereof aggregating up to $16.9
million, the right of participation set forth in this Section 4 shall be of no
further force or effect.

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5. Automatic Conversion. Subject to approval of an amendment to the Certificate
of Designations, Rights and Preferences of the Series E Preferred Stock at the
Special Meeting permitting the mandatory conversion of the then outstanding
Series E Preferred Stock by less than unanimous consent, each of the Series E
Holders hereby elects such mandatory conversion without any further act or
documentation required by such Series E Holder.

 

6. Lock-up Agreements. Subject to the terms and conditions hereof, each Series E
Holder agrees (i) for a period of six (6) months (the “Initial Lock-Up Period”)
from the date the exercise price of the Series E Warrants are adjusted from
$1.5421 per Share to $0.01 per Share (as discussed in Section 3 above), not to
offer, sell, contract to sell or otherwise dispose of the Shares issuable to
such holder upon exercise of such holder’s Series E Warrants, and (ii) for a
period of six (6) months following the Initial Lock-Up Period, each holder may
sell up to 16.67% of the Shares issuable to such holder upon exercise of such
holder’s Series E Warrants in any thirty-day period. Each Series E Holder agrees
to execute a lock-up agreement as further evidence of the foregoing.

 

7. Representations and Warranties of the Series E Holders. Each Series E Holder
hereby represents and warrants to the Company as follows:

 

7.1 Enforceability. Subject to the consent of no less than holders of
seventy-five (75%) percent of the currently outstanding shares of Series E
Preferred Stock acting independently and not as a group, this Agreement and any
and all agreements to be executed by the Series E Holder pursuant to this
Agreement and the transactions contemplated hereby, when executed and delivered
by the Series E Holder, will constitute the valid, binding and enforceable
obligation of the Series E Holder.

 

7.2 Authorization; No Contravention. The execution, delivery and performance of
the obligations of each Series E Holder hereunder (a) have been duly authorized
by all necessary action of the Series E Holder, (b) do not violate, conflict
with or result in any breach or contravention of, or the creation of any lien
under, any material contractual obligation of the Series E Holder or any
requirement of law applicable to the Series E Holder, and (c) do not violate any
orders of any governmental authority against, or binding upon, the Series E
Holder.

 

7.3 Governmental Authorization; Third Party Consents. No approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any governmental authority or any other person, and no lapse of a waiting
period under any requirement of law, is necessary or required in connection with
the execution by, delivery or performance by, or enforcement against, the Series
E Holder of this Agreement and each of the other documents to which it is a
party or the transactions contemplated hereby and thereby.

 

7.4 Ownership. Each Series E Holder is the lawful record owner of the shares of
Series E Preferred Stock and/or Series E Warrants held by such Series E Holder
subject to this Agreement, and of all rights thereto, free and clear of all
liens, claims, charges, encumbrances, restrictions, rights, options to purchase,
proxies, voting trust and other voting agreements, calls or commitments of every
kind, except as contemplated hereby.

 

7.5 Acknowledgements.

 

(a) The Series E Holder is fully aware of the Company’s business, operations and
financial condition and has received or have had full access to all of the
information, including the Company’s financial statements, it considers
necessary or appropriate to make an informed decision with respect to the
conversion of its shares of Series E Preferred Stock and the execution of the
lock-up agreement discussed in Section 6 above.

 

(b) The Series E Holder has had the opportunity to ask questions of and receive
answers from the Company and its executive officers and financial and legal
advisors concerning the Company and it has been furnished with all documents and
other information about the Company which it has requested. The Series E Holder
believes that it has been fully apprised of all facts and circumstances
necessary to permit it to make an informed decision relating to its conversion
of shares of Series E Preferred Stock, that it has sufficient knowledge and
experience in business and financial matters, is capable of evaluating the
merits and risks of the transactions contemplated hereby and has the capacity to
protect its own interest in connection with the transactions contemplated
hereby.

 

(c) The Series E Holder acknowledges and agrees that the Company may in the
future consummate, among other things, (i) a public offering or private
placement of its capital stock, (ii) a merger, consolidation or acquisition of
the Company into, with or by another entity, (iii) a sale of the Company’s
assets or (iv) a strategic alliance, collaboration or other business
arrangement. The Series E Holder acknowledges that, as a result of the
conversion of the Series E Preferred Stock into shares of the Company’s Common
Stock as contemplated by this Agreement, upon consummation of any one or more of
the transactions discussed above, such Series E Holder will not be entitled to
the rights and preferences of the Series E Preferred Stock.

 

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8. Miscellaneous.

 

8.1 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed according to the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof. Any dispute arising under or in relation to
this Agreement shall be resolved in a competent court in the State of Delaware,
and each of the parties hereby submits irrevocably to the exclusive jurisdiction
of such court.

 

8.2 Successors and Assigns; Assignment. Except as otherwise expressly limited
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto. None of the rights, privileges, or obligations set forth in,
arising under, or created by this Agreement may be assigned by a Series E Holder
without the prior consent in writing of the Company.

 

8.3 Entire Agreement. This Agreement and all exhibits hereto, contain the entire
understanding of the parties hereto, shall be binding on the parties hereto,
their parents, subsidiaries, affiliates, heirs, executors, administrators and
assigns. It is the only agreement between the parties with respect to the
subject matter hereof and shall not be modified or varied by oral
understandings. Any term of this Agreement may be amended and the observance of
any term hereof may be waived only with the written consent of the Company.

 

8.4 Notices, etc. All notices and other communications required or permitted
hereunder to be given to a party to this Agreement shall be in writing and shall
be telecopied or mailed by registered or certified mail, postage prepaid, or
otherwise delivered by hand or by messenger, addressed to such party’s address
as set forth below or at such other address as the party shall have furnished to
each other party in writing in accordance with this provision:

 

if to a Series E Holder:    To the address or number set forth on the signature
page hereto if to the Company:    Boston Life Sciences, Inc.      20 Newbury
Street, 5th Floor      Boston, MA 02116      Facsimile: (617) 425-0996     
Attn: Chief Financial Officer      with a copy to:      Philip Rossetti, Esq.  
   Wilmer Cutler Pickering Hale and Dorr LLP      60 State Street      Boston,
MA 02109      Facsimile: (617) 526-5000

 

or such other address with respect to a party as such party shall notify each
other party in writing as above provided. Any notice sent in accordance with
this Section 8.4 shall be effective (a) if mailed, five (5) business days after
mailing, (b) if sent by messenger, one (1) business day after delivery, and (c)
if sent via telecopier, one (1) business day after transmission and electronic
confirmation of receipt or (if transmitted and received on a non-business day)
on the second business day following transmission and electronic confirmation of
receipt (provided, however, that any notice of change of address shall only be
valid upon receipt).

 

8.5 Delays or Omissions. No delay or omission to exercise any right, power, or
remedy accruing to any party upon any breach or default under this Agreement,
shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.

 

8.6 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable law, then such
provision shall be excluded from this Agreement and the remainder of this
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms; provided, however, that in such
event this Agreement shall be interpreted so as to give effect, to the greatest
extent consistent with and permitted by applicable law, to the meaning and
intention of the excluded provision as determined by such court of competent
jurisdiction.

 

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8.7 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and enforceable against the parties
actually executing such counterpart, and all of which together shall constitute
one and the same instrument.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement to Convert as of
the date first herein above set forth.

 

BOSTON LIFE SCIENCES, INC.

By:

 

 

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Name:

   

Title:

    HOLDER OF SERIES E PREFERRED STOCK:

By:

 

 

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Name:

   

Title:

   

Address:

   

Facsimile:

   

 

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