SYNTHEMED, INC.

INVESTOR RIGHTS AGREEMENT

 

This Investor Rights Agreement (this “Agreement”) is made and entered into by
and among SyntheMed, Inc., a Delaware corporation (the “Corporation”), and the
investors listed on the signature pages hereto (the “Investors”), as of the date
of execution by the Corporation.

RECITALS

WHEREAS the Corporation desires the Investors to purchase up to 15,000,000
shares of Common Stock of the Corporation (the “Shares”) at a purchase price of
$0.40 per share (the “Offering”) pursuant to a subscription agreement (the
“Subscription Agreement”);

AND WHEREAS as an inducement for the Investors to enter into the Subscription
Agreement, the Corporation desires to enter into this Agreement with the
Investors;

NOW THEREFORE in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:

1.

DEFINITIONS .

 

 

(a)

“Common Stock” means the Corporation’s Common Stock, par value of $0.001 per
share.

   

 

(b)

Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

   

 

(c)

“Final Closing” means the date on which the full amount of the Offering is sold
or the earlier termination of the Offering period as determined by mutual
agreement of the Corporation and the placement agent.

   

 

(d)

“Holder” means any person owning of record Registrable Securities or securities
convertible, exchangeable or exercisable into Registrable Securities that have
not been sold in a public offering or sold pursuant to Rule 144 promulgated
under the Securities Act or any assignee of record of such Registrable
Securities to whom rights under this Agreement have been duly assigned in
accordance with this Agreement.

   

 

(e)

“register,” “registered” and “registration” refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement.

   

 

(f)

“Registrable Securities” means: (i) the Shares and any shares of Common Stock
issued to the placement agent in connection with the Offering or underlying
warrants (“Broker Warrants”) issued to the placement agent in connection with
the Offering and (ii) any shares of Common Stock or other securities issued in
connection with any stock split, stock dividend, recapitalization,
reorganization,

 

 

--------------------------------------------------------------------------------

merger, sale of assets or similar event in respect of the foregoing securities;
excluding in all cases, however, any securities that would otherwise be
Registrable Securities that have been sold by a person in a transaction in which
rights under this Agreement are not assigned in accordance with this Agreement,
any securities that would otherwise be Registrable Securities that have been
sold in a public offering or sold pursuant to Rule 144 promulgated under the
Securities Act. Notwithstanding the foregoing, shares of Common Stock issued or
issuable pursuant to exercise of the Broker Warrants shall be deemed Registrable
Securities only for so long, and for such purposes, as Shares continue to be
Registrable Securities.

 

 

(g)

“Registration Expenses” means all expenses incurred by the Corporation in
complying with Section 2.1 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and accountants for the Corporation, reasonable fees and expenses of one
counsel for all the Holders, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Corporation, which shall be paid in
any event by the Corporation).

   

 

(h)

“Securities Act” means the United States Securities Act of 1933, as amended.

 

2.

Registration.

2.1              Registration. Within 60 days following the Final Closing, the
Corporation will file with the SEC a registration statement on Form SB-2 (or
such other form as the Corporation may then be eligible to utilize) covering
resale of the Registrable Securities by the Holders thereof, together with any
other securities entitled to be included in such registration statement pursuant
to contractual rights of the holders thereof; provided, however, that the
Corporation shall not be obligated to effect, or take any action to effect, any
such registration pursuant to this Section 2 in any particular jurisdiction in
which the Corporation would be required to execute a general consent to service
of process in effecting such registration, unless the Corporation is already
subject to service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder.

2.2              Expenses of Registration. All Registration Expenses incurred in
connection with the registration pursuant to Section 2.1 shall be borne by the
Corporation.

2.3              Obligations of the Corporation. In connection with the
registration pursuant to Section 2.1, the Corporation shall, as expeditiously as
reasonably possible:

(a)               Prepare and file with the SEC a registration statement with
respect to the Registrable Securities (such filing to occur not later than the
time referred to in Section 2.1) and use its best efforts to cause such
registration statement to become effective on the earlier to occur of (i) 90
days following the final closing of the Offering or, in the case of SEC review,
120 days following the final closing of the Offering and (ii) five days
following the date of SEC clearance to request effectiveness of the registration
statement, and keep such registration statement effective and the related
prospectus current until the distribution is completed, but not more than two
years or such earlier date as any of the Registrable Securities become eligible
for sale

 

--------------------------------------------------------------------------------

pursuant to Rule 144(k) under the Securities Act, provided that such two year
period shall be extended for a period of time equal to the period the Holder
refrains from selling any Registrable Securities included in such registration
statement due to circumstances described in Section 2.3(f).

(b)               Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

(c)               Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and all amendments and supplements thereto, and such other
documents as they may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by them that are included in such
registration.

(d)               Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided, however, that the Corporation shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions unless
the Corporation is already subject to service in such jurisdiction and except as
may be required by the Securities Act or applicable rules or regulations
thereunder.

(e)

[Intentionally omitted].

(f)                Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act if such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing and, following such notification, promptly deliver to each Holder
copies of all amendments or supplements referred to in paragraphs (b) and (c) of
this Section 2.3.

(g)               Furnish, at the request of Holders of a majority of the
Registrable Securities (other than the Holders of Broker Warrants), on the date
that the registration statement becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Corporation for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering addressed to the Holders and (ii) a “comfort”
letter dated as of such date, from the independent certified public accountants
of the Corporation, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to Holders of a majority of the Registrable
Securities (other than Holders of Broker Warrants), addressed to the Holders.

(h)               Use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange or
interdealer quotation system on which the Common Stock is then listed or quoted.

 

--------------------------------------------------------------------------------

 

(i)                Make available for inspection by each seller of Registrable
Securities, and any attorney, accountant or other agent retained by such seller
(an “Advisor”), all financial and other records, pertinent corporate documents
and properties of the Corporation, and cause the Corporation’s officers,
directors and employees to supply all information reasonably requested by any
such seller, attorney, accountant or agent in connection with such registration
statement. Such seller will keep, and will cause its Advisors to keep, such
information confidential subject to Section 4.14.

2.4              Furnish Information. It shall be a condition precedent to the
obligations of the Corporation to take any action pursuant to Section 2.1 that
the selling Holders shall timely furnish to the Corporation such information
regarding themselves, the Registrable Securities and other securities held by
them, and the intended method of disposition of such securities as shall be
required to effect the registration of Registrable Securities.

2.5

Indemnification. In connection with the registration pursuant to Section 2.1:

(a)               By the Corporation. To the extent permitted by law, the
Corporation will indemnify and hold harmless each Holder, the partners, members,
officers and directors of each Holder, and each person, if any, who controls
such Holder within the meaning of the Securities Act against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”):

(i)                any untrue statement or alleged untrue statement of a
material fact contained or incorporated by reference in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;

(ii)               the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or

(iii)              any violation or alleged violation by the Corporation of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement; and the Corporation will reimburse each such Holder,
partner, member, officer or director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Corporation (which consent shall not be unreasonably withheld),
nor shall the Corporation be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information and expressly stated to be for use in connection with such
registration by such Holder, partner, member, officer, director, underwriter or
controlling person of such Holder.

(b)           By Selling Holders. To the extent permitted by law, each selling
Holder will, severally and not jointly, if Registrable Securities held by such
Holder are included in the

 

--------------------------------------------------------------------------------

securities as to which such registration is being effected, indemnify and hold
harmless the Corporation, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the
Corporation within the meaning of the Securities Act, any underwriter (as
defined in the Securities Act) and any other Holder selling securities under
such registration statement or any of such other Holder’s partners, members,
directors or officers or any person who controls such underwriter or other
Holder within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to which the
Corporation or any such director, officer, controlling person, underwriter or
other such Holder, or a member, partner, director, officer or controlling person
of such underwriter or other Holder may become subject under the Securities Act,
the Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder by an
instrument duly executed by such Holder and stated to be specifically for use in
such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Corporation or any such director, officer,
controlling person, underwriter or other Holder, partner, member, officer,
director or controlling person of such other Holder or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld; and
provided further, that the total amounts payable in indemnity by a Holder under
this Section 2.5(b) in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises.

(c)               Notice. Promptly after receipt by an indemnified party of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.5, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if the
defendants include both the indemnifying party and the indemnified party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.5, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.5.

 

--------------------------------------------------------------------------------

 

(d)               Contribution. If the indemnification provided for in this
Section 2.5 is unavailable to a party entitled to indemnification, then the
indemnifying party shall contribute to the aggregate losses, claims, damages or
liabilities of the indemnified party as is appropriate to reflect the relative
fault of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided,
however, that, in any such case, (1) no Holder shall be required to contribute
any amount in excess of the public offering price of all Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (2)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

(e)               Survival. The obligations of the Corporation and Holders under
this Section 2.5 shall survive the completion of any offering of Registrable
Securities in a registration statement.

2.6              Remedy. If, regardless of the reason, the registration
statement referred to in this Section 2 is not declared effective by the
Securities and Exchange Commission within six months of the Final Closing, the
Corporation agrees to grant to the Holders registration rights with respect to
the Registrable Securities on terms similar to the registration rights granted
to investors in the Corporation’s Series C Convertible Preferred Stock and
warrant financing in March 2003, subject to obtaining any consents required
under agreements with existing holders of registration rights (and the
Corporation agrees to use its best efforts to obtain any such required consents,
it being understood that such efforts will not require the Corporation to
provide any additional consideration to or for the benefit of such registration
right holders).

3.

Legends.

The Holders understand that any Share certificates shall be endorsed with the
legend(s) referred to in the Subscription Agreement.

4.

MISCELLANEOUS.

4.1.             Successors and Assigns. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and permitted transferees and
permitted assigns of the parties.

4.2.             Governing Law. This Agreement shall be governed in all respects
by the laws of the State of New York as applied to contracts made and to be
performed entirely within that state between residents of that state.

4.3.             Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.

 

--------------------------------------------------------------------------------

 

4.4.             Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

4.5.             Stock Splits, etc. All share numbers used in this Agreement are
subject to adjustment in the case of any stock split, reverse stock split,
combination or similar events.

4.6.             Notices. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement shall be in writing and shall
be effective on (a) the date of delivery in person, or the date of delivery by
facsimile with confirmation receipt, (b) the business day after deposit with a
nationally-recognized courier or overnight service, for United States deliveries
or (c) five (5) business days after deposit in the United States mail by
registered or certified mail for United States deliveries. All notices not
delivered personally or by facsimile will be sent with postage and other charges
prepaid and properly addressed to the party to be notified at the address set
forth below such party’s signature on this Agreement or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto. All notices for delivery outside the United States will be sent
by facsimile, or by nationally recognized courier or overnight service. Any
notice given hereunder to more than one person will be deemed to have been
given, for purposes of counting time periods hereunder, on the date given to the
last party required to be given such notice. Notices to the Corporation will be
marked to the attention of the President, with a copy to Keith Moskowitz,
Eilenberg & Krause LLP, 11 East 44th Street, 17th Floor, New York, NY 10017.
Notices shall be sent to the addresses on the signature pages hereto, or such
other addresses as a party may provide to the other parties from time to time.

4.7.             Attorneys’ Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys’ fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

4.8.             Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the party against whom
enforcement of such amendment or waiver is sought; provided, however that with
respect to any Holder, the consent of the Holders of more than sixty-six and
two-thirds percent (662/3%) of the Registrable Securities (other than Broker
Warrants) shall be sufficient to bind any and all Holders.

4.9.             Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision was so excluded and shall be enforceable in accordance with its terms.

4.10.          Entire Agreement. This Agreement and the Subscription Agreements
constitute the full and entire understanding and agreement between the parties
with respect to the subject matter hereof and supersede all prior negotiations,
correspondence, agreements, understandings, duties or obligations among the
parties with respect to the subject matter hereof.

 

--------------------------------------------------------------------------------

 

4.11.          Further Assurances. From and after the date of this Agreement,
upon the request of a party, the other parties shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.

4.12.          Assignment. Rights under this Agreement may be assigned in
connection with any transfer or assignment of Registrable Securities provided
that: (a) such transfer may otherwise be effected in accordance with applicable
securities laws, and (b) such other party agrees in writing with the Corporation
to be bound by all of the provisions of this Agreement to the same extent as the
transferor.

4.13.          Changes in Stock. If, and as often as, there is any change in the
Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made to
the provisions hereof so that the rights granted hereby shall continue with
respect to the Common Stock as so changed.

4.14.          Confidentiality. Information related to the terms and conditions
of the Offering, as well as all information contained in the Subscription
Agreement (except information relating solely to an Investor) and instruments
and agreements delivered in connection therewith, shall be deemed confidential
and shall not be disclosed by the Investor to any person unless and until such
information becomes generally available to the public other than by disclosure
in violation of this Agreement. All other information that has been designated
by the Corporation as “confidential” shall likewise be deemed confidential and
not disclosed by the Investor to any person unless and until such information
(i) is or becomes generally available to the public other than by disclosure in
violation of this Agreement, (ii) was properly within such Investor’s possession
prior to its being furnished by the Corporation to such Investor, or (iii)
becomes available to such Investor through disclosure by third parties who have
the right to disclose such information

[Remainder of page intentionally left blank].

 

--------------------------------------------------------------------------------

 

INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE 1

 

IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement.

SYNTHEMED, INC.

 

By:

Robert Hickey

President and CEO

Address: PO Box 219

Little Silver, New Jersey 07739

Dated:

 

 

--------------------------------------------------------------------------------

 

INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE 2

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address

 

 

--------------------------------------------------------------------------------

 

INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE 3

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address

 

 

 

 

By:  

Name:

Title:

Address