EXECUTION COPY









Exhibit

10.26




 




EXECUTION

COPY




 




WARRANT

AGREEMENT




 




between




 




INVERNESS

MEDICAL INNOVATIONS, INC.




 




and




 




RBS

MEZZANINE LIMITED




 




 




Dated as

of December 20, 2001




 




 




 





























 




 




	

   


  	

   


  	

   


  	

  Page


  
	

  ARTICLE I


  	

  CERTAIN DEFINITIONS AND

  TERMS


  	

   


  	

  1


  
	

   


  	

   


  	

   


  
	

  Section 1.01. 


  	

  Definitions


  	

   


  	

  1


  
	

   


  	

   


  	

   


  	

   


  
	

  ARTICLE II


  	

  ISSUANCE

  OF WARRANTS


  	

   


  	

  2


  
	

   


  	

   


  	

   


  
	

  Section 2.01. 


  	

  Issuance of Warrants


  	

   


  	

  2


  
	

   


  	

   


  	

   


  	

   


  
	

  ARTICLE III


  	

  REPRESENTATIONS

  AND WARRANTIES OF THE COMPANY


  	

   


  	

  2


  
	

   


  	

   


  	

   


  
	

  Section

  3.01.


  	

  Authorization

  and Enforceability 


  	

   


  	

  2


  
	

  Section

  3.02


  	

  Private

  Offering by the Company


  	

   


  	

  2


  
	

  Section

  3.03.


  	

  Authorized

  Capital Stock


  	

   


  	

  2


  
	

  Section

  3.04. 


  	

  Percentage of

  Common Equity


  	

   


  	

  3


  
	

  Section 3.05. 


  	

  Mezzanine Loan Facility Representations

  and Warranties


  	

   


  	

  3


  
	

   


  	

   


  	

   


  	

   


  
	

  ARTICLE IV


  	

  REPRESENTATIONS OF PURCHASER


  	

   


  	

  3


  
	

   


  	

   


  	

   


  
	

  Section

  4.01. 


  	

  Representations

  of Purchaser


  	

   


  	

  3


  
	

   


  	

   


  	

   


  	

   


  
	

  ARTICLE V


  	

  COVENANTS


  	

   


  	

  3


  
	

   


  	

   


  	

   


  
	

  Section 5.01. 


  	

  Observer Rights


  	

   


  	

  3


  
	

  Section

  5.02. 


  	

  Bank

  Regulatory Requirements


  	

   


  	

  3


  
	

   


  	

   


  	

   


  	

   


  
	

  ARTICLE VI


  	

  MISCELLANEOUS


  	

   


  	

  4


  
	

   


  	

   


  	

   


  
	

  Section 6.01. 


  	

  Notices


  	

   


  	

  4


  
	

  Section 6.02.


  	

  Headings


  	

   


  	

  4


  
	

  Section 6.03. 


  	

  Successors and

  Assigns


  	

   


  	

  4


  
	

  Section 6.04. 


  	

  Severability


  	

   


  	

  4


  
	

  Section 6.05. 


  	

  GOVERNING LAW


  	

   


  	

  4


  
	

  Section 6.06.


  	

  Amendments


  	

   


  	

  5


  
	

  Section 6.07. 


  	

  No Stockholder

  Rights


  	

   


  	

  5


  
	

   


  	

   


  	

   


  
	

  SCHEDULE

  I TO WARRANT AGREEMENT 

  Warrants, Options or Other Rights for the Purchase or Acquisition of

  Capital Stock of the Company


  	

   


  	

  SI-1


  
	

   


  	

   


  	

   


  
	

  SCHEDULE

  II TO WARRANT AGREEMENT 

  Notices


  	

   


  	

  SII-1


  
	

   


  	

   


  	

   


  
	

  EXHIBIT A TO WARRANT AGREEMENT Form of Warrant


  	

   


  	

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WARRANT

AGREEMENT




 




This WARRANT AGREEMENT is entered into as of

December 20, 2001 by and between INVERNESS

MEDICAL INNOVATIONS, INC., a Delaware corporation (the “Company”),

and RBS MEZZANINE LIMITED, a

company organized pursuant to the laws of the United Kingdom (“Purchaser”).




 




WHEREAS,

concurrently with the execution and delivery of this Agreement, the Company

will issue warrants to purchase 65,000 shares of its common stock to Purchaser

in consideration of the provision by Purchaser of a mezzanine loan facility to

the Company (as amended, restated, supplemented or otherwise modified from time

to time, the “Mezzanine Loan Facility”);




 




NOW, THEREFORE, the parties hereto agree as

follows:




 




ARTICLE I






CERTAIN DEFINITIONS AND TERMS




 




Section 1.01.          Definitions. 

As used in this Agreement, the following terms have the meanings

indicated:




 




“Business Day”

shall mean any day which is neither a Saturday or Sunday nor a legal holiday on

which banks are authorized or required to be closed in New York, New York.




 




 “Commission” shall mean the Securities

and Exchange Commission, or any other Federal agency at the time administering

the Securities Act or the Trust Indenture Act of 1939, as amended, as the case

may be.




 




“Common Stock”

shall mean the shares of common stock, $.001 par value per share, of the

Company.




 




“Current Market

Price” shall mean, at any date, the last reported sale price per share of a

share of Common Stock on the New York Stock Exchange trading day preceding that

date.  The “last reported sale price”

for any day shall be (i) if the Common Stock is listed or admitted for

trading on any national securities exchange, the last sale price, or the

closing bid price if no sale occurred, of the Common Stock on the principal

securities exchange on which the Common Stock is listed, or (ii) if not

listed or admitted for trading as described in clause (i) above, the last

reported sale price of the Common Stock on the National Market System of the

National Association of Securities Dealers, Inc. Automated Quotation System, or

any similar system of automated dissemination of quotations of securities

prices then in common use, if so quoted, or (iii) if not quoted as

described in clause (ii) above, the last bid quotation for the Common

Stock as reported by the National Quotation Bureau Incorporated if at least two

securities dealers have inserted bid quotations for the Common Stock.  If none of the conditions set forth above is

met, the Current Market Price of the Common Stock on any day shall be the fair

market value of the Common Stock as determined by any firm of independent

public accountants of internationally recognized standing selected by the Board

of Directors of the Company and reasonably acceptable to the Holder (the fees

and expenses of any such firm to be paid by the Company).




 




“Holder”

shall mean any beneficial owner of (i) any Warrant Share or (ii) any

Warrant.




 




“Mezzanine Loan

Facility” shall have the meaning set forth in the second paragraph of this

Agreement.




 




 





























 




“Person”

shall mean an individual, partnership, corporation, trust or unincorporated

organization, or a government or agency or political subdivision thereof.




 




“Securities Act”

shall mean the Securities Act of 1933, as amended.




 




“Warrant Shares”

shall mean shares of Common Stock issued upon the exercise of any of the

Warrants.




 




“Warrants”

shall have the meaning set forth in Section 2.01.




 




ARTICLE II






ISSUANCE OF WARRANTS




 




Section 2.01.          Issuance of Warrants. 

The Company shall issue, sell and deliver to Purchaser, promptly

following the execution and delivery of this Agreement and the closing of the

Mezzanine Loan Facility, one or more warrants, each substantially in the form

attached hereto as Exhibit A, to purchase up to an aggregate of 65,000

Warrant Shares, subject to adjustment as provided therein (such warrants,

including any replacements, amendments, supplements or other modifications

thereof, being referred to collectively as the “Warrants”).




 




ARTICLE III






REPRESENTATIONS

AND WARRANTIES OF THE COMPANY




 




The Company

represents and warrants to Purchaser as follows:




 




Section 3.01.          Authorization and Enforceability. 

The execution and delivery of this Agreement and the issuance and sale

of the Warrants has been duly authorized by all necessary corporate action on

the part of the Company and this Agreement and the Warrants constitute the

legal, valid and binding obligations of the Company enforceable against the

Company in accordance with the terms hereof and thereof, 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).




 




Section 3.02.          Private Offering by the Company. 

Neither the Company nor anyone acting on its behalf has offered the

Warrants, or any similar securities, for sale to, or solicited any offer to buy

any of the Warrants from, or otherwise approached or negotiated in respect thereof

with, any Person other than Purchaser. 

Neither the Company nor anyone acting on its behalf has taken, or will

take, any action that would subject the offer, issuance or sale of the Warrants

to the registration requirements of the Securities Act.




 




Section 3.03.          Authorized Capital Stock.  The authorized capital stock of the Company consists of (a)

5,000,000 shares of preferred stock, $.001 par value per share, of which class

2,666,667 are designated Series A Convertible Preferred Stock, and of which series

1,828,333 shares will be issued and outstanding immediately after the Closing

(as defined in Section 3.04), and (b) 50,000,000 shares of Common Stock,

$.001 par value per share, of which 7,779,197 shares were issued and

outstanding on December 17, 2001.  There

have been no material issuances of shares of Common Stock since that date.  All of the issued and outstanding shares of

Common Stock have been duly authorized and validly issued and are fully paid

and non-assessable.  Except as set forth

on Schedule I hereto, the Company does not 




 




2





























 




have outstanding

any warrants, options or other rights for the purchase or acquisition of shares

of its capital stock other than the Warrants. 

The Board of Directors of the Company has duly reserved for issuance

upon exercise of the Warrants 65,000 shares of Common Stock.  No stockholder of the Company or any other

Person is entitled to preemptive or similar rights that have not been properly

waived or complied with, with respect to the shares of Common Stock that are

issuable upon exercise of the Warrants and, if and when issued upon exercise of

the Warrants in accordance with the provisions thereof, such shares will be

validly issued, fully paid and non-assessable.




 




Section 3.04.          Percentage of Common Equity. 

The shares of Common Stock issuable on exercise of the Warrants

represent in the aggregate .4622% of the Common Stock on a fully diluted basis,

computed after giving effect to the issuance of the Warrants and consummation

of the transactions contemplated by the Mezzanine Loan Facility (the “Closing”).




 




Section 3.05.          Mezzanine

Loan Facility Representations and Warranties.  Each of the representations and warranties of the Company set

forth in the loan agreement for the Mezzanine Loan Facility are true and

correct as of the date hereof.




 




ARTICLE IV






REPRESENTATIONS OF PURCHASER




 




Section 4.01.          Representations of Purchaser. 

Purchaser represents that it is purchasing the Warrants for its own

account and not with a view to the distribution thereof.  Purchaser further represents that it is an

accredited investor within the meaning of Rule 501(a) under the Securities

Act.  Purchaser acknowledges that the

offering of the Warrants pursuant to this Agreement and the Warrant Shares

pursuant to the Warrants is being made without registration under the

Securities Act and applicable state securities laws and has not been reviewed

by the Commission or any state regulatory authority.




 




ARTICLE V






COVENANTS




 




Section 5.01.          Observer Rights. 

The Company agrees that one representative of the Holders, collectively,

shall have the right to receive all notices of and to attend (by any of their

authorized representatives) at such Holders’ expense all meetings of the

Company’s Board of Directors and any committees thereof.  The Company shall provide to the

representative of the Holders copies (reasonably promptly) of all minutes of

such meetings along with copies of any items distributed to the members of the

Board of Directors at or prior to such meeting, whether or not such

representative of the Holders attends such meeting; provided, however,

that the Company reserves the right to exclude such representative from access

to any material or meeting or portion thereof if (i) the Company’s Board of

Directors determines in good faith upon advice of counsel that failure to so

exclude such representative could jeopardize the attorney-client privilege with

respect to material information or (ii) such material or such meeting or

portion thereof relates directly or primarily to any existing or proposed legal

proceeding or contractual arrangement with any Holder or any affiliate of a

Holder.  The rights of the Holders and

the obligations of the Company under this Section 5.01 shall terminate upon the

earlier to occur of the (x) expiration of the Warrants, or (y) first

date that the Holders no longer hold, or have rights to purchase, at least

5,000 Warrant Shares in the aggregate.




 




Section 5.02.          Bank Regulatory Requirements. 

The Company shall take all actions reasonably requested by any Holder

(including, without limitation, creating a new series of common stock of the

Company that is not voting and authorizing the issuance thereof to any such

Holder and the entering into 




 




3





























 




of an appropriate

exchange agreement to permit any such Holder to exchange such shares for voting

common shares upon a sale thereof) in order to permit such Holder to reduce the

percentage of the Company’s voting stock held by such Holder to such percentage

that would not be in violation of laws applicable to such Holder including,

without limitation, Regulation Y promulgated by the Board of Governors of

the U.S. Federal Reserve System.  Notwithstanding

the foregoing, or anything else contained herein to the contrary, the Company

shall not be required to undertake any action which, in the reasonable judgment

of the Board of Directors of the Company, would materially and adversely affect

the Company’s business or materially impair the Company’s ability to raise

future financings.




 




ARTICLE VI






MISCELLANEOUS




 




Section 6.01.          Notices. 

All notices and communications provided for hereunder shall be in

writing and sent (i) by facsimile if the sender on the same day sends a

confirming copy of such notice by a recognized international express delivery

service (charges prepaid), or (ii) by a recognized international express

delivery service (specifying delivery within two Business Days, with charges

prepaid).  Any such notice must be sent:




 




(i)            if to a Holder or its nominee, to

such Holder at the address specified for such communications in Schedule II,

or at such other address as such Holder shall have specified to the Company in

writing, or




 




(ii)           if to the Company, at 51 Sawyer Road,

Suite 200, Waltham, Massachusetts 02453 or to such other address as the Company

may designate to the Holders in writing.




 




Notices under this

Section 6.01 will be deemed given only when actually received.




 




Section 6.02.          Headings. 

The table of contents and the descriptive headings of the various

sections of this Agreement are for convenience only and shall not affect the

meaning or construction of the provisions hereof.




 




Section 6.03.          Successors and Assigns. 

This Agreement shall be binding upon the Company and its respective

successors and assigns and shall inure to the benefit of Purchaser and their

successors and permitted assigns, including each successive Holder.




 




Section 6.04.          Severability. 

Should any part of this Agreement for any reason be declared invalid or

unenforceable, such decision will not affect the validity or enforceability of

any remaining portion, which remaining portion will remain in force and effect

as if this Agreement had been executed with the invalid or unenforceable

portion thereof eliminated and it is hereby declared the intention of the

parties hereto that they would have executed the remaining portion of this

Agreement without including therein any such part or portion which may, for any

reason, be hereafter declared invalid or unenforceable.




 




Section 6.05.          GOVERNING LAW. 

THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND

THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF

DELAWARE, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE

THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.




 




4





























 




Section 6.06.          Amendments. 

This Agreement may be amended only by an instrument in writing executed

by the Holders.




 




Section 6.07.          No Stockholder Rights. 

This Agreement and the Warrant in and of itself shall not entitle a

holder of a Warrant to any voting rights or other rights as a stockholder of

the Company prior to the exercise of the Warrant in accordance with its terms.




 




[Signatures are on

the following page.]




 




 




5





























 




IN WITNESS

WHEREOF, the parties hereto, intending to be legally bound hereby, have duly

executed this Agreement on the date first above written.  This Agreement may be executed in any number

of counterparts, each executed counterpart constituting an original but all

together only one agreement.




 




	

  .


  	

  INVERNESS MEDICAL

  INNOVATIONS, INC


  
	

   


  	

   


  
	

   


  	

  By: 


  	

  /s/ Paul T. Hempel


  
	

   


  	

   


  	

  Name:


  
	

   


  	

   


  	

  Title:


  
	

   


  	

   


  





 




	

   


  	

  RBS MEZZANINE LIMITED


  
	

   


  	

   


  
	

   


  	

  By:


  	

  /s/ Alison M. Rose


  
	

   


  	

   


  	

  Name:  Alison M. Rose


  
	

   


  	

   


  	

  Title:  Director


  
	

   


  	

   


  





 




6





























 




SCHEDULE

I TO WARRANT AGREEMENT






Warrants,

Options or Other Rights for the Purchase




or

Acquisition of Capital Stock of the Company




 




Warrants






Warrants to purchase an

aggregate of 55,189 shares of Common Stock, par value $.001 per share (“Common

Stock”) have been issued in connection with that certain Note and Warrant

Purchase Agreement, dated as of December 19, 2001, between the Company and the

Investors party thereto (the “Note and Warrant Purchase Agreement”).




 




As of December 17 2001,

warrants to purchase an aggregate of 117,629 shares of Common Stock were

assumed and remain outstanding pursuant to the Agreement and Plan of Merger

among Inverness Medical Technology, Inc., Johnson & Johnson, and Sunrise

Acquisition Corp. dated May 23, 2001.




 




A warrant to purchase

500,000 shares of Common Stock has been issued to Ron Zwanziger as of the

Closing.




 




Options




Options to purchase and

aggregate of 1,486,794 shares of Common Stock issued pursuant to the Company’s

2001 Stock Option and Incentive Plan (the “Plan”).  A total of 2,655,890 shares of Common Stock remain reserved for

issuance under the Plan.




 




As of December 17, 2001,

options to purchase and aggregate of 903,317 shares of Common Stock were

assumed and remain outstanding pursuant to the Agreement and Plan of Merger

among Inverness Medical Technology, Inc., Johnson & Johnson, and Sunrise

Acquisition Corp. dated May 23, 2001.




 




Convertible

Securities




Subordinated promissory

notes, which are convertible into shares of Series A Preferred Stock, and on

which interest is payable, at the Company’s election, in shares of Common

Stock, all on the terms and conditions set forth therein (the “Notes”), have

been issued pursuant to the Note and Warrant Purchase Agreement.  The aggregate principal amount of the Notes

is approximately $20,000,000.00.




 




1,828,333 shares of

Series A Convertible Preferred Stock, par value $.001 per share, have been

issued in connection with that certain Stock Purchase Agreement, dated as of

December 19, 2001, between the Company and the Investors thereto.




 




 




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SCHEDULE

II TO WARRANT AGREEMENT






Notices






 




RBS MEZZANINE LIMITED




Level 7, 135 Bishops Gate




London England




EC2M 3UR




Fax:  +44 207 375 5202




Contact:  David Beadle




 




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