WARRANT AGREEMENT
AGREEMENT, dated as of this 27th day of January, 1998, by and among
PROCEPT, INC., a Delaware corporation ("Company"), AMERICAN STOCK TRANSFER &
TRUST COMPANY, as warrant agent ("Warrant Agent"), and PARAMOUNT CAPITAL, INC.,
a New York corporation ("Paramount").
W I T N E S S E T H
WHEREAS, the Company has commenced a private placement (the "Private
Placement") of a minimum (the "Minimum Offering") of ten (10) Units (as defined
below) and a maximum (the "Maximum Offering") of sixty (60) Units, with an
option in favor of Paramount, to offer up to an additional sixty (60) Units to
cover over-allotments, each "Unit" consisting of (a) a number of shares of
Common Stock of the Company, par value $.01 per share, (the "Common Stock")
determined by dividing one hundred thousand dollars ($100,000) by the lesser of
(A) $0.50 and (B) 75% of the average closing bid price of the Common Stock on
the Nasdaq National Market or the Nasdaq SmallCap Market, as applicable for the
thirty (30) consecutive trading days or five (5) consecutive trading days
immediately preceding (i) the Initial Closing Date (as defined below), (ii) any
Interim Closing Date (as defined below), or (iii) the Final Closing Date (as
defined below) of this Offering, whichever is lowest (the "Offering Price") and
(b) warrants (the "Class C Warrants") to purchase at any time prior to the fifth
anniversary of the Final Closing Date, a number of shares of common stock of the
Company equal to the aggregate number of shares of Common Stock included in a
Unit on the Final Closing Date (as defined herein), pursuant to a placement
agency agreement dated as of October 26, 1997, as amended by a Side Letter No. 1
dated January 13, 1998 (the "Placement Agency Agreement"), between the Company
and Paramount;
WHEREAS, each Class C Warrant entitles the Registered Holder (as
defined below) thereof to purchase a number of shares of Common Stock initially
equal to the aggregate number of shares of Common Stock included in a Unit on
the Final Closing Date;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Class C
Warrants, the issuance of certificates representing the Class C Warrants, the
exercise of the Class C Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Class C Warrants and the certificates representing the Class C
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class C Warrants and the Warrant
Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "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 earnings and assets of the Company without limit as to amount or
percentage, which at the Initial Closing Date will consist of 30,000,000
authorized shares of Common Stock, par value $.01 per share.
(b) The "Closing Bid Price," for each trading day, shall mean the per
share price at which the Common Stock was last exchanged on the Stock Market (as
defined below) during such trading day or, if there were no transactions on such
trading day, shall mean the average of the reported per share closing bid and
asked prices of the Common Stock on the Stock Market on such trading day.
(c) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which, at any particular time, its principal business shall be
administered, which office is located at the date hereof at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
(d) "Exercise Date" shall mean, as to any Class C Warrant, the date on
which the Warrant Agent shall have received both (i) the Warrant Certificate
representing such Class C Warrant, with the subscription form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, and (ii) payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the United States of
America equal to the applicable Purchase Price.
(e) "Fair Market Value" means, with respect to any security or other
asset, the fair market value set by, or determined in a manner established by,
the Board of Directors of the Company and reasonably acceptable to Paramount,
provided that in the event the Company and Paramount are unable to reach
agreement on such fair market value within 30 days of the date Paramount is
first advised of such fair market value, "Fair Market Value" shall mean the fair
market value of such security or other asset set forth in a written opinion of
an independent appraiser mutually acceptable to Paramount and the Company and
retained by the Company, at the expense of the Company, to determine such fair
market value.
(f) "Final Closing Date" shall mean the final closing date of the
Private Placement.
(g) "Initial Closing Date" shall mean, as to each Class C Warrant, the
date of the initial closing of the Private Placement.
(h) "Initial Warrant Exercise Date" shall mean, as to each Class C
Warrant, the Final Closing Date.
(i) "Interim Closing Date" shall mean, as to each Class C Warrant, any
closing date of the Private Placement other than the Initial Closing Date and
the Final Closing Date.
(j) "Market Price" shall mean the average Closing Bid Price, for twenty
(20) consecutive trading days, ending with the trading day prior to the date as
of which the Market Price is being determined, (with appropriate adjustments for
subdivisions or combinations of shares effected during such period) provided
that if the prices referred to in the definition of Closing Bid Price cannot be
determined for such period, "Market Price" shall mean Fair Market Value (as
defined above).
(k) "Purchase Price" shall mean the purchase price per share of common
stock to be paid upon exercise of each Class C Warrant in accordance with the
terms hereof, which price shall be the lesser of (a) $0.50 and (b) 75% of the
Trading Price as of the day immediately preceding any Offering closing date,
whichever is lowest, subject to adjustment from time to time pursuant to the
provisions of Section 9, and subject to the Company's right to reduce the
Purchase Price upon notice to all warrantholders (which may be given, without
limitation, prior to the Final Closing Date).
2
(l) "Redemption Price" shall mean the price at which the Company may,
at its option in accordance with the terms hereof, redeem the Class C Warrants,
which price shall be $0.01 per share of Common Stock subject to such Class C
Warrants.
(m) "Registered Holder" shall mean, as to any Class C Warrant and as of
any particular date, the person in whose name the certificate representing the
Class C Warrant shall be registered on that date on the books maintained by the
Warrant Agent pursuant to Section 6.
(n) "Series A Preferred Stock" means the Series A Preferred Stock
described in the Certificate of Incorporation of the Company, as in effect on
the date hereof.
(o) The "Stock Market" shall mean the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, shall mean The Nasdaq National Market System or The Nasdaq SmallCap
Market (collectively, "Nasdaq") or, if the Common Stock is not quoted on Nasdaq,
shall mean the OTC Bulletin Board or, if the Common Stock is not quoted on the
OTC Bulletin Board, shall mean the over-the-counter market as furnished by any
NASD member firm selected from time to time by the Company for that purpose.
(p) "Trading Price" shall mean the lower of (i) the average Closing Bid
Price (with appropriate adjustments for subdivisions or combinations of shares
effected during such period) for thirty (30) consecutive trading days,
immediately preceding any Offering closing date, ending with the trading day
prior to the date as of which the Trading Price is being determined, and (ii)
the average Closing Bid Price (with appropriate adjustments for subdivisions or
combinations of shares effected during such period) for five (5) consecutive
trading days, immediately preceding any Offering closing date, ending with the
trading day prior to the date as of which the Trading Price is being determined.
(q) A "trading day" shall mean a day on which the Stock Market is open
for the transaction of business.
(r) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(s) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
the day prior to the fifth anniversary of the Final Closing Date or the
Redemption Date as defined in Section 8, whichever is earlier; provided that if
such date shall in the State of New York be a holiday or a day on which banks
are authorized or required to close, then 5:00 P.M. (New York time) on the next
following day which in the State of New York is neither a holiday nor a day on
which banks are authorized or required to close. Upon notice to all Registered
Holders, the Company shall have the right to extend the Warrant Expiration Date.
(t) Unless otherwise stated, section references used within this
Warrant Agreement refer to sections of this Warrant Agreement.
3
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Class C Warrant initially shall entitle the Registered Holder of
the Warrant Certificate representing such Class C Warrant to purchase a number
of shares of Common Stock equal to the aggregate number of shares of Common
Stock included in a Unit on the Final Closing Date, upon the exercise thereof,
in accordance with the terms hereof, subject to modification and adjustment as
provided in Section 9.
(b) The Class C Warrants included in the offering of Units will
immediately be detachable and separately transferable from the shares of Common
Stock constituting part of such Units.
(c) Within five (5) days after the Final Closing Date, Warrant
Certificates representing the number of Class C Warrants sold pursuant to the
Private Placement shall be executed by the Company and delivered to the Warrant
Agent. Within five (5) days of receipt of the Warrant Certificates by the
Warrant Agent, the Warrant Agent shall send the Warrant Certificates to the
Registered Holders. The Company shall issue a written order, signed by its
Chairman of the Board, President or any Vice President and by its Secretary or
an Assistant Secretary, to the Warrant Agent directing that the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
in accordance with the preceding sentence.
(d) From time to time, until the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 28,021,800 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Class C
Warrants in accordance with this Agreement.
(e) From time to time, until the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Class C Warrants represented by any Warrant Certificate, to
evidence any unexercised Class C Warrants held by the exercising Registered
Holder, (iii) those issued upon any transfer or exchange pursuant to Section 6;
(iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7; (v) those issued upon exercise of the
Placement and Advisory Warrants (as defined in the Placement Agency Agreement)
and (vi) at the option of the Company, in such form as may be approved by its
Board of Directors, to reflect any adjustment to, or change in: the Purchase
Price; the number of shares of Common Stock purchasable upon exercise of the
Class C Warrants; or the Warrant Expiration Date.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) 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 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 Class C Warrants may be listed, or to conform
to usage or to the requirements of Section 2. The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange
4
or in lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and
issued in registered form. Warrant Certificates shall be numbered serially with
the letters CW on Class C Warrants of all denominations.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issuance and delivery thereof, such Warrant Certificates may
nevertheless 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 an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Subsection 4(a).
SECTION 4. Exercise.
(a) Each Class C Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein and in the applicable Warrant Certificate. A Class C Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of those
securities upon the exercise of the Class C Warrant as of the close of business
on the Exercise Date. As soon as practicable on or after the Exercise Date the
Warrant Agent shall deposit the proceeds received from the exercise of a Class C
Warrant and shall notify the Company in writing of the exercise of the Class C
Warrants. Promptly following, and in any event within five days after, the date
of such notice from the Warrant Agent, the Warrant Agent, on behalf of the
Company, shall cause to be issued and delivered by the Transfer Agent, to the
person or persons entitled to receive the same, a certificate or certificates
for the securities deliverable upon such exercise, (plus a certificate for any
remaining unexercised Class C Warrants of the Registered Holder). In the case of
payment made in the form of a check drawn on an account of Paramount or such
other investment banks and brokerage houses as the Company shall approve in
writing to the Warrant Agent, certificates shall immediately be issued without
prior notice to the Company nor any delay, provided prompt notice shall be given
to the Company following such exercise. Upon the exercise of any Class C Warrant
and clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Class C Warrant (the "Warrant Proceeds") to the Company
or as the Company may direct in writing, subject to the provisions of
Subsections 4(b) and 4(c).
(b) On the Exercise Date in respect of the exercise of any Class C
Warrant, the Warrant Agent shall, simultaneously with the distribution of the
Warrant Proceeds to the Company, on behalf of the Company, pay from the Warrant
Proceeds, a fee of five percent (5%) (the "Paramount Fee") of the Purchase Price
to Paramount for Class C Warrant exercises solicited by Paramount or its
representatives (of which a portion may be reallowed by Paramount to the dealer
who solicited the exercise, which may also be Paramount). In the event the
Paramount Fee is not received within seven (7) days of the date on which the
Company receives Warrant Proceeds, then the Paramount Fee shall
5
begin accruing interest at an annual rate three hundred (300) basis points above
prime payable by the Company to Paramount at the time Paramount receives the
Paramount Fee. Within five (5) days after exercise the Warrant Agent shall send
Paramount a copy of the reverse side of each Class C Warrant exercised. In
addition, Paramount and the Company may at any time during business hours,
examine the records of the Warrant Agent, including its ledger of original
Warrant Certificates returned to the Warrant Agent upon exercise of Class C
Warrants. Paramount is intended by the parties hereto to be, and is, a
third-party beneficiary of this Agreement. The provisions of this paragraph may
not be modified, amended or deleted without the prior written consent of
Paramount. In addition to the foregoing, any costs incurred by Paramount shall
be promptly reimbursed by the Company.
(c) In order to enforce the provisions of Subsection 4(b) above, in the
event there is any dispute or question as to the amount or payment of the
Paramount Fee, the Warrant Agent is hereby expressly authorized to withhold
payment to the Company of the Warrant Proceeds unless and until the Company
establishes an escrow account for the purpose of depositing the entire amount of
the unpaid Paramount Fee claimed by Paramount, which amount will be deducted
from the net Warrant Proceeds to be paid to the Company. The funds placed in the
escrow account may not be released to the Company without a written agreement
from Paramount that the required Paramount Fee has been received by Paramount.
Paramount shall promptly notify the Warrant Agent by facsimile and certified
mail in the event of any such dispute or when the Paramount Fee has been paid.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Class C Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class C Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class C Warrants shall, at the time of delivery (assuming
full payment of the purchase price thereof), be duly and validly issued, fully
paid, nonassessable and free from all issuance taxes, liens and charges with
respect to the issue thereof including, without limitation, adverse claims
whatsoever (with the exception of claims arising through the acts of the
Registered Holders themselves and except as arising from applicable Federal and
state securities laws), that the Company shall have paid all taxes, if any, in
respect of the original issuance thereof and that upon issuance such shares, to
the extent applicable, shall be listed on, or included in, the applicable Stock
Market.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Class C Warrants hereunder require registration with, or
the approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval. The Company will use
reasonable efforts to obtain appropriate approvals or registrations under state
"blue sky" securities laws; provided, that the Company shall not be required to
qualify as a foreign corporation or file a general or limited consent to service
of process in any such jurisdictions or make any changes in its capital
structure or any other aspects of its business or enter into any agreements with
blue sky commissions, including any agreement to escrow shares of its capital
stock. With respect to any such securities, however, Class C Warrants may not be
exercised by, or shares of Common Stock issued to, any Registered Holder in any
state in which such exercise would be unlawful.
6
(c) The Company shall pay all documentary, stamp or similar taxes and
other similar governmental charges that may be imposed with respect to the
issuance of Class C Warrants, or the issuance or delivery of any shares upon
exercise of the Class C Warrants; provided, however, that if the shares of
Common Stock are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Class C Warrant being
exercised, then no such delivery shall be made unless the person requesting the
same has paid to the Warrant Agent the amount of transfer taxes or charges
incident thereto, if any or provided satisfactory evidence that no amount is
due.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock issuable upon exercise of the Class C Warrants, and the
Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Class C Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Class C Warrants of the
same class (provided the Warrant Agent shall not exchange Warrant Certificates
for new Warrant Certificates in denominations of fewer than fifty thousand
(50,000) underlying shares) or may be transferred in whole or in part. Warrant
Certificates to be exchanged shall be surrendered to the Warrant Agent at its
Corporate Office, and upon satisfaction of the terms and provisions hereof, the
Company shall execute, and the Warrant Agent shall countersign, issue and
deliver in exchange therefor, the Warrant Certificate or Certificates that the
Registered Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and any transfers thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Class C Warrants.
(c) With respect to all Warrant Certificates presented for registration
or transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent on holders for
any exchange or registration of transfer of Warrant Certificates of such
Registered Holders. In addition, the Company may require payment by such
Registered Holder of a sum sufficient to cover any tax or governmental or other
charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise, or for exchange
in case of mutilated Warrant Certificates, shall be promptly canceled by the
Warrant Agent and thereafter retained by the Warrant Agent in a manner
consistent with its customary practices until termination of this
7
Warrant Agreement or resignation as Warrant Agent, or, with the prior written
consent of Paramount, disposed of or destroyed at the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Class C Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Class C Warrants, which are being offered in Units with shares
of Common Stock pursuant to the Placement Agency Agreement, will immediately be
detachable and separately transferable from the Common Stock comprising the
Units.
SECTION 7. Loss or Mutilation. Upon receipt by the Warrant Agent of
evidence satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity reasonably satisfactory to it and the Company, and (in
the case of mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall (in the absence of notice to the
Company and/or Warrant Agent that the Warrant Certificate has been acquired by a
bona fide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Class C Warrants. Applicants for a substitute Warrant Certificate
shall comply with such other reasonable regulations and pay such other
reasonable charges as the Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) At any time after the first anniversary of the Final Closing Date,
on no fewer than sixty (60) days' prior written notice to Registered Holders of
the Class C Warrants being redeemed, the Company may, at its option, redeem the
Class C Warrants at the Redemption Price, provided the Market Price of the
Common Stock as of the third business day prior to the date of notice of
redemption (which shall be the date of mailing of such notice) exceeds 250% of
the Purchase Price per share of Common Stock subject to a Class C Warrant. All
outstanding Class C Warrants must be redeemed if any are redeemed. The date
fixed for redemption of the Class C Warrants is referred to herein as the
"Redemption Date."
(b) If the conditions set forth in Subsection 8(a) are met, and the
Company desires to exercise its right to redeem the Class C Warrants, it shall
request the Warrant Agent to mail a notice of redemption to each of the
Registered Holders of the Class C Warrants to be redeemed, first class, postage
prepaid, not later than the sixtieth day before the date fixed for redemption,
at their last address as shall appear on the records maintained pursuant to
Subsection 6(b). Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the Registered
Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, (iv) that Paramount will assist each
Registered Holder of a Class C Warrant and be entitled to a commission and
reimbursement of costs in connection with the exercise thereof and (v) that the
right to exercise the Class C Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a
8
Registered Holder (A) to whom notice was not mailed or (B) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Class C Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, Holders of the Class C Warrants shall
have no further rights except to receive, upon surrender of the Class C Warrant,
the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the place
specified in the notice of redemption, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Class C Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum in cash
equal to the redemption price of such Class C Warrants. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Class C Warrants called for redemption, such Class
C Warrants shall expire and become void and all rights hereunder and under the
Warrant Certificates, except the right to receive payment of the redemption
price, shall cease.
SECTION 9. Adjustment of Purchase Price and Number of Shares of Common
Stock or Class C Warrants. Upon each adjustment of the Purchase Price pursuant
to this Section 9, the total number of shares of Common Stock purchasable upon
the exercise of each Class C Warrant shall (subject to the provisions contained
in Subsection 9(c)) be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price in effect immediately prior to such adjustment
multiplied by a fraction, the numerator of which shall be the Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the Purchase Price in effect immediately after such adjustment.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (i) sell or issue
any shares of Common Stock for a consideration per share less than either (a)
the Purchase Price in effect on the date of such sale or issuance or (b) the
Market Price of the Common Stock as of the date of the sale or issuance, (ii)
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or (iii) subdivide or combine the outstanding shares of Common Stock into
a greater or fewer number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares, the Purchase Price in effect immediately prior to
such Change of Shares shall be changed to a price (rounded to the nearest cent)
determined by multiplying the Purchase Price in effect immediately prior thereto
by the quotient of (x) the sum of (A) the number of shares of Common Stock
outstanding immediately prior to the sale or issuance of such additional shares
or such subdivision or combination plus (B) the number of shares of Common Stock
that the aggregate consideration received (determined as provided in Paragraph
9(g)(vi)) for the issuance of such additional shares would purchase at the
greater of (1) the Purchase Price in effect on the date of such issuance or (2)
the Market Price as of such date, divided by (y) the number of shares of Common
Stock outstanding immediately after the sale or issuance of such additional
shares or such subdivision or combination. Such adjustment shall be made
successively whenever any such issuance is made.
9
(b) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another entity (other than a consolidation or
merger in which the Company is the continuing entity and which does not result
in any reclassification, capital reorganization or other change of outstanding
shares of Common Stock other than the number thereof), or in case of any sale or
conveyance to another entity of the property of the Company as, or substantially
as, an entirety (other than a sale/leaseback, mortgage or other financing
transaction), the Company shall cause effective provision to be made so that
each holder of a Class C Warrant then outstanding shall have the right
thereafter, by exercising such Class C Warrant, upon the terms and conditions
specified in the Class C Warrants and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Class C Warrants, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Class C Warrant immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9. The Company shall not effect any such consolidation, merger or sale unless
prior to, or simultaneously with, the consummation thereof the successor (if
other than the Company) resulting from such consolidation or merger or the
entity purchasing assets or other appropriate entity shall assume, by written
instrument executed and delivered to the Warrant Agent, the obligation to
deliver to the holder of each Class C Warrant such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Agreement. The
foregoing provisions shall similarly apply to successive reclassifications,
capital reorganizations and other changes of outstanding shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
(c) If, at any time or from time to time, the Company shall issue or
distribute to the holders of shares of Common Stock evidence of its
indebtedness, any other securities of the Company or any cash, property or other
assets (excluding an issuance or distribution governed by one of the preceding
Subsections of this Section 9 and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof (any such non-excluded event being herein called a "Special
Dividend")), then in each case the Registered Holders of the Class C Warrants
shall be entitled to a proportionate share of any such Special Dividend as
though they were the holders of the number of shares of Common Stock of the
Company for which their Class C Warrants are exercisable as of the record date
fixed for the determination of the holders of Common Stock of the Company
entitled to receive such Special Dividend.
(d) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class C Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Class C Warrant as hereinabove provided, so that each Class C Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Class C Warrant held of record prior to such
adjustment of the number of Class C Warrants shall become that number of Class C
Warrants (calculated to the nearest tenth) determined by multiplying the number
one by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each adjustment
of the number of Class C Warrants pursuant to this Section 9, the Company shall,
as promptly as practicable, cause to be distributed to each Registered Holder of
Warrant Certificates on the date of such adjustment Warrant
10
Certificates evidencing, subject to Section 10, the number of additional Class C
Warrants to which such Holder shall be entitled as a result of such adjustment
or, at the option of the Company, cause to be distributed to such Holder in
substitution and replacement for the Warrant Certificates held by him prior to
the date of adjustment (and upon surrender thereof, if required by the Company)
new Warrant Certificates evidencing the number of Class C Warrants to which such
Holder shall be entitled after such adjustment.
(e) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Class C
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Subsection 2(e), continue to express the same Purchase Price per
share, number of shares purchasable thereunder and Redemption Price therefor as
when the same were originally issued.
(f) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Class C Warrant after such adjustment, and, if
the Company shall have elected to adjust the number of Class C Warrants pursuant
to Subsection 9(d), the number of Class C Warrants to which the registered
holder of each Class C Warrant shall then be entitled, and the adjustment in
Redemption Price resulting therefrom, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such certificate
with the Warrant Agent and cause a brief summary thereof to be sent by ordinary
first class mail to Paramount and to each Registered Holder of Class C Warrants
at his or her last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of such adjustment. The affidavit of
an officer of the Warrant Agent or the Secretary or an Assistant Secretary of
the Company that such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. The Warrant Agent may rely on
the information in the certificate as true and correct and has no duty or
obligation to independently verify the amounts or calculations set forth
therein.
(g) For purposes of Subsection 9(a), the following provisions (i) to
(vi) shall also be applicable:
(i) the number of shares of Common Stock deemed outstanding at any
given time shall include all shares of capital stock convertible into, or
exchangeable for, Common Stock (on an as converted basis) as well as all shares
of Common Stock issuable upon the exercise of (x) any convertible debt, (y)
warrants outstanding on the date hereof and (z) options outstanding on the date
hereof.
(ii) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.01 in such price;
provided that any adjustments which by reason of this Paragraph (ii) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with
adjustments so carried forward, shall require an increase or decrease of at
least $.01 in the Purchase Price then in effect hereunder.
11
(iii) In case of (A) the sale by the Company (including as a
component of a unit) of any rights or warrants to subscribe for or purchase, or
any options for the purchase of, Common Stock or any securities convertible into
or exchangeable for Common Stock (such securities convertible, exercisable or
exchangeable into Common Stock being herein called "Convertible Securities"), or
(B) the issuance by the Company, without the receipt by the Company of any
consideration therefor, of any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or Convertible Securities,
whether or not such rights, warrants or options, or the right to convert or
exchange such Convertible Securities, are immediately exercisable, and the
consideration per share for which Common Stock is issuable upon the exercise of
such rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum aggregate
consideration, as set forth in the instrument relating thereto without regard to
any antidilution or similar provisions contained therein for a subsequent
adjustment of such amount, payable to the Company upon the exercise of such
rights, warrants or options, plus the consideration received by the Company for
the issuance or sale of such rights, warrants or options, plus, in the case of
such Convertible Securities, the minimum aggregate amount, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
additional consideration, if any, other than such Convertible Securities,
payable upon the conversion or exchange thereof, by (y) the total maximum
number, as set forth in the instrument relating thereto without regard to any
antidilution or similar provisions contained therein for a subsequent adjustment
of such amount, of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities issuable upon the exercise of such rights, warrants or
options) is less than either the Purchase Price or the Market Price of the
Common Stock as of the date of the issuance or sale of such rights, warrants or
options, then such total maximum number of shares of Common Stock issuable upon
the exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities (as of the date of the issuance or sale
of such rights, warrants or options) shall be deemed to be "Common Stock" for
purposes of Subsection 9(a) and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause an adjustment to be made
in accordance with Subsection 9(a).
(iv) In case of the sale or other issuance by the Company of any
Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount of consideration received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount, as set forth in the instrument relating thereto without regard to any
antidilution or similar provisions contained therein for a subsequent adjustment
of such amount, of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (B) the total
maximum number, as set forth in the instrument relating thereto without regard
to any antidilution or similar provisions contained therein for a subsequent
adjustment of such amount, of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than either the
Purchase Price or the Market Price of the Common Stock as of the date of the
sale of such Convertible Securities, then such total maximum number of shares of
Common Stock issuable upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible Securities) shall be
deemed to be "Common Stock" for purposes of Subsection 9(a) and shall be deemed
to have been sold for an amount equal to such consideration per share and shall
cause an adjustment to be made in accordance with Subsection 9(a).
12
(v) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in Paragraphs (iii) or
(iv) of this Subsection 9(g) or any other securities of the Company convertible,
exchangeable or exercisable for shares of Common Stock, for any reason other
than an event that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is less
than either the Purchase Price or the Market Price as of the date prior to such
modification, then such securities, to the extent not theretofore exercised,
converted or exchanged, shall be deemed to have expired or terminated
immediately prior to the date of such modification and the Company shall be
deemed, for purposes of calculating any adjustments pursuant to this Section 9,
to have issued such new securities upon such new terms on the date of
modification. Such adjustment shall become effective as of the date upon which
such modification shall take effect. On the expiration or cancellation of any
such right, warrant or option or the termination or cancellation of any such
right to convert or exchange any such Convertible Securities, the Purchase Price
then in effect hereunder shall forthwith be readjusted to such Purchase Price as
would have obtained (A) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants or options or upon the conversion or exchange
of such Convertible Securities and (B) had adjustments been made on the basis of
the Purchase Price as adjusted under clause (A) of this sentence for all
transactions (which would have affected such adjusted Purchase Price) made after
the issuance or sale of such rights, warrants, options or Convertible
Securities.
(vi) In case of the sale of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or purchase, or
any options for the purchase of, Common Stock or Convertible Securities, the
consideration received by the Company therefor shall be deemed to be the gross
sales price therefor without deducting therefrom any expense paid or incurred by
the Company or any underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith. In the event that any securities
shall be issued in connection with any other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated among the securities, then each of such securities shall be deemed to
have been issued for such consideration as the Board of Directors of the Company
determines in good faith; provided, however that if holders of more than of ten
percent (10%) of the then outstanding Class C Warrants disagree with such
determination, the Company shall retain an independent investment banking firm
for the purpose of obtaining an appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to the
Purchase Price of the Class C Warrants or to the number of shares of Common
Stock purchasable upon the exercise of each Class C Warrant will be made:
(i) upon the exercise of any of the options outstanding on the date
hereof under the Company's existing stock option plans; or
(ii) upon the issuance or exercise of options which may hereafter
be granted with the approval of the Board of Directors, or exercised, under any
employee benefit plan of the Corporation to officers, directors, consultants or
employees, but only with respect to such options as are exercisable at prices no
lower than the Market Price of the Common Stock as of the date of grant thereof;
or
13
(iii) upon issuance or exercise of the Placement Warrants, or the
Advisory Warrants, (as defined in the Placement Agency Agreement between the
Corporation and Paramount Capital, Inc. dated as of October 26, 1997 (the
"Placement Agency Agreement")) (collectively, the "Paramount Warrants"), upon
the conversion of the Series A Preferred Stock, upon the exercise of the New
Warrants (as defined in the Securities Purchase Agreement dated as of June 30,
1997 (the "Securities Purchase Agreement"), upon the exchange of the Series A
Preferred Stock and the New Warrants for Common Stock and Class C Warrants
pursuant to the Letter Agreement dated January 13, 1998, or upon the issuance,
conversion or exercise of the Common Stock or the Class C Warrants included in
the Units of the Corporation issued (i) on or prior to the Final Closing Date,
or (ii) pursuant to the exercise of the Paramount Warrants; or
(iv) upon the issuance or sale of Common Stock or Convertible
Securities pursuant to the exercise of any rights, options or warrants to
receive, subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants or options
were outstanding on the date of the original sale of the Class C Warrants or
were thereafter issued or sold, provided that an adjustment was either made or
not required to be made in accordance with Subsections 9(a) and 9(c) in
connection with the issuance or sale of such securities or any modification of
the terms thereof; or
(v) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, provided that any adjustments required
to be made upon the issuance or sale of such Convertible Securities or any
modification of the terms thereof were so made, and whether or not such
Convertible Securities were outstanding on the date of the original sale of the
Class C Warrants or were thereafter issued or sold; or
(vi) upon the issuance of stock which may hereafter be purchased or
sold with the approval of the Board of Directors, under the 1993 Employee Stock
Purchase Plan of the Company to officers, directors, consultants or employees,
but only with respect to such shares as are purchased and/or sold in accordance
with the current plan and at prices no lower than eighty-five percent (85%) of
the Closing Bid Price (or, if the prices referenced in the definition of Closing
Bid Price cannot be determined, 85% of the Fair Market Value) of the Common
Stock as of the date of purchase and/or sale thereof.
Paragraph 9(g)(v) shall nevertheless apply to any modification of the rights of
conversion, exchange or exercise of any of the securities referred to in
Paragraphs (i), (ii) and (iii) of this Subsection 9(h), except for modifications
required by the original terms of such securities.
(i) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Class C Warrants shall include only shares of such
class designated in the Company's Certificate of Incorporation, as amended, as
Common Stock on the date of the original issue of the Units or (i), in the case
of any reclassification, change, consolidation, merger, sale or conveyance of
the character referred to in Subsection 9(b), the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Class C Warrants as a result of a
14
subdivision or combination or consisting of a change in par value, or from par
value to no par value, or from no par value to par value, such shares of Common
Stock as so reclassified or changed.
(j) Any determination as to whether an adjustment in the Purchase Price
in effect hereunder is required pursuant to Section 9, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the Class
C Warrants and the Company if made in good faith by the Board of Directors of
the Company, except as otherwise contemplated hereby.
(k) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect concurrently therewith to grant to
each Registered Holder as of the record date for such transaction of the Class C
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
determine the stockholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his or her
Class C Warrants. If the Company shall so elect under this Subsection 9(k), then
such grant by the Company to the holders of the Class C Warrants shall be in
lieu of any adjustment which otherwise might be called for pursuant to this
Section 9.
SECTION 10. Fractional Warrants and Fractional Shares. If the number of
shares of Common Stock purchasable upon the exercise of each Class C Warrant is
adjusted pursuant to Section 9, the Company nevertheless shall not be required
to issue fractions of shares, upon exercise of the Class C Warrants or
otherwise, nor to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Registered Holder an amount in cash equal to such
fraction multiplied by the Fair Market Value of one (1) share of Common Stock as
of the date of exercise.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Class
C Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Class C Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Class C Warrants, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or 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 or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Class C
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Class C
Warrants, and any Registered Holder of a Class C Warrant, without consent of the
Warrant Agent or of the holder of any other Class C Warrant, may, in his own
behalf and for his own benefit, enforce against the Company his right to
exercise his Class C Warrants for the purchase of shares of Common Stock in the
manner provided in the Warrant Certificate and this Agreement.
15
SECTION 13. Agreement of Warrant Holders. Every holder of any Class C
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of any Class C Warrant that:
(a) The Class C Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if the Warrant Certificates
representing such Class C Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent, in its sole discretion, together with payment
of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Class C Warrants represented thereby for
all purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 6.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Class C Warrant or Class C Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same, by redemption or
otherwise, shall thereupon be delivered to the Warrant Agent and canceled by it
and retired. The Warrant Agent shall also cancel the Warrant Certificate or
Warrant Certificates following exercise of any or all of the Class C Warrants
represented thereby or delivered to it for transfer, split up, combination or
exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates, or by any other act
hereunder, be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Class C Warrants represented
thereby or of any securities or other property delivered upon exercise of any
Class C Warrant or whether any stock issued upon exercise of any Class C Warrant
is fully paid and nonassessable.
(a) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists that may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or willful misconduct.
(b) The Warrant Agent may at any time consult with counsel satisfactory
to it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
16
(c) Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, or any Vice President and the Secretary,
or any Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
(d) The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder as governed by a separate agreement to be entered into between the
Warrant Agent and the Company; the Company further agrees to indemnify the
Warrant Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses and liabilities arising as a result of
the Warrant Agent's negligence or willful misconduct.
(e) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or willful misconduct), after giving
thirty (30) days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to the Registered Holders of
each Warrant Certificate at the Company's expense. Upon such resignation, or any
inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of fifteen (15) days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the Registered
Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having capital and surplus, as shown by its last published report to its
stockholders, of not less than $10,000,000 or a stock transfer company. After
acceptance in writing of such appointment by the new warrant agent is received
by the Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein as
the Warrant Agent, without any further assurance, conveyance, act or deed; but
if for any reason it shall be necessary or expedient to execute and deliver any
further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
(e) Any entity into which the Warrant Agent or any new warrant agent
may be converted or merged or any entity resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any entity
succeeding to the trust business of the Warrant Agent shall be a successor
warrant agent under this Agreement without any further act, provided that such
entity is eligible for appointment as successor to the Warrant Agent under the
provisions of the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed to the
Company and to the Registered Holder of each Warrant Certificate.
(f) The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Class C Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were
17
not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
Subsection 4(b), the parties hereto and the Company may by supplemental
agreement make any changes or corrections in this Agreement (a) that they shall
deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; (b) to
reflect an increase in the number of Class C Warrants which are to be governed
by this Agreement resulting from a subsequent offering of Company securities
which includes Class C Warrants having the same terms and conditions as the
Class C Warrants, originally covered by or subsequently added to this Agreement
under this Section 16; or (c) that they may deem necessary or desirable and that
shall not adversely affect the interests of the holders of Warrant Certificates;
provided, however, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders of Warrant Certificates representing more than 50% of the
Class C Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any Class C
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Class C Warrant, other than
such changes as are specifically prescribed by this Agreement (including those
contemplated in Subsection 9(d)) as originally executed or are made in
compliance with applicable law.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed by means of first class registered or certified
mail, postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; if to the Warrant
Agent, at its Corporate Office; and, if to Paramount, at Paramount Capital Inc.,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
SECTION 18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, Paramount, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended nor shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
business on the Warrant Expiration Date of all the Class C Warrants or such
earlier date upon which all Class C Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company for cash held by it
and the provisions of Section 15 shall survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PROCEPT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Authorized Officer, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Authorized Officer, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
PARAMOUNT CAPITAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Authorized Officer, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
19
EXHIBIT A
[FORM OF FACE OF CLASS C WARRANT CERTIFICATE]
No. _________________ Class C Warrants
VOID AFTER __________________, 2003
CLASS C WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
PROCEPT, INC.
T h i s c e r t i f i e s t h a t F O R V A L U E R E C E I V E D
------------------------------------------------------------------------------
_____________________________ or registered assigns (the "Registered Holder") is
the owner of the number of Class C Warrants ("Class C Warrants") specified
above. Each Class C Warrant represented hereby initially entitles the Registered
Holder to purchase, subject to the terms and conditions set forth in this
Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, par value $.01 per share
("Common Stock"), of Procept, Inc., a Delaware corporation (the "Company"), at
any time between _______________, 1998, and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of American Stock Transfer & Trust Company, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of the Purchase Price
(as defined in the Warrant Agreement) in lawful money of the United States of
America in cash or by official bank or certified check made payable to the
Company.
This Warrant Certificate and each Class C Warrant represented hereby
are issued pursuant to, and are subject in all respects to, the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
January [ ], 1998, by and among the Company, the Warrant Agent and Paramount
Capital, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Class C Warrant represented hereby are
subject to modification or adjustment.
Each Class C Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of fewer than every Class C Warrant represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Class C Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
____________, 2003, or such earlier date as the Class C Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall
mean 5:00 P.M. (New York time) the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close. Upon
notice to all Registered Holders of the Class C Warrants, the Company shall have
the right to extend the Expiration Date.
The Registered Holder of this Class C Warrant shall have the
registration rights as provided in Section 5 of the Subscription Agreement (the
"Subscription Agreement") dated as of the date hereof between the Company and
such Registered Holder. The Class C Warrants represented hereby shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class C Warrants, each of such new Warrant Certificates to
represent such number of Class C Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Class C
Warrants will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Warrant Agreement.
Prior to the exercise of any Class C Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to Section 8 of the Warrant Agreement, the Class C Warrants
represented hereby may be redeemed at the option of the Company, at a redemption
price of $.01 per Class C Warrant (subject to adjustment under the circumstances
set forth in Section 8 of the Warrant Agreement) (the "Redemption Price").
Notice of redemption shall be given not later than the sixtieth day before the
date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no rights
with respect to the Class C Warrants represented hereby except to receive the
Redemption Price upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class C Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price to
Paramount Capital, Inc. under certain conditions as specified in the Warrant
Agreement upon the exercise of the Class C Warrants represented hereby. Any
costs incurred by the Placement Agent in connection with the solicitation of
Class C Warrant exercises or the redemption of Class C Warrants shall be
reimbursed by the Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
PROCEPT, INC.
Dated: _____________________ By: _____________________________________
By: _____________________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: ___________________________
Authorized Officer
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $___________ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Class C Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Class C Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Class C Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
____________________________________________
____________________________________________
____________________________________________
____________________________________________
[please print or type name and address]
and be delivered to
__________________________________________
__________________________________________
__________________________________________
__________________________________________
[please print or type name and address]
and if such number of Class C Warrants shall not be all the Class C Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class C Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
The undersigned represents that the exercise of the within Class C
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in
the space below. Unless otherwise indicated by listing the name of another NASD
member firm, it will be assumed that the exercise was solicited by Paramount
Capital, Inc.
(Name of NASD Member)
Dated: __________________________ X ____________________________________
____________________________________
____________________________________
Address
____________________________________
Taxpayer Identification Number
____________________________________
Signature Guaranteed
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class C Warrants
FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
__________________________________________
__________________________________________
__________________________________________
__________________________________________
[please print or type name and address]
________________________________ of the Class C Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints
_______________________________________________________________________ Attorney
to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: _________________________ X _______________________________________
Signature Guaranteed
_______________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.