ARTICLE VI RIGHTS TERMINATION
AND EXCHANGE AGREEMENT
This Article VI Rights Termination and Exchange Agreement is dated
as of December __, 1999 among Procept, Inc., a Delaware corporation
("Procept"), and the undersigned stockholders of Procept, being the holders
of a majority of the Rights Shares, as defined below.
WHEREAS, the undersigned stockholders of Procept own shares of
Procept Common Stock (the "Common Stock") which are entitled to certain
rights inherent in the ownership thereof, referred to herein as the Article
VI Rights (as defined below);
WHEREAS, Procept and Heaven's Door Corporation ("HDC") are
contemplating a corporate transaction in which shares of Common Stock not
entitled to Article VI Rights will be issued to the stockholders of HDC and
the stockholders of Procept, by virtue of their ownership of Procept, will
acquire the business of HDC (the "Merger"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
(a) "1998 Subscription Agreements" shall mean those certain Subscription
Agreements entered into by Procept and certain stockholders in connection
with a unit offering of Procept Common Stock and Class C Warrants of Procept
consummated in 1998.
(b) "Article VI Rights" shall include all rights, privileges and
preferences held by stockholders of Procept and all obligations of Procept to
such stockholders arising under:
(i) Article VI of the 1998 Subscription Agreements;
(ii) Section 10 of the Agreement and Plan of Merger among Procept,
Pacific Pharmaceuticals, Inc. and a subsidiary of Procept dated as of
December 10, 1998;
(iii) Article VI of the Subscription Agreement between Procept and
Commonwealth Associates dated February 24, 1999;
(iv) Article VI of the Subscription Agreement between Procept and
the Harvard School of Dental Medicine dated March 12, 1999;
(v) Article VI of the Subscription Agreements between Procept and
the former holders of Series A Convertible Preferred Stock of B-G Development
Corp. dated as of June 30, 1999;
(vi) a letter agreement dated November 10, 1999 between the Company
and Paramount Capital, Inc. relating to the cancellation of a brokerage fee
payable in connection with Procept's acquisition of Pacific Pharmaceuticals,
Inc.; and
(vii) a letter agreement dated November 10, 1999 between the
Company, Xxxxxxx Xxxxxxxxx, the Aries Trust and the Aries Domestic Fund, L.P.
relating to the discharge of certain indebtedness of Binary Therapeutics,
Inc., a subsidiary of Procept.
(c) "Contingent Rights Shares" shall mean the shares of Common Stock
entitled to Article VI Rights upon issuance as follows:
(i) an aggregate of 1,197,747 shares of Common Stock issuable on
exercise of Unit Purchase Options issued by Procept in connection with its
1998 private placement; and
(ii) an aggregate of 983,013 shares of Common Stock issuable on
exercise of Unit Purchase Options originally issued by Pacific
Pharmaceuticals, Inc. in 1997 and assumed by Procept in 1999.
(d) "Rights Shares" shall mean:
(i) 12,086,433 shares of Common Stock issued and outstanding on the
date hereof and entitled to Article VI Rights; and
(ii) the Contingent Rights Shares.
(e) "Rights Holder" shall mean a record holder of Rights Shares as of
the effective date of the Merger or a holder of Contingent Rights Shares
issued after the Merger on exercise of a Unit Purchase Option.
2. TERMINATION OF ARTICLE VI RIGHTS AND EXCHANGE OF SHARES.
(a) The undersigned Rights Holders, representing both (i) the holders of
at least a majority of the shares of Common Stock acquired under the 1998
Subscription Agreements which shares are entitled to Article VI Rights and
(ii) the holders of at least a majority of all shares of Common Stock
entitled to Article VI Rights, hereby agree, effective upon the Merger, to
exchange their Rights Shares for a number of shares of Common Stock not
having such rights but being of equivalent value to the Rights Shares
exchanged.
(b) The number of shares to be issued in exchange for the Rights Shares
shall be equal to the number of Rights Shares plus additional shares of
Common Stock calculated pursuant to Section 3 hereof.
(c) Pursuant to the terms of the Article VI Rights, the undersigned
agree, effective upon the Merger and in consideration of the exchange
described in Section 2(a), to perpetually waive (or terminate) the Article VI
Rights and that none of the parties to any agreement granting Article VI
Rights shall have any further rights or obligations thereunder with respect
to the Article VI Rights.
(d) In order to avoid the unnecessary expense of collecting the
outstanding stock certificates representing the Rights Shares, the Rights
Holders shall be deemed to have exchanged such Rights Shares without actually
surrendering their current stock certificates and
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only certificates representing the additional shares of Common Stock issued
pursuant to Section 3 hereof shall be issued by the Company.
3. ISSUANCE OF SHARES.
(a) OBLIGATION TO ISSUE STOCK. Effective upon the Merger, Procept shall
issue to the Rights Holders an aggregate of 5,000,000 shares of Common Stock
(the "Additional Issuance"); provided that the Contingent Additional Issuance
(as defined below) shall be issued as and when the Contingent Rights Shares
are issued. Each Rights Holder shall receive, for each Rights Share which is
held by the Rights Holder at the effective date of the Merger or issued after
the Merger with respect to the exercise of a Unit Purchase Option underlying
a Contingent Rights Share, a number of shares or fraction of a share of
Common Stock equal to the Additional Issuance divided by the aggregate number
of Rights Shares, rounded up and down to the nearest whole share. The
"Contingent Additional Issuance" shall mean a number of shares of Common
Stock equal to the Additional Issuance multiplied by a fraction representing
the number of Contingent Rights Shares divided by the aggregate number of
Rights Shares. Until the earlier of the issuance of shares included in the
Contingent Additional Issuance or the expiration or termination of the Unit
Purchase Options relating to Contingent Rights Shares, Procept shall reserve
for issuance the shares comprising the Contingent Additional Issuance. If any
of the Contingent Rights Shares are not issued prior to the expiration or
termination of the Unit Purchase Options relating to those Contingent Rights
Shares, Procept shall have no further obligation to reserve for issuance, or
issue, the Contingent Additional Issuance relating to such unissued
Contingent Rights Shares.
(b) TREASURY STOCK. The shares of Common Stock comprising the Additional
Issuance shall be duly authorized, fully-paid and non-assessable shares of
Common Stock, in accordance with Delaware Law.
(c) COMPLIANCE WITH SECURITIES LAWS.
(i) The Additional Issuance is intended to be exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Act"). The Rights Holders receiving shares of Common Stock
contained in the Additional Issuance (the "Termination Shares") may not sell
or otherwise transfer the Termination Shares unless they are registered under
the Act or unless an exemption from such registration is available.
(ii) Each recipient of Termination Shares will be deemed to
understand that although there currently is a public market for the Common
Stock, reliance upon Rule 144 under the Act, as amended, for resales
requires, among other conditions, a one-year holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering
without having to satisfy the registration requirements under the Act.
Procept is under no obligation to register any of the Termination Shares
under the Act or any state securities or "blue sky" laws.
(iii) Procept may place a legend on any certificate or other
document evidencing the Termination Shares that such Termination Shares have
not been registered under the Act or any state securities or "blue sky" laws
and setting forth or referring to the restrictions on transferability and
sale thereof contained in this Agreement. Procept will make a notation in its
appropriate records with respect to the restrictions on the transferability
of such Termination Shares.
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4. MISCELLANEOUS.
(a) NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to Procept, Inc., 000 Xxxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000, Attn: President, and to the Rights Holder at the Rights
Holder's last address as it shall appear in Procept's record books. Notices
shall be deemed to have been given or delivered on the date of mailing,
except notices of change of address, which shall be deemed to have been given
or delivered when received.
(b) BINDING BENEFIT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them, except to the extent of
written agreements referenced herein to the extent not expressly superseded
hereby. Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement other than a
Rights Holder.
(c) GOVERNING LAW. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL
THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY,
THE EXCLUSIVE FORA FOR RESOLVING DISPUTES ARISING OUT OF, OR RELATING TO,
THIS AGREEMENT ARE EITHER THE SUPREME COURT OF THE STATE OF NEW YORK IN AND
FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE AND COUNTY,
AND ALL RELATED APPELLATE COURTS. THE PARTIES HEREBY IRREVOCABLY CONSENT TO
THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
(d) EXPENSES OF ENFORCEMENT. In order to discourage frivolous claims,
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other
parties to the action), then the other party shall be entitled to recover
from such claimant all of its/their reasonable legal costs and expenses
relating to such proceeding and/or incurred in preparation therefor.
(e) SEVERABILITY. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full
force and effect. If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, such provision shall be interpreted so as to
remain enforceable to the maximum extent permissible consistent with
applicable law and the remaining conditions and provisions or portions
thereof shall nevertheless remain in full force and effect and enforceable to
the extent they are valid, legal and enforceable, and no provisions shall be
deemed dependent upon any other covenant or provision unless so expressed
herein.
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(f) NO CONTINUING WAIVER. A waiver by any party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
(g) FURTHER ASSURANCES. The parties shall execute and deliver all such
further documents, agreements and instruments and shall take such other and
further action as may be necessary or appropriate to carry out the purposes
and intent of this Agreement.
(h) COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be executed
in two or more counterparts each of which shall be deemed an original, but
all of which shall together constitute one and the same instrument. The
delivery of a signature of a party by facsimile shall be deemed for the
purposes of execution of this Agreement as the equivalent of the delivery of
an original signature.
(i) SPECIFIC ENFORCEMENT. Procept acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with its specific terms or
were otherwise breached and that such damage would not be compensable in
money damages and that it would be extremely difficult or impracticable to
measure the resultant damages. Accordingly, the Rights Holders shall be
entitled to an injunction or injunctions with respect to the provisions of
this Agreement and to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which they may be entitled at law or in
equity, and Procept expressly waives any defense that a remedy in damages
would be adequate and expressly waives any requirement in an action for
specific performance for the posting of a bond by the Rights Holder bringing
such action.
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[SIGNATURE PAGE]
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.
RIGHTS HOLDER
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Signature Signature (if held jointly)
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Name Typed or Printed Name Typed or Printed
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Entity Name Entity Name
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Address Address
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City, State and Zip Code City, State and Zip Code
PROCEPT, INC.
By:
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Xxxx X. Xxx, President
