EXHIBIT 4.03
ISONICS CORPORATION
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
AND
XXXXXX XXXXXX SECURITIES, INC.
WARRANT AGREEMENT
Dated as of _______, 1997
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement"), dated this day of _________
1997, by and among ISONICS CORPORATION, a California corporation (the
"Company"), CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent (the
"Warrant Agent"), and XXXXXX XXXXXX SECURITIES, INC. (the "Underwriter"), and
each of their successors and assigns.
W I T N E S S E T H:
WHEREAS, in connection with (i) the Company's underwritten initial public
offering pursuant to a registration statement on Form SB-2 of 700,000 Units
consisting of 1,400,000 shares of Common Stock (as defined in Section 1), and
1,400,000 redeemable common stock purchase warrants (the "Warrants"), each
warrant entitling the holder thereof to purchase one additional share of Common
Stock; (ii) the over-allotment option to purchase up to an additional 105,000
Units (consisting of 210,000 shares of Common Stock and 210,000 Warrants) (the
"Over-allotment Option"); and (iii) the sale to the Underwriter of warrants (the
"Underwriter's Warrants") to purchase up to 140,000 shares of Common Stock
and/or 140,000 Warrants, the Company will issue up to 1,750,000 Warrants
(subject to adjustment as provided herein and in the Underwriter's Warrant
Agreement); and
WHEREAS, the Company desires to provide for the issuance of certificates
representing the Warrants; and
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 Warrants, the
issuance of certificates representing the Warrants, the exercise of the 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 Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the Underwriter,
the holders of certificates representing the Warrants and the Warrant Agent, the
parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
------------
following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Common Stock" shall have the meaning assigned to it in
Section 8(h) hereof.
(c) "Commission" shall mean the Securities and Exchange
Commission.
2
(d) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its business in , shall be
administered, which office is located on the date hereof c/o Continental Stock
Transfer & Trust Company, 0 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder hereof or
his attorney duly authorized in writing; and (ii) payment in cash or by official
bank or certified check made payable to the Warrant Agent for the account of the
Company, of the amount in lawful money of the United States of America equal to
the applicable Purchase Price (as hereinafter defined) in good funds.
(g) "Exercise Price" shall mean, subject to modification and
adjustment as provided in Section 8, $4.00 per share and further subject to the
Company's right, in its sole discretion, to decrease the Exercise Price for a
period of not less than thirty (30) days on not less than thirty (30) days'
prior written notice to the Registered Holders and Xxxxxx Xxxxxx Securities,
Inc.
(h) "Initial Warrant Exercise Date" shall mean one year after the
Effective Date of the Prospectus.
(i) "Initial Warrant Redemption Date" shall mean eighteen (18)
months following the Effective Date of the Prospectus.
(j) "Market Price" shall mean (i) if the Common Stock is listed,
or admitted to unlisted trading privileges on a national securities exchange, or
is traded on the Nasdaq National Market or Nasdaq, the last reported sale price
on the date of the event to which such Market Price relates, or, if no such
reported sale takes place on such date, then the average of the last reported
sales prices for the last three (3) trading days, in each case as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to unlisted trading privileges or by the Nasdaq National
Market or Nasdaq, or (ii) if the Common Stock is not listed or admitted to
unlisted trading privileges on any national securities exchange, or traded on
the Nasdaq National Market or Nasdaq, but is traded in the over-the-counter
market, then the average of the last reported bid and asked prices of the Common
Stock reported by the National Quotation Bureau, Inc. on the last business day
prior to the date of the event to which such Market Price relates, and if no
such reported sale takes place on such date, then the average of the last sales
prices so reported for the last three (3) trading days on which such price is
reported immediately preceding the date to which such Market Price relates; or
(iii) if the Common Stock is neither listed, nor admitted to unlisted trading
privileges on the National Securities Exchange, nor traded on the Nasdaq
National Market or Nasdaq, nor traded in the over-the-counter market, then the
amount, not less that the book value thereof as of the end of the most recently
completed fiscal quarter of the Company ending prior
3
to the date to which such Market Price relates, as determined in good faith
(using customary valuation methods) by the Board of Directors of the Company,
which determination shall be evidenced by a resolution of the Board of Directors
and based on the best information available to it.
(k) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(1) "Nasdaq" shall mean the Nasdaq SmallCap Market.
(m) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
(n) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with the terms hereof,
which price shall be $.10 per Warrant, subject to adjustment from time to time
pursuant to the provisions of Section 9 hereof.
(o) "Registered Holder" shall mean each person in whose name a
Warrant Certificate representing any of the Warrants shall be registered on the
books maintained by the Warrant Agent pursuant to Section 6.
(p) "Underwriter's Warrant Agreement" shall mean the agreement
dated as of _, 1997 between the Company and the Underwriter relating to and
governing the terms and provisions of the Underwriter's Warrants.
(q) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, or its authorized successor.
(r) "Underwriting Agreement" shall mean the underwriting
agreement dated as of _, 1997 between the Company and the underwriters listed
therein relating to the Offering.
(s) "Warrant Certificate" shall mean a certificate representing
one or more of the Warrants substantially in the form annexed hereto as Exhibit
A.
(t) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (New York
time), on _______ (four (4) years from the date of the Prospectus), or the
Redemption Date as defined herein, whichever date is earlier; provided that if
such date shall in the State of New York be a holiday or a day on which banks
located in the State of New York are authorized 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 such banks are authorized to close. Upon five
business days' prior written notice to the Registered Holders, the Company shall
have the right to extend the Warrant Expiration Date.
4
2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
(a) Each Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase at the Exercise
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one share of Common Stock upon the exercise thereof in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 8.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
(subject to modification and adjustment as provided in Section 8) shall be
executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Underwriter's Warrants as provided
therein, Warrant Certificates representing all or a portion of 140,000 Warrants
to purchase up to an aggregate of 140,000 shares of Common Stock (subject to
modification and adjustment as provided in Section 8 hereof and in the
Underwriter's Warrant Agreement), shall be countersigned, issued and delivered
by the Warrant Agent upon written order of the Company signed by its Chairman of
the Board, Chief Executive Officer, President or a Vice President and by its
Chief Financial Officer, Treasurer or an Assistant Treasurer or its Secretary or
an Assistant Secretary.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
denominations of one or whole number multiples thereof to the person entitled
thereto in connection with any transfer or exchange permitted under this
Agreement. Except as provided herein, no Warrant Certificates shall be issued
except Warrant Certificates initially issued hereunder and those issued on or
after the Initial Warrant Exercise Date, upon the exercise of fewer than all
Warrants held by the exercising Registered Holder, (ii) Warrant Certificates
issued upon any transfer or exchange of Warrants, (iii) Warrant Certificates
issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7, (iv) Warrant Certificates issued pursuant to
the Underwriter's Warrant Agreement; and (v) at the option of the Company,
Warrant Certificates in such form as may be approved by its Board of Directors,
to reflect any adjustment or change in the Exercise Price, the number of shares
of Common Stock purchasable upon exercise of the Warrants or the Redemption
Price therefor made pursuant to Section 8 hereof.
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 Warrants may be listed, or to
conform to usage. The Warrant
5
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed
Warrant Certificates) and issued in registered form. Warrants shall be numbered
serially with the letter "W" on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or any
Vice President and by its Chief Financial Officer, Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary, by manual signatures or by
facsimile signatures printed thereon, and shall have imprinted thereon a
facsimile of the Company's seal. 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 such officer of the Company after
the date of signature but before the date of issuance of the Warrant
Certificates or before countersignature by the Warrant Agent and issuance and
delivery thereof, such Warrant Certificates, nevertheless, may 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 such
officer of the Company. After countersignature by the Warrant Agent, Warrant
Certificates shall be delivered by the Warrant Agent to the Registered Holder
promptly and without further action by the Company, except as otherwise provided
by Section 4(a) hereof.
4. Exercise.
---------
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised by the Registered Holder thereof commencing at any time
on or after the Initial Warrant 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. Warrants may be exercised by their
holders or redeemed by the Company as follows: Exercise of Warrants shall be
accomplished upon surrender of the Warrant Certificate evidencing such Warrants,
with the Subscription Form on the reverse side thereof duly filled in and
executed, to the Warrant Agent at its business office, together with payment to
the Warrant Agent of the Exercise Price (as of the date of such surrender) of
the Warrants then being exercised and an amount equal to any applicable transfer
tax and, if requested by the Company, any other taxes or governmental charges
which the Company may be required by law to collect in respect of such exercise.
Payment of the Exercise Price and other amounts may be made by wire transfer of
good funds, or by certified or bank cashier's check, payable in lawful money of
the United States of America to the order of the Warrant Agent, who shall in
turn make prompt payment to the Company. No adjustment shall be made for any
cash dividends, whether paid or declared, on any securities issuable upon
exercise of a Warrant. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and upon
exercise thereof, the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of the securities
issuable thereby as of the close of business on the Exercise Date. If Warrants
in denominations other than whole number multiples thereof shall be exercised at
one time by the same Registered Holder, the number of full shares of Common
Stock which shall be issuable upon exercise thereof shall be computed on the
basis of the aggregate number of full shares of Common Stock issuable upon such
exercise. As soon as practicable on or after the Exercise Date and in any event
within five business days after such date,
6
if one or more Warrants have been exercised in the manner described in this
subsection (a), the Warrant Agent on behalf of the Company shall cause to be
issued to the person or persons entitled to receive the same a Common Stock
certificate or certificates for the shares of Common Stock deliverable upon such
exercise, and the Warrant Agent shall deliver the same to the person or persons
entitled thereto. Upon the exercise of any one or more Warrants, the Warrant
Agent shall promptly notify the Company in writing of such fact and of the
number of securities delivered upon such exercise and, subject to subsection (b)
below, shall cause payment in cash or by check made payable to the order of the
Company, equal to the Exercise Price of such Warrants, to be deposited promptly
in the Company's bank account or paid directly to the Company, as specified by
the Company.
(b) The Company shall engage the Underwriter as a Warrant
solicitation agent, and, at any time upon the valid exercise of any Warrants
after one year from the date hereof, excluding any Warrant (i) exercise at a
time when the Exercise Price exceeds the Market Price, (ii) held in a
discretionary account; or (iii) exercised in an unsolicited transaction, the
Company shall instruct the Warrant Agent to, and the Warrant Agent shall, on a
daily basis, within two (2) business days after such exercise, notify the
Underwriter of the exercise of any such Warrants and shall, on a weekly basis
(subject to collection of funds constituting the tendered Exercise Price, but in
no event later than five (5) business days after the last day of the calendar
week in which such funds were tendered), remit to the Underwriter an amount
equal to five percent (5%) of the Exercise Price of such Warrants then being
exercised unless the Underwriter shall have notified the Warrant Agent that the
payment of such amount with respect to such Warrant is violative of the General
Rules and Regulations promulgated under the Exchange Act, or the rules and
regulations of the Nasdaq Stock Market, Inc. or any of its markets or quotation
systems on which the Company's securities are quoted or applicable state
securities or "blue sky" laws, or the Warrants are those underlying the
Underwriter's Warrants in which event, the Warrant Agent shall have to pay such
amount to the Company; provided, that, the Warrant Agent shall not be obligated
--------
to pay any amounts pursuant to this Section 4(b) during any week that such
amounts payable are less than $1,000 and the Warrant Agent's obligation to make
such payments shall be suspended until the amount payable aggregates $1,000, and
provided further, that, in any event, any such payment (regardless of amount)
shall be made not less frequently than monthly. Notwithstanding the foregoing,
the Underwriter shall be entitled to receive the commission contemplated by this
Section 4(b) as Warrant solicitation agent only if: (i) the Underwriter has
provided actual services in connection with the solicitation of the exercise of
a Warrant by a Registered Holder; and (ii) the Registered Holder exercising a
Warrant affirmatively designates in writing on the Subscription Form on the
reverse side of the Warrant Certificate that the exercise of such Registered
Holder's Warrant was solicited by the Underwriter.
(c) The Company shall not be required to issue fractional shares
on the exercise of Warrants. Warrants may be exercised only in such multiples as
are required to permit the issuance by the Company of one or more whole shares.
If one or more Warrants shall be presented for exercise in full at the same time
by the same Registered Holder, the number of whole shares which shall be
issuable upon such exercise thereof shall be computed on the basis of the
aggregate number of shares purchasable on exercise of the Warrants presented. If
any fraction of a share would, except for the provisions provided herein, be
issuable on the exercise of any Warrant (or specified
7
portion thereof), the Company shall pay an amount in cash equal to such fraction
multiplied by the then current Market Price of a share of Common Stock.
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 Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery thereof, be validly issued, fully
paid and nonassessable and free from all preemptive or similar rights, taxes,
liens and charges with respect to the issue thereof, and that upon issuance such
shares shall be listed on each securities exchange, if any, on which the other
shares of outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration with, or
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 file a registration statement under the federal securities laws or
a post-effective amendment covering such securities, use its best efforts to
cause the same to become effective and to keep such registration statement
current on or after the Initial Warrant Exercise Date and while any of the
Warrants are outstanding and deliver a prospectus which complies with Section
10(a)(3) of the Act to the Registered Holder exercising the Warrant (except, if
in the opinion of counsel to the Company, such registration is not required
under the federal securities laws or if the Company receives a letter from the
staff of the Commission stating that it would not take any enforcement action if
such registration is not effected; provided, however, that (i) if at the time of
exercise of any Warrants the Company does not have in place an effective
registration statement or is otherwise, in the good faith determination of the
Board of Directors of the Company, precluded by applicable laws from issuing the
underlying shares of Common Stock, the Company may, in lieu of issuance of the
shares of Common Stock, elect to redeem the Warrants duly surrendered for
exercise for a price per Warrant equal to the difference between the Market
Price of the securities for which such Warrant is exercisable on the date of
such submission and the Exercise Price of such Warrants, and in the event of
such redemption, the Company will pay to the holder of such Warrants the above-
described redemption price in cash within ten (10) business days after receipt
of notice from the Warrant Agent that such Warrants have been submitted for
exercise; and (ii) if the Market Price of the Common Stock is less than the
Exercise Price, then the Company need not take such actions to file a
registration statement (or a post-effective amendment to a registration
statement) with respect to the issuance of Common Stock upon exercise of the
Warrants until such time as the Company has been subject to the requirements of
Section 12 or 15(d) of the Exchange Act for a period of at least twelve calendar
months immediately preceding the filing of the registration statement). The
Company will use its best efforts to obtain appropriate approvals or
registrations under state "blue sky" securities laws with respect to any such
securities. However, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise or issuance
would be unlawful.
8
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; provided, however, that if 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 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;
provided, however, that the Company shall not be required (i) to pay any tax
which may be payable in respect of any transfer involved in the transfer and
delivery of Warrant Certificates; or (ii) to issue or deliver any certificate
for shares of Common Stock or other securities upon the exercise of any Warrant
Certificate until any such tax shall have been paid, all such tax being payable
by the holder of such Warrant Certificate at the time of surrender.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required to be issued upon exercise of the
Warrants, and the Company will comply with all such requisitions.
6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class 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, promptly following 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 which 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 the transfer thereof in accordance with customary
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 Warrants
of the same class.
(c) With respect to all Warrant Certificates presented for
registration of 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
thereof or his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed on the Registered Holder by
the Warrant Agent for any exchange or registration of transfer of Warrant
Certificates. In addition, the Company may require payment by such holder of a
sum sufficient to cover any tax or other
9
governmental 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 until termination
of this Agreement.
(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
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.
7. Loss or Mutilation. Upon receipt by the Company and the Warrant
-------------------
Agent of evidence satisfactory to them of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate and (in the case of loss,
theft or destruction) of indemnity satisfactory to them, and (in 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 the
Warrant Agent that a new 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
Warrants. Applicants for substitute Warrant Certificates shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
8. Adjustments of Number and Kind of Shares Purchasable and Exercise
-----------------------------------------------------------------
Price. The number and kind of securities or other property purchasable upon
-------
exercise of a Warrant shall be subject to adjustment from time to time upon the
occurrence, after the date hereof, of any of the following events:
(a) Dividends. Stock Splits. Reverse Splits. Etc. In case the
---------------------------------------------
Company shall (i) pay a dividend in, or make a distribution of, shares of Common
Stock or of capital stock convertible into Common Stock on its outstanding
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of such shares; or (iii) combine its outstanding shares of Common
Stock into a smaller number of such shares, the total number of shares of Common
Stock purchasable upon the exercise of each Warrant outstanding immediately
prior thereto shall be adjusted so that the Registered Holder of any Warrant
Certificate thereafter surrendered for exercise shall be entitled to receive, at
the same aggregate Exercise Price, the number of shares of Common Stock which
such holder would have owned or have been entitled to receive immediately
following the happening of any of the events described above had such Warrant
been exercised in full immediately prior to the occurrence of such event. Any
adjustment made pursuant to this subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this subsection, the
Registered Holder of any Warrant Certificate thereafter surrendered for exercise
shall become entitled to receive shares of two or more
10
classes of capital stock of the Company, the Board of Directors of the Company
(whose determination shall be conclusive and shall be evidenced by a Board
resolution filed with the Warrant Agent) shall determine the allocation of the
Exercise Price among shares of such classes of capital stock.
(b) No Change in Aggregate Exercise Price. In the event of any
--------------------------------------
adjustment of the total number of shares of Common Stock purchasable upon the
exercise of Warrants pursuant to subsection (a) above, the aggregate Exercise
Price of each such Warrant shall remain unchanged, but the number of shares of
capital stock obtainable on exercise of each such Warrant shall be adjusted as
provided in subsection (a) above.
(c) Reorganization or Reclassification. In the event of a capital
-----------------------------------
reorganization or a reclassification of the Common Stock (except as provided in
subsection (a) above or subsection (e) below), each Registered Holder of a
Warrant, upon exercise of such Warrant, shall be entitled to receive at the same
aggregate Exercise Price, in substitution for the Common Stock to which such
Registered Holder would have become entitled upon exercise immediately prior to
such reorganization or reclassification, the shares or other securities or
property of the Company (or cash) that he would have been entitled to receive
upon such reorganization or reclassification if such Warrant had been exercised
immediately prior thereto; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a certified Board resolution filed with
the Warrant Agent) shall be made for the application of this Section 8 with
respect to the rights and interests thereafter of the Registered Holders of all
then outstanding Warrants (including but not limited to the allocation of the
Exercise Price among shares of classes of capital stock), to the end that this
Section 8 (including the adjustments of the number of shares of Common Stock or
other securities purchasable and the Exercise Price thereof) shall thereafter be
reflected, as nearly as reasonably practicable, in all subsequent exercises of
the Warrants for any shares or securities or other property (or cash) thereafter
deliverable upon the exercise of the Warrants.
(d) Certificate of Adjustment. Whenever the number of shares of
--------------------------
Common Stock or other securities purchasable upon exercise of a Warrant is
adjusted as provided in this Section 8, the Company will promptly file with the
Warrant Agent a certificate signed by a Chairman or Vice-Chairman of the Board
or the President or a Vice President of the Company and by the Chief Financial
Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company setting forth the number and kind of securities or
other property purchasable upon exercise of a Warrant, as so adjusted, stating
that such adjustments in the number or kind of shares or other securities or
property conform to the requirements of this Section 8, and setting forth a
brief statement of the facts accounting for such adjustments. Promptly after
receipt of such certificate, the Company, or the Warrant Agent at the Company's
request, will deliver, by first-class mail, postage pre-paid, a brief summary
thereof (to be supplied by the Company) to all Registered Holders of the
outstanding Warrant Certificates; provided, however, that failure to file or to
give any notice required under this subsection, or any defect therein, shall not
affect the legality or validity of any such adjustments under this Section 8;
and provided, further, that, where appropriate, such notice may be given in
advance and included as part of the notice required to be given pursuant to
Section 12
11
hereof.
(e) Merger or Consolidation. In case of any consolidation of the
------------------------
Company with, or merger of the Company into another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety in a transaction involving as an element thereof the distribution of
the consideration received by the Company therefrom, the corporation formed by
such consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Warrant Agent a
supplemental warrant agreement provided that the Registered Holder of each
Warrant then outstanding shall have the right thereafter (until the expiration
of such Warrant) to receive, upon exercise of such Warrant, solely the kind and
amount of shares of stock and other securities and property (or cash) receivable
upon such consolidation, merger sale or transfer by a holder of the number of
shares of Common Stock of the Company for which such Warrant could have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided in this
Section 8. The above provision of this Subsection 8(f) shall similarly apply to
successive consolidations, mergers, sales or transfers.
(f) Effect of Adjustments on Warrant Certificates. Irrespective
----------------------------------------------
of any adjustments in the number or kind of shares issuable upon exercise of
Warrants, Warrant Certificates theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrant Certificates initially issuable pursuant to this Warrant Agreement.
(g) Assistance of Accounting Firm in Making Computations. The
-----------------------------------------------------
Company may retain a firm of independent public accountants of recognized
standing, which may be the accountants regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board, and not disapproved by the Warrant Agent, to make any computation
required under this Section 8, and a certificate signed by such firm shall, in
the absence of fraud or gross negligence, be conclusive evidence of the
correctness of any computation made under this Section.
(h) "Common Stock". The term "Common Stock" shall mean (i) the
---------------
class of stock designated as Common Stock in the Certificate of Incorporation of
the Company, as amended, at the date of this Agreement; or (ii) any other class
of stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time as a
result of an adjustment made pursuant to this Section 8, the Registered Holder
of any Warrant thereafter surrendered for exercise shall become entitled to
receive any shares of capital stock of the Company other than shares of Common
Stock, thereafter the number of such other shares obtainable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 8, and all other provisions of this
Agreement, with respect to the Common Stock, shall apply on like terms to any
such other shares.
12
9. Redemption.
-----------
(a) Commencing on the Initial Warrant Redemption Date, the
Company may, on thirty (30) days' prior written notice, redeem all, but not less
than all, the Warrants at ten cents ($.10) per Warrant, provided, however, that
before any such call for redemption of Warrants can take place, the last closing
sale price for the Common Stock as reported by Nasdaq, (or the last closing sale
price, if the Common Stock is then traded on the Nasdaq National Market or on a
national securities exchange) shall have equaled or exceeded $8.50 per share
(250% of the initial public offering price per share of Common Stock which
assumes, for purposes of this Agreement that the initial public offering price
per share of Common Stock is $3.40 per share) (subject to adjustment in the
event of any stock splits or other similar events as provided in Section 8
hereof) for at least twenty (20) consecutive trading days ending on the third
day prior to the date on which the notice contemplated by (b) and (c) below is
given.
(b) In case the Company shall exercise its right to redeem all of
the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants by mailing to such Registered Holders a notice of
redemption, first-class mail, postage pre-paid, at their last address as shall
appear on the records of the Warrant Agent. Any notice mailed in the manner
provide herein shall be conclusively presumed to have been duly given whether or
not the Registered Holder receives such notice. Not less than five (5) business
days prior to the mailing to the Registered Holders of the notice of redemption,
the Company shall deliver or cause to be delivered to the Underwriter a similar
notice telephonically and confirmed in writing, and if the Underwriter is
engaged as the Warrant solicitation agent, the Company shall also cause to be
delivered to the Underwriter a list of the Registered Holders (including their
respective addresses and number of Warrants beneficially owned) to whom such
notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the Redemption Date, which shall in no event be less than thirty
(30) days after the date of mailing of such notice, (iii) the place where the
Warrant Certificate shall be delivered and the redemption price shall be paid,
(iv) that the Underwriter shall receive the commission contemplated by Section
4(b) hereof; and (v) that the right to exercise the Warrant shall terminate at
5:00 p.m. (New York time) on the business day immediately preceding the date
fixed for redemption. 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 holder (a) to whom notice was not mailed; or (b) whose
notice was defective. An affidavit of the Warrant Agent or the Secretary or
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 Warrant shall terminate at 5:00 p.m.
(New York time) on the business day immediately preceding the Redemption Date.
The redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) If the Underwriter acts as the Warrant solicitation agent for
the Company, the Company shall indemnify the Underwriter and each person, if
any, who controls the
13
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from the registration statement or prospectus
referred to in Section 5(b) hereof to the same extent and with the same effect
(including the provisions regarding contribution) as the provisions pursuant to
which the Company has agreed to indemnify the Underwriter contained in Section 7
of the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the Company
shall furnish to the Underwriter, as the Warrant solicitation agent, (i) an
opinion of counsel to the Company, dated such date and addressed to the
Underwriter; and (ii) a "cold comfort" letter dated such date addressed to the
Underwriter, signed by the independent public accountants who have issued a
report on the Company's financial statements included in such registration
statement, or if different, the Company's regular outside accountants at such
time, in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(g) On and after the date fixed for redemption, the Registered
Holders shall have no rights with respect to the Warrants except to receive the
$.10 per Warrant upon surrender of their Warrant Certificates.
10. Concerning the Warrant Agent.
----------------------------
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the Underwriter, 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 or value or authorization
of the Warrant Certificates (except its countersignature thereof) or the
Warrants represented thereby or of any securities or other property delivered
upon exercise of any Warrant or whether any stock issued upon exercise of any
Warrant is fully paid and nonassessable.
(b) 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 Exercise Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustments,
when made, or with respect to the method employed in making the same (except
with respect to the exercise of Warrant Certificates after actual notice of any
adjustment of the Exercise Price). The Warrant Agent shall not (i) be liable for
any recital or statement of fact 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 (except its
countersignature on the Warrant Certificates and such statements or recitals as
describe the Warrant Agent or action taken or to be
14
taken by it); (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, bad faith or
willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or for the Underwriter)
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.
(d) 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 of Directors, Chief Executive Officer, Chief
Financial Officer, President or any Vice President (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
reasonably believed by it to be genuine.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and save it harmless from and against any and all losses, expenses and
liabilities, including judgments, costs and 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, bad faith or willful conduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities resulting
as a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving thirty (30) days' prior written notice to the Company. At least
fifteen (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 Holder 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 in writing a new warrant agent. 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 a 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.
15
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.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation 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 Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any
of its or their officers or directors, may buy and hold or sell 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 effect as though it were 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.
(i) The Warrant Agent shall retain for a period of two (2) years
from the date of exercise, any Warrant Certificate received by it upon such
exercise.
(j) The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all moneys
received by the Warrant Agent for the purchase of securities or other property
through-the exercise of such Warrants.
11. Modification of Agreement.
-------------------------
The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement (i) that they shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained; or (ii) that they may deem necessary
or desirable and which 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 representing not less than 66-2/3%
of the Warrants then outstanding; provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
or to increase the Exercise Price therefor or to accelerate the Warrant
Expiration Date shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are presenting specifically prescribed by this Agreement as
originally executed. In addition, this Agreement may not be modified, amended or
supplemented without the prior written consent of the Underwriter, other than to
cure any ambiguity or to correct any provision which is inconsistent with any
other provision of this Agreement or to make any such change that is necessary
or desirable and which shall not adversely affect the interests of the
Underwriter and except as may be required by law.
16
12. 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 first-
class registered or certified mail, postage prepaid, as follows: if to the
Registered Holder of a Warrant Certificate, at the last address of such holder
as shown on the registry books maintained by the Warrant Agent; if to the
Company at 0000 Xxxxxxxx Xxx., Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000 Attention:
CEO, or at such other address as may have been furnished to the Warrant Agent in
writing by the Company; and if to the Warrant Agent, at 0 Xxxxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000. Copies of any notice delivered pursuant to this Agreement
shall also be delivered to Xxxxxx Xxxxxx Securities, Inc., 0000 Xxxxxxxxxxx
Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, Attention: General Counsel, or at such other
address as any such party may have been furnished to the Company and the Warrant
Agent in writing.
13. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the state of New York without reference to conflicts of laws or choice
of law principles.
14. Binding Effect.
---------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Underwriter, the Warrant Agent and their respective successors and
assigns and the Registered Holders from time to time of Warrant Certificates or
any of them. Nothing in this Agreement is intended or 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.
15. Termination.
-----------
This Agreement shall terminate at the close of business on the Expiration
Date of all of the Warrants or such earlier date upon which all Warrants have
been exercised or redeemed, except that the Warrant Agent shall account to the
Company for all Warrants outstanding and all cash held by it and the provisions
of Section 10 hereof shall survive such termination.
16. Counterparts.
-------------
This Agreement may be executed in several counterparts each of which shall
be an original, but all of which taken together shall constitute a single
instrument.
17. Holders of Warrants Not Deemed Shareholders. No holder of a
--------------------------------------------
Warrant, as such, shall be entitled to vote, receive dividends or be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Warrants represented thereby for any
purpose whatever, nor shall anything contained herein or in any Warrant
Certificate be construed to confer upon any holder of a Warrant, as such, any of
the rights of a
17
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance or otherwise), or to
receive notice of meetings or other actions affecting shareholders, or to
receive dividend or subscription rights, or otherwise, until such Warrant shall
have been exercised in accordance with the provisions hereof, including the
receipt by the Company of the Exercise Price and any other amounts payable upon
such exercise to the Warrant Agent.
18. Benefits of this Agreement. Nothing in this Agreement or in the
---------------------------
Warrant Certificates shall be construed to give to any person or corporation
other than the Company, the Underwriter, the Warrant Agent, and their respective
successors and assigns hereunder and the Registered Holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Underwriter, the Warrant Agent, their respective successors and assigns
hereunder and the Registered Holders of the Warrant Certificates.
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the first date first above written.
ATTEST: ISONICS CORPORATION
By:____________________________ By:___________________________
Name: _________________________ Name: Xxxxx X. Xxxxxxxxx
Title: ________________________ Title: President and Chief
Executive Officer
ATTEST: CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:____________________________ By:___________________________
Name: _________________________ Name: ________________________
Title: ________________________ Title: _______________________
XXXXXX XXXXXX SECURITIES, INC.
By:___________________________
Name: Xxxxxxx Xxxxxxxx
Title: Director Corporate Finance
19
Exhibit A
No. W______ VOID AFTER _________, 2001
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
ISONICS CORPORATION
CUSIP # 464895 11 9
----------
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or its registered assigns (the "Registered Holder") is the owner of the number
of Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, no par value
per share, of Isonics Corporation, a California corporation (the "Company"), at
any time commencing one year after the date of the Prospectus (the "Initial
Warrant Exercise Date"), and the earlier to occur of the Expiration Date (as
hereinafter defined) and the Redemption 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 Continental
Stock Transfer & Trust Company, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $4.00 per share, subject to adjustment (the
"Exercise Price"), in lawful money of the United States of America in cash or by
check made payable to the Warrant Agent for the account of the Company.
This Warrant Certificate and each 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 September __,
1997, by and between the Company, Xxxxxx Xxxxxx Securities, Inc. (the
"Underwriter") and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof
EXH. A-1
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 Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on (i) the
date which is three (3) years after the Initial Warrant Exercise Date; or (ii)
the date fixed for redemption hereof, whichever date is earlier. If each such
date shall in the State of New York be a holiday or a day on which the 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 neither a holiday
nor a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, use
its best efforts to keep such registration statement current, if required under
the Act, while any of the Warrants are outstanding, and deliver a prospectus
which complies with Section 10(a)(3) of the Act to the Registered Holder
exercising this Warrant; provided however, that (i) if at the time of exercise
of any of the Warrants, the Company does not have in place an effective
registration statement or is otherwise, in the good faith determination of the
Board of Directors of the-Company, precluded by applicable laws from issuing the
shares of Common Stock issuable upon such exercise, the Company may, in lieu of
issuance of those shares, elect to redeem the Warrants duly surrendered for
exercise for a price per Warrant equal to the difference between the Market
Price (as defined below) of a share of Common Stock on the date of such
submission and the Exercise Price, and in the event of such redemption, the
Company will pay to the Registered Holder the above-described redemption price
in cash within ten (10) business days after receipt of notice from the Warrant
Agent that such Warrants have been submitted for exercise; and (ii) if the
Market Price of the Common Stock is less than the Exercise Price, then the
Company need not take such actions to file a registration statement (or a post-
effective amendment to a registration statement) with respect to the issuance of
Common Stock upon exercise of the Warrants until such time as the Company has
been subject to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934, as amended, for a period of at least twelve calendar
months immediately preceding the filing of the registration statement. This
Warrant shall not be exercisable by a Registered Holder in any state where such
exercise would be unlawful.
The term "Market Price" shall mean (i) the last reported sale price on the
date of the event to which such market price relates, or, in case no such
reported sale takes place on such day, the average of the last reported sales
prices for the last three (3) trading days before such date, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or by the Nasdaq National Market or the
Nasdaq SmallCap Market, (ii) if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted by Nasdaq National Market
or the Nasdaq SmallCap Market, the average closing bid price as furnished by the
Nasdaq Quotation Bureau, Inc. or similar organization if the Nasdaq Quotation
Bureau, Inc. is no longer reporting such information, or (iii) if the Common
Stock is neither admitted to trading on a national securities exchange nor
quoted on the Nasdaq National Market nor the Nasdaq
EXH. A-2
SmallCap Market, nor quoted by over-the-counter trading, then as determined in
good faith (using customary valuation methods) by the Board of Directors of the
Company which determination shall be evidenced by a resolution of the Board of
Directors and based on the best information available to it.
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 Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of 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 Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a shareholder 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 the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time eighteen (18) months after the date of the Prospectus,
provided that the last closing sale price for the Common Stock as reported by
the Nasdaq SmallCap Market, if the Common Stock is then traded on the Nasdaq
SmallCap Market (or the last closing sale price, if the Common Stock is then
traded on the Nasdaq National Market or a national securities exchange), shall
have equaled or exceeded $8.50 (250% of the initial public offering price) per
share for at least twenty (20) consecutive trading days ending on the third day
prior to the date on which the Notice of Redemption, as defined below, is given
(subject to adjustment in the event of any stock splits or other similar
events). Notice of redemption (the "Notice of Redemption") shall be given not
later than the thirtieth (30th) day before the date fixed for redemption, or 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 Warrants except
to receive the $.10 per Warrant upon surrender of this Warrant Certificate.
Upon certain circumstances, the Underwriter may be entitled to receive an
aggregate of five percent (5%) of the Exercise Price of the Warrants represented
hereby.
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 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 the
Company's right so to treat the Registered Holder shall not be affected by any
notice to the contrary, except as provided in the Warrant Agreement.
EXH. A-3
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of California without reference to conflict of laws
or choice of law principles.
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.
Dated:
[SEAL] ISONICS CORPORATION
By:___________________________
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
By:___________________________
Name: Xxxx X. Xxxxxx
Title: Secretary
COUNTERSIGNED:
_____________________
as Warrant Agent
By:
Authorized Officer
EXH. A-4
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such 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 Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
EXH. A-5
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign 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 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: ______________
__________________________________
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. THE SIGNATURE(S)
MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
XXX. X-0
