WARRANT TO PURCHASE
SHARES OF COMMON STOCK
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
ATLANTIC PHARMACEUTICALS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
Void after August 16, 2001
THIS CERTIFIES THAT, for value received, Paramount Capital, Incorporated
("Holder") is entitled to purchase, on the terms hereof, Twelve Thousand Five
Hundred (12,500) shares of Common Stock (as adjusted pursuant to Section 4
hereof, the "Shares") of Atlantic Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, the term "Common Stock" shall mean the
Company's presently authorized Common Stock, par value $.001 per share, and any
stock into or for which such Common Stock may hereafter be converted or
exchanged. The term "Warrant" as used herein shall include this Warrant, and any
warrants delivered in substitution or exchange therefor as provided herein.
The following terms shall apply to this Warrant:
1. Term of Warrant. Subject to the terms and conditions set forth herein,
the term of this Warrant shall commence and this Warrant shall be exercisable
for the Shares, commencing on the date hereof and expiring at 5:00 p.m. Pacific
Standard Time on August 16, 2001.
2. Exercise Price; Number of Shares. The exercise price ("Exercise
Price") at which this Warrant may be exercised shall be Six Dollars and Seventy
Three Cents ($6.73), as adjusted from time to time pursuant to Section 4 hereof.
The number of shares of Common Stock for which this Warrant is initially
exercisable is Twelve Thousand Five Hundred (12,500) shares of Common Stock,
which number is subject to adjustment pursuant to Section 4 of this Warrant.
3. Exercise of Warrant. Subject to the terms of Section 1 hereof, the
purchase rights represented by this Warrant are exercisable by Holder during the
term hereof, in whole or in part and from time to time, by the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A duly
executed) at the principal office of the Company and by payment to the Company,
by check or wire transfer of an amount equal to the then applicable Exercise
Price multiplied by the number of Shares then being purchased. In the event of
any exercise of the rights represented by this Warrant, certificates for the
Shares so purchased shall be delivered to Holder hereof as soon as possible and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to Holder hereof
as soon as possible.
4. Certain Adjustments.
4.1. Adjustments for Splits, Subdivisions, Recapitalizations and other
Combinations. In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in the form of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, (iv) issue by reclassification
of its Common Stock other securities of the Company, or (v) take any other
action, the effect of which is to reclassify or reorganize the outstanding
shares of Common Stock into a different number of shares or class of securities,
the number of shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of shares or other securities of the Company which it would have
owned or would have been entitled to receive immediately after the happening of
any of the events described above, had the Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made with respect to this Section 4.1 shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Whenever the number of Shares purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Exercise Price
payable upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon the exercise of the
Warrant immediately prior to such adjustment, and of which the denominator shall
be the number of Warrant shares so purchasable immediately thereafter. Except as
provided above, no adjustment in respect of any dividends or distributions out
of earnings shall be made during the term of this Warrant or upon the exercise
of this Warrant.
4.2. Mergers, Consolidations or Sale of Assets. If at any time there shall
be a capital reorganization (other than a combination or subdivision of Shares
otherwise provided for herein), or a merger or consolidation of the Company with
or into another corporation, or the sale of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation or sale, lawful provision shall be
made so that the Holder shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified in this Warrant and upon payment of
the purchase price, the number of shares of stock or other securities or
property of the Company or the successor corporation resulting from such
reorganization, merger, consolidation or sale, to which a holder of Common Stock
deliverable upon exercise of this Warrant would have been entitled under the
provisions of the agreement in such reorganization, merger, consolidation or
sale if this Warrant had been exercised immediately before that reorganization,
merger, consolidation or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the reorganization, merger, consolidation or sale
to the end that the provisions of this Warrant (including adjustment of the
purchase price then in effect and the number of the Shares) shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant;
provided, however, that the aggregate purchase price shall not be adjusted.
4.3. Certificate as to Adjustments. In the case of each adjustment or
readjustment of the purchase price pursuant to this Section 4, the Company will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
to be delivered to the Holder of this Warrant. The Company will, upon the
written request at any time of the Holder of this Warrant, furnish or cause to
be furnished to such Holder a certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
2.
(c) The number of Shares and the amount, if any, of other property at the
time receivable upon the exercise of the Warrant.
5. Fractional Stock. No fractional shares shall be issued in connection
with any exercise of this Warrant. In lieu of the issuance of such fractional
share, the Company shall make a cash payment equal to the then fair market value
of such fractional share as determined in good faith by the Company's Board of
Directors.
6. Reservation of Common Stock. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the exercise of this Warrant, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the exercise of this Warrant.
7. Restrictions on Transfer.
Unless the issuance of the Shares has been registered under the Securities
Act of 1933, as amended (the "1933 Act"):
(a) this Warrant and any Shares may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except: (i) to a person who, in the
opinion of counsel to the Company, is a person to whom this Warrant or the
Shares may legally be transferred without registration and without the delivery
of a current prospectus under the 1933 Act with respect thereto and then only
against receipt of an agreement of such person to comply with the provisions of
this Section 6 with respect to any resale or other disposition of such
securities; or (ii) to any person upon the delivery of a prospectus then meeting
the requirements of the 1933 Act relating to such securities and the offering
thereof for such sale or disposition, and thereafter to all successive
assignees;
(b) upon exercise of any of the Warrants and the issuance of any of the
Shares, all certificates representing such shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with California
law, as well as any other legends necessary to comply with applicable state and
federal laws for the issuance of such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE
PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED
BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE
ON STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED, EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE
1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION; ONLY IF
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF ANY SUCH SECURITIES.
8. Rights as Stockholders; Information. Holder shall not be entitled to
vote or 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
hereof for any purpose, nor shall anything contained herein be construed
3.
to confer upon Holder 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
shareholders or at any meeting thereof, or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Shares purchasable upon the exercise hereof shall
have become deliverable, as provided herein.
9. Net Issuance.
(a) Right to Convert. In addition to and without limiting the rights of
the Holder under the terms of this Warrant, the Holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 9(a) at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the Holder (without payment by
the Holder of any exercise price or any cash or other consideration) that number
of shares of fully paid and nonassessable Common Stock equal to the quotient
obtained by dividing (x) the value of this Warrant (or the specified portion
hereof) on the Conversion Date (as defined in subsection (b) hereof), which
value shall be determined by subtracting (1) the aggregate Exercise Price of the
Converted Warrant Shares immediately prior to the exercise of the Conversion
Right from (2) the aggregate fair market value of the Converted Warrant Shares
issuable upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as herein defined) by (y) the fair market value of one share of
Common Stock on the Conversion Date (as herein defined). No fractional shares
shall be issuable upon exercise of the Conversion Right, and, if the number of
shares to be issued determined in accordance with the foregoing formula is other
than a whole number, the Company shall pay to the Holder an amount in cash equal
to the fair market value of the resulting fractional share on the Conversion
Date (as hereinafter defined). For purposes of Section 9 of this Warrant, shares
issued pursuant to the Conversion Right shall be treated as if they were issued
upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
Holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the Holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in subsection (a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"). Certificates for the shares issuable
upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the Holder within
thirty (30) days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section 9(c),
"fair market value" of a share of Common Stock or a Converted Warrant Share, as
the case may be, as of a particular date (the "Determination Date") shall mean:
(i) If traded on a securities exchange or on Nasdaq, the fair market
value of the Common Stock shall be deemed to be the closing price of the Common
Stock on such exchange on the business day prior to the Determination Date;
(ii) If traded over-the-counter, the fair market value of the Common
Stock shall be deemed to be the closing price of the Common Stock on the
business day prior to the Determination Date; and
4.
(iii) If there is no public market for the Common Stock, then fair
market value shall be determined by the Board of Directors of the Company;
provided, however, that if the Holder shall not agree with the fair market value
determined by the Board, the Company shall engage an investment banker of
national reputation (or such other party as shall be mutually acceptable to the
parties) to determine the fair market value. If the valuation of the investment
banker is less than the value determined the Board of Directors or does not
exceed such valuation by 10%, the expenses of the valuation shall be borne by
the Holder. If the valuation of the investment banker is greater than the value
determined by the Board of Directors by more than 10%, the expenses of such
valuation shall be borne by the Company.
10. Transfers and Exchanges. Subject to the terms and conditions of the
applicable Federal and state securities laws, this Warrant is transferable in
whole or in part by the Holder. All new warrants issued in connection with
transfers or exchanges shall be identical in form and provision to this Warrant
except as to the number of shares.
11. Successors and Assigns. The terms and provisions of this Warrant shall
be binding upon the Company and the Holder and their respective successors and
assigns.
12. Amendments. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the same is sought.
13. Letter Agreement. This Warrant is issued pursuant to the letter
agreement, dated as of April 15, 1996, between the Company and Holder.
14. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
15. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
5.
16. Governing Law. The terms and conditions of this Warrant shall be
governed by and construed in accordance with California law as such laws are
applied to agreements which are entered into solely between California residents
and are to be performed entirely within that state.
Dated: ___________________ ATLANTIC PHARMACEUTICALS, INC.
By:_____________________________________
Jon D. Lindjord
President and Chief Executive Officer
Dated: ___________________ PARAMOUNT CAPITAL, INCORPORATED
By:_____________________________________
Lindsay Rosenwald, M.D.
Chairman
6.
EXHIBIT A
NOTICE OF EXERCISE
To: Atlantic Pharmaceuticals, Inc.
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of Atlantic Pharmaceuticals, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
--------------------------------
(Name)
--------------------------------
--------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
HOLDER
By: ____________________________________
Its:____________________________________
Dated: __________________________