Exhibit (10.2)
EXHIBIT A-1
to Securities Purchase Agreement
VOID AFTER 5:00 P.M. BELTSVILLE, MARYLAND
TIME ON DECEMBER 12, 2000
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED
OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIRMETNS OF THOSE LAWS.
Right to Purchase 375,000 Shares of
Common Stock, par value $.005 per share
Date: December 12, 1997
BIOSPHERICS INCORPORATED
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC International Investors,
LDC, or its registered assigns, is entitled to purchase from Biospherics
Incorporated, a Delaware corporation (the "Company"), at any time or from
time to time during the period specified in Section 2 hereof, 375,000 fully
paid and nonassessable shares of the Company's common stock, par value $.005
per share (the "Common Stock"), at an exercise price of $4.00 per share (the
"Exercise Price"). This Warrant is being issued pursuant to that certain
Securities Purchase Agreement dated December 12, 1997 between the Company and
the signatories thereto (the "Securities Purchase Agreement"). The number of
shares of Common Stock purchaseable hereunder (the "Warrant Shares") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "Warrants" means this Warrant and the other warrants of the Company
issued pursuant to the terms of the Securities Purchase Agreement.
The term "Closing Price" means, for any security as of any date, the
last reported sale price of such security on the principal securities
exchange or trading market where such security is listed or traded as
reported by Bloomberg Financial Markets or a comparable reporting service of
national reputation selected by the Company and reasonably acceptable to the
holder hereof (the "Holder") if Bloomberg Financial Markets is not then
reporting sale prices of such security (collectively, "Bloomberg"), or if the
foregoing does not apply, the last reported sale price of such security in
the over-the-counter market on the electronic bulletin board of such security
as reported by Bloomberg, or, if no sale price is reported for such security
by Bloomberg, the average of the bid prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Price cannot be calculated for such
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security on such date on any of the foregoing bases, the Closing Price of
such security on such date shall be the fair market value as reasonably
determined by an investment bank firm selected by the Company and reasonably
acceptable to the Holder with the costs of such appraisal to be borne by the
Company.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Mechanics of Exercise. Subject to the provisions hereof,
including, without limitation, the limitations contained in Section 7(f)
hereof, this Warrant may be exercised as follows:
(a) Manner of Exercise. This Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant (or evidence of loss,
theft, destruction or mutilation thereof in accordance with Section 11(e)
hereof), together with a completed exercise agreement in the Form of Exercise
Agreement attached hereto as Exhibit 1 (the "Exercise Agreement"), to the
Company at the Company's principal executive offices (or such other office or
agency of the Company as it may designate by notice to the Holder), and upon
(i) payment to the Company in cash, by certified or official bank check or by
wire transfer for the account of the Company, of the Exercise Price for the
Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act, delivery to the
Company of a written notice of an election to effect a Cashless Exercise (as
defined in Section 11(c) below) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the Holder or Holder's designees, as the record owner of such
shares, as of the date on which this Warrant shall have been surrendered, the
contemplated Exercise Agreement shall have been delivered, and payment (or
notice of an election to effect a Cashless Exercise) shall have been made for
such shares as set forth above.
(b) Issuance of Certificates. Subject to Section 1(c), certificates
for the Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to the Holder
within a reasonable time, not exceeding three (3) business days, after this
Warrant shall have been so exercised (the "Delivery Period"). The
certificates so delivered shall be in such denominations as may be requested
by the Holder and shall be registered in the name of Holder or such other
name as shall be designated by such Holder. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver
to the Holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised.
(c) Exercise Disputes. In the case of any dispute with respect to an
exercise, the Company shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with this Section. If such dispute
involves the calculation of the Exercise Price, the Company shall submit the
disputed calculations to a "Big Six" independent accounting firm (selected by
the Company) via facsimile within three (3) business days of receipt of the
Exercise Agreement. The accounting firm shall review the calculations and
notify the Company and the converting Holder of the results no later than two
(2) business days from the date it receives the disputed calculations. The
accounting firm's calculation shall be deemed conclusive, absent
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manifest error. The Company shall then issue the appropriate number of
shares of Common Stock in accordance with this Section.
(d) Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Exercise Price of a
share of Common Stock (as determined for exercise of this Warrant into whole
shares of Common Stock); provided that in the event that sufficient funds are
not legally available for the payment of such cash adjustment any fractional
shares of Common Stock shall be rounded up to the next whole number.
(e) Buy-In. If (i) the Company fails for any reason to deliver during
the Delivery Period shares of Common Stock to Holder upon an exercise of this
Warrant and (ii) after the applicable Delivery Period with respect to such an
exercise, Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to make delivery upon a sale by Holder of the shares
of Common Stock (the "Sold Shares") which Holder was entitled to receive upon
such exercise (a "Buy-in"), the Company shall pay Holder (in addition to any
other remedies available to Holder) the amount by which (x) Holder's total
purchase price (including brokerage commission, if any) for the shares of
Common Stock so purchased exceeds (y) the lesser of (A) the Exercise Price or
(B) the net proceeds received by Holder from the sale of the Sold Shares.
Holder shall provide the Company written notification indicating any amounts
payable to Holder pursuant to this subsection.
2. Period of Exercise. This Warrant is exercisable at any time or
from time to time on or after the date hereof and before 5:00 P.M.,
Beltsville, Maryland, time on the third (3rd) anniversary of the date hereof
(the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock
to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon the NASDAQ
National Market ("NASDAQ") as required by Section 4.9 of the Securities
Purchase Agreement and upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
or become listed and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant so long as any
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shares of the same class shall be listed on such national securities exchange
or automated quotations system.
(d) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in carrying out of all the provisions of this Warrant and
in the taking of all such actions as may reasonably by requested by the
Holder of this Warrant in order to protect the exercise privilege of the
Holder of this Warrant, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and
(ii) will take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from
time to time as provided in this Section 4. In the event that any adjustment
of the Exercise Price as required herein results in a fraction of a cent,
such Exercise Price shall be rounded up or down to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. Except as otherwise provided in Section 4(c) and 4(e) hereof,
if and whenever after the initial issuance of this Warrant, the Company
issues or sells, or in accordance with Section 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as herein defined) on the
date of issuance (a "Dilutive Issuance"), then effective immediately upon the
Dilutive Issuance, the Exercise Price will be adjusted in accordance with the
following formula:
E' = E x O + P/M
-------
CSDO
where
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price;
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as herein defined) immediately after the
Dilutive Issuance.
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(b) Effect of Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities"), but not to include the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee or
Director benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by
majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee directors
established for such purpose (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options"), and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance ("Below Market Options"),then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full exercise, conversion or exchange of Convertible Securities, if
applicable) will, as of the date of the issuance or grant of such Below
Market Options, be deemed to be outstanding and to have been issued and sold
by the Company for such price per share. For purposes of the preceding
sentence, the price per share for which Common Stock is issuable upon the
exercise of such Below Market Options is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for
the issuance or granting of such Below Market Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Below Market Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable
upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Below Market Options or upon the exercise, conversion or
exchange of Convertible Securities issuable upon exercise of such Below
Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is
less than the Market Price on the date of issuance, then the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date of issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
the preceding sentence, the price per share for which Common Stock is
issuable upon such exercise, conversion or exchange is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
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payable to the Company upon the exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable, onvertible or
exchangeable, by (ii) the maximum total number of share of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made upon
the actual issuances of such Common Stock upon exercise, conversion or
exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
assuming that (1) all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied, and (2) the
Market Price on the date of issuance of such Convertible Security was 80% of
the Market Price on such date (the "Assumed Variable Market Price").
(iii) Change in Option Price or Conversion Rate. Except for the
grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee or Director benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee
of non-employee directors established for such purpose, if there is a change
at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion
or exchange or any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for
such changed additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Options or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights
to exercise such option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Options or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of
shares of Common Stock issued upon exercise or conversion thereof), never
been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor the purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with such issuance,
grant or sale. In case any
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Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration except where such consideration consists
of freely-tradeable securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration therefor will be
deemed to be the fair market value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair
market value of any consideration other than cash or securities will be
determined in the good faith reasonable business judgment of the Board of
Directors.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the date hereof
in accordance with the terms of such securities as of such date; (ii) upon
the grant or exercise of any stock or options which may hereafter be granted
or exercised under any employee or Director benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee
of non-employee directors established for such purpose; (iii) upon the
issuance of the Common Shares (as defined in the Securities Purchase
Agreement) or Warrants in accordance with terms of the Securities Purchase
Agreement; or (iv) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company, at any
time after the initial issuance of this Warrant, subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassifications or
otherwise) its shares of Common Stock into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price
in effect immediately prior to such subdivision will be proportionately
reduced. If the Company, at any time after the initial issuance of this
Warrant, combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a smaller
number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
(e) Major Transactions. If the Company shall consolidate with or merge
into any corporation or sell or convey all or substantially all of its assets
or reclassify its outstanding shares of Common Stock (other than by way of
subdivision, or in case of any sale or conveyance of all or substantially all
of the assets of the Company other than in connection with a plan of complete
liquidation of the Company, or reduction of such shares) (each a "Major
Transaction"),
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then each holder of a Warrant shall thereafter be entitled to receive
consideration, in exchange for such Warrant, equal to the greater of, as
determined in the sole discretion of such older: (i) a warrant to purchase
(at the same aggregate exercise price and on the same terms and conditions as
the Warrant surrendered) the number of shares of stock or securities or
property of the Company, or of the entity resulting from such consolidation
or merge (the "Major Transaction Consideration"), to which a holder of the
number of shares of Common Stock delivered upon exercise of such Warrant
would have been entitled upon such Major Transaction had the holder of such
Warrant exercised (without regard to any limitations on exercise herein
contained) the Warrant on the trading date immediately preceding the public
announcement of the transaction resulting in such Major Transaction and had
such Common Stock been issued and outstanding and had such holder been the
holder of record of such Common Stock at the time of such Major Transaction,
and the Company shall make lawful provision therefor as part of such
consolidation, merger, sale, conveyance or reclassification; and (ii) cash
paid by the Company in immediately available funds, in an amount equal to the
Black-Scholes Amount (as defined herein) times the number of shares of Common
Stock for which this Warrant was exercisable (without regard to any
limitations on exercise herein contained) on the date immediately preceding
the date of such Major Transaction. No sooner than ten (10) days nor later
than five (5) days prior to the consummation of the Major Transaction, but
not prior to the public announcement of such Major Transaction, the Company
shall deliver written notice ("Notice of Major Transaction") to each holder
of Warrants, which Notice of Major Transaction shall be deemed to have been
delivered one (1) business day following the Company's sending such notice by
telecopy (provided that the Company sends a confirming copy of such notice on
the same day by overnight courier) of such Notice of Major Transaction. Such
Notice of Major Transaction shall indicate the amount and type of the Major
Transaction Consideration which such holder would receive under clause (i) of
this paragraph (e). If the Major Transaction Consideration does not consist
entirely of United States currency, such holder may elect to receive United
States currency in an amount equal to the value of the Major Transaction
Consideration in lieu of the Major Transaction Consideration by delivering
notice of such election to the Company within five (5) days of the holder's
receipt of the Notice of Major Transaction. The Company will not effect any
Major Transaction unless prior to the consummation thereof, the successor
corporation (if other than the Company) assumes by written instrument the
obligations under this Section 4 and the obligations to deliver to the Holder
of this Warrant such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Holder may be entitled to acquire.
The "Black-Scholes Amount" shall be an amount determined by calculating
the "Black-Scholes" value of an option to purchase one share of Common Stock
on the applicable page on the Bloomberg online page, using the following
variable values: (i) the current market price of the Common Stock equal to
the closing trade price on the last trading day before the date of the Notice
of the Major Transaction; (ii) volatility of the Common Stock equal to the
volatility of the Common Stock during the 100 trading day period preceding
the date of the Notice of the Major Transaction; (iii) a risk free rate equal
to the interest rate on the United States treasury bill or treasury note with
a maturity corresponding to the remaining term of this Warrant on the date of
the Notice of the Major Transaction; and (iv) an exercise price equal to the
Exercise Price on the date of the Notice of the Major Transaction. In the
event such calculation function is no longer available utilizing the
Bloomberg online page, the Holder shall calculate such amount in its sole
discretion using the closest available alternative mechanism and variable
values to those available utilizing the Bloomberg online page for such
calculation function.
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(f) Distribution of Assets. In case the Company shall declare or make
any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock
of a subsidiary) (a "Distribution"), at any time after the initial issuance
of this Warrant, then the Holder shall be entitled upon exercise of this
Warrant for the purchase of any or all shares of Common Stock subject hereto,
to receive the amount of such assets (or rights) which would have been
payable to the Holder has such Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
(g) Notices of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the Holder, which notice shall state
the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchaseable at such price upon
exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than 1% of
such Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock; provided that in the event that sufficient funds are
not legally available for the payment of such cash adjustment any fractional
shares of Common Stock shall be founded up to the next whole number.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution to the
holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
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(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) the notice
of the date on which the books of the Company shall close or a record shall
be taken for determining the holders of Common Stock entitled to receive any
such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall
be entitled to receive such dividend, distribution, or subscription rights or
to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be.
Such notice shall be given at least 30 days prior to the record date or the
date on which the Company's books are closed in respect thereto, but in no
event earlier than public announcement of such proposed transaction or event.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii), and (iv)
above.
(k) Certain Events. If any event occurs of the type contemplated by
the adjustment provision of this Section 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of
the Holder shall neither be enhanced or diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in case of any
adjustment required by Section 4(a) resulting from the issuance of any
Options, the maximum total number of shares of Common Stock issuable upon the
exercise of the Options for which the adjustment is required (including any
Common Stock issuable upon the conversion of Convertible Securities issuable
upon the exercise of such Options), and (y) in the case of any adjustment
required by Section 4(a) resulting from the issuance of any Convertible
Securities, the maximum total number of shares of Common Stock issuable upon
the exercise, conversion or exchange of the Convertible Securities for which
the adjustment is required, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the
Closing Prices for the shares of Common Stock as reported to NASDAQ for the
five (5) trading days immediately preceding such date, or (ii) if the NASDAQ
is not the principal trading market for the Common Stock, the average of the
last reported sale prices on the principal trading market for the Common
Stock during the same period, or (iii) if market value cannot be calculated
as off such date on any of the foregoing bases, the Market Price shall be the
average fair market value
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as reasonably determined by an investment banking firm selected by the
Company and reasonable acceptable to the Holders of a majority in interest of
the Warrants, with the costs of the appraisal to be borne by the Company.
The manner of determining the Market Price of the Common Stock set forth in
the foregoing definition shall apply with respect to any other security in
respect of which a determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Section 4, includes the
Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchaseable pursuant to this Warrant shall include only Common Stock
in respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger or sale of the
character referred to in Section 4(d) hereof, the stock or other securities
or property provided for in such Section.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder or
such shares for any issuance tax or other costs in respect thereof, provided
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the Holder.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the Holder to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative
action by the Holder to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction of Transfer. This Warrant and the rights granted to
the Holder are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the Form of
Assignment attached hereto as Exhibit 2, at the office or agency of the
Company referred to in Section 7(e) below, provided, however, that any
transfer or assignment shall be subject to the provisions of Section 5.1 and
5.2 of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat
the registered holder hereof as the owner and holder hereof for all purposes,
and the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 8 hereof are assignable only in accordance with
the provisions of that certain Registration Rights Agreement, dated as of
December 12, 1997, by and among the Company and the other signatories thereto
(the "Registration Rights Agreement"). Upon exercise of this Warrant, the
Holder will make representations and warranties substantially equivalent to
the representations and warranties concerning investment intent contained in
Article II of the Securities Purchase Agreement; provided that any such
representations and warranties will not cover any investment intent which may
or may not exist with respect to the resale of the Common Stock upon a
registration pursuant to the Registration Rights Agreement. No transfer of
this Warrant to any investor who
11
is not an accredited investor will be permitted and each Holder agrees that
such Holder will remain an accredited investor.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the office or agency
of the Company referred to in Section 7(e) below, for new Warrants, in the
form hereof, of different denominations representing in the aggregate the
right to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the Holder of at the time of such
surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant or, in the case of any such loss, theft, or destruction, upon
delivery, of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of any such mutilation, upon surrender
and cancellation of this Warrant, the Company, at its expense, will execute
and deliver, in lieu thereof, a new Warrants, in the form hereof, in such
determinations as Holder may request.
(d) Cancellation: Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Section 7, this Warrant shall be promptly canceled by the Company.
The Company shall pay all issuance taxes (other than securities transfer
taxes) and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Section 7.
(e) Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Additional Restriction on Exercise or Transfer. Notwithstanding
anything to the contrary contained herein, the Warrants shall not be
exercisable by the Holder to the extent (but only to the extent) that, if
exercisable by Holder, Holder would beneficially own in excess of 9.9% (the
"Applicable Percentage") of the shares of Common Stock. To the extent the
above limitation applies, the determination of whether the Warrants shall be
exercisable (vis-a-vis other securities owned by Holder) and of which
Warrants shall be exercisable (as among Warrants) shall be in the sole
discretion of the Holder and submission of the Warrants for exercise shall be
deemed to be the Holder's determination of whether such Warrants are
exercisable (vis-a-vis other securities owned by Holder) and of which
warrants are exercisable (among Warrants), in each case subject to such
aggregate percentage limitation. No prior inability to exercise Warrants
pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination of
exercisability. For the purposes of this paragraph, beneficial ownership and
all determinations and calculations, including without limitation, with
respect to calculations of percentage ownership, shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and G thereunder. The provisions of this
paragraph may be waived and/or implemented in a manner otherwise than
strictly in conformity with the foregoing provisions of
12
this paragraph (i) with the approval of the Board of Directors of the Company
and the Holders: (i) with respect to any matter to cure any ambiguity
herein, to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Applicable Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Applicable Percentage
limitation; and (ii) with respect to any other matter, with the further
consent of the holders of a majority of the then outstanding shares of Common
Stock. In addition, the provisions of this paragraph (i) may be waived by
Holder upon ninety (90) days prior written notice from Holder to the Company.
The limitations contained in this paragraph shall apply to a successor holder
of Warrants if, and to the extent, elected by such successor holder
concurrently with its acquisition of such Warrants, such election to be
promptly confirmed in writing to the Company (provided no transfer or series
of transfer to a successor holder or holders shall be used by a Holder to
evade the limitations contained in this paragraph).
8. Registration Rights. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement.
9. Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier (including
a recognized overnight delivery service) or by confirmed telecopy, and shall
be deemed delivered at the time and date of receipt (which shall include
telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company:
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, MD 20705
Telecopy: 301-210-4908
Attention: Dr. Gilbert V. Levin
with a copy to:
Smith, Somerville & Case, L.L.C.
Attorneys At Law
100 Light Street
Baltimore, MD 21202
Telecopy: 410-385-8060
Attention: James Baker, Esq.
and if to the Holder, at such address as Holder shall have provided in
writing to the Company, or at such other address as each party furnishes by
notice given in accordance with this Section 9.
11. Governing Law: Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the
13
United States federal courts located in the County of New Castle in the State
of Delaware in any suit or proceeding based on or arising under this Warrant
and irrevocably agrees that all claims in respect of such suit or proceeding
may be determined in such courts. The Company irrevocably waives the defense
of an inconvenient forum to the maintenance of such suit or proceeding. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the Holder.
(b) Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices
with a written notice of the Holder's intention to effect a cashless
exercise, including a calculation of the number of shares of Common Stock to
be issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the Holder shall surrender this Warrant for the
number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price, and the
denominator of which shall be such then current Market Price per share of
Common Stock.
(d) Assignability. This Warrant shall be binding upon the Company and
its successors and assigns and shall inure to the benefit of Holder and its
successors and assigns. The Holder shall notify the Company upon the
assignment of this Warrant.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BIOSPHERICS INCORPORATED
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of common stock of Biospherics Incorporated, a
Delaware corporation (the "Company"), evidenced by the attached Warrant, and
herewith makes payment of the Exercise Price with respect to such shares in
full or, if the resale of the Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under
the Securities Act of 1933, as amended, elects to effect a Cashless Exercise
pursuant to the terms of the Warrant, all in accordance with the conditions
and provisions of said Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercises of the Warrant, except
under circumstances that will not result in a violation of the Securities Act
of 1933, as amended, or any state securities laws.
(ii) The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder (or such other person or
persons indicated below) and delivered to the undersigned (or designee(s) at
the address (or addresses) set forth below:
Date:
------------------------ ----------------------------------
Signature of Holder
----------------------------------
Name of Holder (Print)
Address:
----------------------------------
----------------------------------
15
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth herein below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Date:
---------------------, -----------
In the presence of:
- ----------------------------------------
Name:
-------------------------------
Signature:
--------------------------
Title of Signing Officer or Agent (if any):
------------------------------------
Address:
----------------------------
------------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
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