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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 12, 1997
BIOSPHERICS-Registered Trademark- INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 0-5576 52-0849320
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(Name or other jurisdiction (Commission File Number) (IRS Employer
of incorporation or organization) Identification No.)
12051 Indian Creek Court, Beltsville, Maryland 20705
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 301-419-3900
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Item 5. Other Events.
Biospherics Incorporated announced the completion of a $3 million private
offering of units consisting of shares of its common stock and warrants.
Wharton Capital, a New York-based financial consulting firm, helped
facilitate the transaction and received a cash fee of $150,000 and 40,000
units (each unit consisting of two shares of common stock and one warrant
exercisable at $4 per share). A copy of the definitive agreements between
the Registrant and the Investor and the press release issued by Biospherics
Incorporated are attached hereto as Exhibits to this Form 8-K.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(10.1) Securities Purchase Agreement, dated as of December 12, 1997,
by and between Biospherics Incorporated and RGC International
Investors, LDC (filed herewith).
(10.2) Exhibit A-1 to Securities Purchase Agreement - Form of Warrants
to be issued by Registrant (filed herewith).
(10.3) Exhibit A-2 to Securities Purchase Agreement - Form of Warrants
to be issued by Registrant (filed herewith).
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(10.4) Exhibit B to Securities Purchase Agreement - Registration Rights
Agreement, dated as of December 12, 1997, by and among Biospherics
Incorporated and RGC International Investors, LDC (filed herewith).
(99) Press Release dated December 17, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 18, 1997
Biospherics Incorporated
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(Registrant)
/s/ Jeffrey W. Church
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(Signature)
Name: Jeffrey W. Church
Title: Executive Vice President and
Chief Financial Officer
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Exhibit (10.1)
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 12, 1997, by and between Biospherics Incorporated, a Delaware
corporation (the "Company"), with headquarters located at 12051 Indian Creek
Court, Beltsville, Maryland, and the Purchaser (the "Purchaser") set forth on
the execution pages hereof, with regard to the following:
RECITALS
A. The Company and Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").
B. Purchaser desires to purchase, upon the terms and conditions stated
in this Agreement, (i) shares of the Company's Common Stock, par value $.005
per share (the "Common Stock") and (ii) warrants to purchase shares of Common
Stock in the forms attached hereto as Exhibits A-1 and A-2. The shares of
Common Stock being purchased hereunder are referred to herein as the "Common
Shares". The warrants being purchased hereunder are referred to herein as the
"Warrants". The shares of Common Stock issuable upon the exercise of or
otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares". The Common Shares, Warrants and Warrant Shares are collectively
referred to herein as the "Securities."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act, the rules and regulations
promulgated thereunder and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase of Common Stock and Warrants. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell, and Purchaser
shall purchase, Common Stock and Warrants as further contemplated hereby.
The purchase price for a unit consisting of two (2) shares of Common Stock
and two (2) Warrants, each Warrant to purchase one (1) share of
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Common Stock (subject to adjustment as provided in the Warrant) shall be
$8.00. Purchaser shall purchase the number of shares of Common Stock set
forth on the signature page executed by Purchaser. In addition, Purchaser
shall purchase Warrants to purchase the number of shares of Common Stock
(subject to adjustment as provided in the Warrants) set forth on the
signature page executed by Purchaser.
1.2 Form of Payment. Purchaser shall pay the aggregate Purchase Price
for the Common Shares and Warrants being purchased by Purchaser by wire
transfer to the Company, in accordance with the Company's written wiring
instructions, against delivery of duly executed Warrants and stock
certificates for the Common Shares, and the Company shall deliver such Common
Shares and Warrants against delivery of such aggregate Purchase Price.
1.3 Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Articles VI and VII below, the closing (the
"Closing") of the issuance, sale and purchase of the Securities pursuant to
this Agreement shall occur at 10:00 a.m. on December 12, 1997 (the "Closing
Date"), at the offices of Ballard, Spahr, Andrews & Ingersoll, 1735 Market
Street, 51st Floor, Philadelphia, PA 19103-7599.
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants, solely with respect to itself and its
purchase hereunder. No Purchaser makes any other representations or
warranties, express or implied, to the Company in connection with the
transactions contemplated hereby and any and all prior representations and
warranties, if any, which may have been made by Purchaser to the Company in
connection with the transactions contemplated hereby shall be deemed to have
been merged in this Agreement and any such prior representations and
warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Common Shares and
Warrants (collectively, the "Purchased Securities") for Purchaser's own
account for investment only and not with a present view toward or in
connection with the public sale or distribution thereof. Purchaser will not
resell the Purchased Securities or any securities which may be issued upon
exercise of the Warrants except pursuant to an effective registration
statement filed under the Securities Act or sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the
economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state securities
laws or an exemption from such Securities Act other than as contemplated by
the Registration Rights Agreement. By making the representations in this
Section 2.1, the Purchaser does not agree to hold the Securities for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption from registration under the Securities Act or
applicable state securities laws.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
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2.3. Reliance on Exemptions. Purchaser understands that the Purchased
Securities are being offered and sold to the Purchaser in reliance upon
specific exemptions from the registration requirements of the United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understanding of Purchaser set
forth herein in order to determine the availability of such exemptions and
the eligibility of Purchaser to acquire the Purchased Securities.
2.4 Information. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Purchased Securities
which have been specifically requested by Purchaser. Purchaser has been
afforded the opportunity to ask questions of the Company and has received
what Purchaser believes to be complete and satisfactory answers to any such
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by Purchaser or any of its representations shall modify, amend or
affect Purchaser's right to rely on the Company's representations and
warranties contained in Article III or the Officer's Certificate delivered
pursuant to Section 3.3. Purchaser understands that Purchaser's investment
in the Securities involves a high degree of risk.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government agency has passed upon or
made any recommendation or endorsement of the Securities or an investment
therein.
2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be transferred unless subsequently registered thereunder,
an exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof) or such Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 under the Securities Act (or a successor
rule) ("Rule 144")); (ii) any sale of such Securities made in reliance on Rule
144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities without
registration under the Securities Act under circumstances in which the seller
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Common Shares and Warrant Shares, and until such
time as the Common Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by Purchaser pursuant to Rule 144, the certificates for
the Common Shares and Warrant Shares will be a restrictive legend (the
"Legend") in the following form:
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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.
2.8 Authorization: Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and
delivered on behalf of Purchaser and are valid and binding agreements of
Purchaser enforceable against Purchaser in accordance with their terms.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereto executed by Purchaser.
2.10 Organization. Purchaser is duly organized, validity existing and in
good standing under the laws of the jurisdiction in which it is formed, and has
the requisite power and authority to own its properties and to carry on its
business as now being conducted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
3.1 Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized, validity existing and in good
standing under the laws of the jurisdiction in which it is incorporated, and
has the requisite corporate power and authority to own its properties and to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction where the failure to so qualify would
have a Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on either (i) the business, operations, properties,
financial condition, operating results or prospects of the Company and its
subsidiaries, taken as a whole on a consolidated basis or (ii) the
transactions contemplated hereby.
3.2 Authorization: Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement, and to issue and sell,
perform its obligations with respect to, the Purchased Securities in
accordance with the terms hereof and to issue the Warrant Shares in
accordance with the terms and conditions of the Warrants; (b) the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation
the issuance of the Purchased Securities and the reservation for issuance and
issuance of the Warrant Shares)
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have been duly authorized by all necessary corporate action and, except as
set forth on Schedule 3.2 hereof, no further consent or authorization of the
Company, its board of directors, or its stockholders or any other person,
body or agency is required with respect to any of the transactions
contemplated hereby or thereby (whether under rules of NASDAQ National Market
System ("NASDAQ"), the National Association of Securities Dealers or
otherwise); (c) this Agreement, the Registration Rights Agreement and the
Purchased Securities have been duly executed and delivered by the Company;
and (d) this Agreement, the Registration Rights Agreement and the Purchased
Securities constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Warrants) exercisable for, or
convertible into or exchangeable for any shares of Common Stock and the
number of shares to be initially reserved for issuance upon exercise of the
Warrants is set forth on Schedule 3.3. All of such outstanding shares of
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company (including the
Common Shares and the Warrant Shares) are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances. Except as disclosed in Schedule 3.3, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for,
any shares of capital stock of the Company or any of its subsidiaries or
contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its subsidiaries, (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement), and (iii) there
are no anti-dilutive or price adjustment provisions contained in any security
issued by the Company (or any agreement providing rights to security holders)
that will be triggered by the issuance of the Purchased Securities or Warrant
Shares. The Company has furnished to Purchaser true and correct copies of
the Company's Certificate of Incorporation as currently in effect
("Certificate of Incorporation"), and the Company's By-laws as currently in
effect (the "By-laws"). The Company has set forth on Schedule 3.3 all
instruments and agreements (other than the Certificate of Incorporation and
By-laws) governing securities convertible into or exercisable for Common
Stock of the Company (and the Company shall provide to Purchaser copies
thereof upon the request of Purchaser). The Company shall provide Purchaser
with a written update of this representation signed by the Company's Chief
Executive Officer on behalf of the Company as of the date of the Closing.
3.4 Issuance of Shares. The Common Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon consummation of the purchase
contemplated hereby (with respect to the Common Shares) and exercise of the
Warrants in accordance with the terms thereof (with respect to the Warrant
Shares), will be validly issued, fully paid and non-assessable, and
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free from all taxes, liens, claims and encumbrances and will not be subject
to the preemptive rights or other similar rights of stockholders of the
Company. The Common Shares are duly authorized and reserved for issuance, and
are validly issued, fully paid and nonassessable, and free from all taxes,
liens claims and encumbrances and are not and will not be subject to
preemptive rights or other similar rights of stockholders of the Company.
Accordingly, no further corporate authorization or approval is required under
the rules of the NASDAQ with respect to the transaction contemplated by this
Agreement, including, without limitation, the issuance of the Warrant Shares
and the inclusion thereof on the NASDAQ. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Common Shares and, upon exercise of the Warrants, the Warrant
Shares. The Company further acknowledges that its obligation to issue the
Common Shares and the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
and the consummation by the Company of transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Common Shares and Warrant Shares) will not
(a) result in a violation of the Certificate of Incorporation or By-laws, (b)
violate or conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration, or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party (except for such conflicts, defaults, terminations,
amendments, accelerations, and cancellations as would not, individually or in
the aggregate, have a Material Adverse Effect), or (c) result in a violation
of any law, rule, regulation, order, judgment or decree to the Company or any
of its subsidiaries, or by which any property or asset of the Company or any
of its subsidiaries, is bound or affected. Neither the Company nor any of
its subsidiaries is in violation of its Certificate of Incorporation, By-laws
or other organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice
or lapse of time or both) any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, except for possible defaults
or rights as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries are not
being conducted, and shall not be conducted so long as Purchaser owns any of
the Securities, in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal
except for possible violations the sanctions for which either singly or in
the aggregate would not have a Material Adverse Effect. Except as set forth
on Schedule 3.5, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Warrants or the Registration Rights Agreement or to perform
its obligations in accordance with the terms hereof or thereof. The Company
is not in violation of the listing requirements of NASDAQ and does not
reasonably anticipate that the Common Stock will be delisted by NASDAQ for
the foreseeable future. The Company and its subsidiaries are unaware of any
facts which might give rise to any of the foregoing.
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3.6 Registration and SEC Documents. The Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been so registered since 1969. Except as disclosed
in Schedule 3.6, since January 1, 1995, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed after December 31, 1993 and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being referred to herein as the
"SEC Documents"). The Company has delivered to Purchaser true and complete
copies of the SEC Documents, except for exhibits, schedules and incorporated
documents (the SEC documents filed prior to the date hereof being the "Filed
SEC Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statements of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the statements made in any such SEC
Documents is required to be updated or amended under applicable law. The
financial statements of the Company included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, and the rules and regulations of the SEC during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they do not include footnotes or are condensed or
summary statements) and present accurately and completely the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the Filed SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred subsequent to the date of such financial statements in
the ordinary course of business consistent with the past practice and (ii)
obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles
to be reflected in such financial statements, in each case of clause (i) and
(ii) next above which, individually and in the aggregate, are not material to
the financial condition, business, operations, properties, operating results
or prospects of the Company and its subsidiaries taken on a whole. The Filed
SEC Documents contain a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other
instruments to which the Company or any subsidiary is a party or by which the
Company or any subsidiary is bound or to which any of the properties or
assets of the Company or any subsidiary is subject (each a "Contract"). None
of the Company, its subsidiaries or, to the best knowledge of the Company,
any of the other parties thereto, is in breach or violation of any Contract,
which breach or violation would have a Material Adverse Effect. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, or the happening of any further event or condition, would
become a breach or default by the Company or its subsidiaries or, to the
Company's knowledge, by any other party under any Contract which breach or
default would have a Material Adverse Effect.
3.7 Absence of Certain Changes. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the
business, properties,
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operations, financial condition, results of operations or prospects of the
Company, except as disclosed in Schedule 3.7.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8, there
is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, governmental agency or authority, or self-regulatory
organization or body pending or, to the knowledge of the Company or any of
its subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or would adversely affect the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents. There are no facts which, if known
by a potential claimant or governmental agency or authority, could give rise
to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could have a Material
Adverse Effect.
3.9 Disclosure. No information relating to or concerning the Company
set forth in this Agreement or provided to Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. Except for the execution and performance of
this Agreement, no material fact (within the meaning of the federal
securities laws of the United States) exists with respect to the Company or
any of its subsidiaries which has not been publicly disclosed.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, that
this Agreement and the transaction contemplated hereby, and the relationship
between Purchaser and the Company, are "arms-length", and that any statement
made by Purchaser, or any of its representatives or agents, in connection
with the Agreement or the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to Purchaser's purchase of the
Securities and has not been relied upon in any way by the Company, its
officers, directors or other representatives. The Company further represents
to Purchaser that the Company's decision to enter into this Agreement and the
transactions contemplated hereby has been based solely on an independent
evaluation by the Company and its representatives.
3.11 Current Public Information. The Company currently meets the
"Registrant eligibility requirements" set forth in the general instructions to
Form S-3 under the Securities Act.
3.12 No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has conducted any "general solicitation," as
described in Rule 502(c) under Regulation D, with respect to any of the
Securities being offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any if its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would prevent the parties hereto
from consummating the transactions contemplated hereby pursuant to an
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exemption from registration under the Securities Act pursuant to the
provisions of Regulation D. The transactions contemplated hereby are exempt
from the registration requirements of the Securities Act, assuming the
accuracy of the representations and warranties herein contained of Purchaser
to the extend relevant for such determination. The issuance of the
Securities to the Purchaser will not be integrated with any other issuance of
the Company's Securities (past, present, or future) which requires
stockholder approval under the rules of the NASDAQ stock market.
3.14 No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments to Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Wharton Capital and Coppers &
Lybrand Securities LLP (the fees of which shall be paid in full by the
Company). The Company will indemnify Purchaser from and against any fees and
expenses sought or other claims made by Wharton Capital and Coppers & Lybrand
Securities LLP.
3.15 Acknowledgment of Terms and Nature of Securities. The Company's
executive officers and directors have studied and fully understand the terms
and nature of the securities being sold hereunder. The board of directors of
the Company has concluded in its good faith business judgment that such
issuance is in the best interests of the Company.
3.16 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of
its business as now being conducted and as previously described in the
Company's Annual Report on Form 10-KSB for its most recently ended fiscal
year. Neither the Company nor any subsidiary of the Company infringes on or
is in conflict with any right or any other person with respect to any
Intangibles nor is there any claim or infringement made by a third party
against or involving the Company or any of its subsidiaries, which
infringement, conflict or claim, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
3.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee. Without limiting the generality of
the foregoing, the Company and its subsidiaries have not directly or
indirectly made or agreed to make (whether or not said payment is lawful) any
payment to obtain, or with respect to, sales other than usual and regular
compensation to its or their employees and sales representatives with respect
to such sales.
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3.18 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in Schedule 3.18. No Key
Employee, to the best of the knowledge of the Company and its subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each Key Employee
does not subject the Company or any of its subsidiaries to any liability with
respect to any of the foregoing matters. No Key Employee has, to the best of
the knowledge of the Company and its subsidiaries, any intention to terminate
or limit his employment with, or services to, the Company or any of its
subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
limitation) which would cause such employee to be unable to devote his full
time and attention to such employment or services. "Key Employee" means each
of individuals listed on Schedule 3.18.
3.19 Certain Transactions. Except as set forth on Schedule 3.19 and
except for arm's length transactions pursuant to which the Company or any of
its Subsidiaries makes payments in the ordinary course of business upon terms
no less favorable than the Company or any of its Subsidiaries could obtain
from third parties and other than the grant of stock options disclosed on
Schedule 3.3, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
3.20 Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 Securities Laws. The Company agrees to file a Form D with respect
to the Securities with the SEC as required under Regulation D and to provide
a copy thereof to Purchaser within five (5) business days following the Date
of Closing. The Company agrees to file a Form 8-K disclosing this Agreement
and the transactions contemplated hereby with the SEC within five business
(5) days following the date of Closing. Such Form 8-K shall include
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this Agreement and the related transaction documents as exhibits thereto.
The Company shall, on or prior to the date of Closing, take such action as is
necessary to sell the Securities to Purchaser in accordance with applicable
securities laws of states of the United States, and shall provide evidence of
any such action so taken to Purchaser on or prior to the date of Closing.
Without limiting any of the Company's obligations under this Agreement, the
Registration Rights Agreement or the Warrants, from and after the date of
Closing, neither the Company nor any person acting on its behalf shall take
any action which would adversely affect any exemptions from registration
under the Securities Act with respect to the transactions contemplated hereby.
4.3 Reporting Status. For so long as the Purchaser owns any of the
Securities or three (3) years from the Closing Date, whichever is sooner, the
Company shall timely file all reports required to be filed with the SEC
pursuant to the Exchange Act, and the Company shall not terminate its status
as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. The Company will take all action necessary to continue to meet
the registrant eligibility requirements set forth in the general instruction
to Form S-3.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale
of the Common Shares and Warrants for general working capital needs, capital
expenditures including software development for future contracts and expenses
associated with new health care call center ventures.
4.5 Restriction on Below Market Issuance of Securities. (a) For a
period of one hundred and eighty (180) days following the date of Closing
(the "Restricted Period"), the Company shall not issue or agree to issue
(except (i) to Purchaser pursuant to this Agreement, (ii) pursuant to any
employee stock option, stock purchase or restricted stock plan of the Company
in effect on the date hereof up to the aggregate amounts set forth on
Schedule 4.5 hereto, (iii) pursuant to any existing security, option,
warrant, scrip, call or commitment or right in each case or disclosed on
Schedule 3.3 hereof or (iv) pursuant to a strategic joint venture or
partnership entered into by the Company, undertaken at the reasonable
discretion of the Board of Directors of the Company, the primary purpose of
which is not to raise equity capital) any equity securities (including debt
securities with an equity component) of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, or
equity securities of the Company) if such securities are issued at a price
(or in the case of securities convertible into or exercisable or
exchangeable, directly or indirectly, for Common Stock such securities
provide for a conversion, exercise or exchange price) which may be less than
the then current market price for Common Stock on the date of issuance (in
the case of Common Stock) or the date of conversion, exercise or exchange (in
the case of securities convertible into or exercisable or exchangeable,
directly or indirectly, for Common Stock).
4.6 Right of First Offer. For a period of one year after the expiration
of the Restricted Period, the Company shall not issue or sell, or agree to
issue or sell any equity or debt securities of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, for
equity or debt securities of the Company) ("Future Offerings") unless the
Company shall have first delivered to Purchaser at least fifteen (15)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering,
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including the terms and conditions thereof, and providing Purchaser and its
affiliates an option during the ten (10) business days period following
delivery of such notice to purchase up to the full amount of the securities
being offered in the Future Offering on the same terms as contemplated by
such Future Offering (the limitations referred to in this sentence are
collectively referred to as the "Capital Raising Limitations"). The Capital
Raising Limitations shall not apply to any transaction involving issuances of
securities in connection with a bona fide merger or consolidation or exercise
of options of employees, consultants or directors. In addition, the Capital
Raising Limitations also shall not apply to (a) the issuance of securities
upon exercise of conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or (b) the grant of
additional options or warrants, or the issuance of additional securities,
under any employee stock option, stock purchase or restricted stock plan of
the Company up to the aggregate amounts set forth on Schedule 4.5 hereto.
This Section 4.6 shall not limit the Company's obligations under Section 4.5
above. The Company shall prohibit any Common Stock or other security issued
subject to the Capital Raising Limitations but not purchased by Purchaser
from being converted, exercised or resold until the day following the first
anniversary of the date of the Closing and shall take all actions necessary
(including, without limitation, the issuance of a stop transfer order) to
effect such prohibition. Notwithstanding anything to the contrary contained
herein, and without limiting any of the Company's other obligations in this
Agreement, the Registration Rights Agreement or the Warrants, any securities
issued in a Future Offering (whether or not to Purchaser) (and any security
issued upon conversion, exercise or exchange of any of such security) shall
be ineligible for conversion, exercise, exchange, resale and/or registration
under Federal or state securities laws for a period of six (6) months
following the closing of such Future Offering.
4.7 Expenses. The Company shall pay to Purchaser, or at its direction,
at the Closing reimbursement for the expenses reasonably incurred by it and
its affiliates and advisors in connection with the negotiation, preparation,
execution, and delivery of this Agreement and the other agreements to be
executed in connection herewith, including, without limitation, Purchaser's
and its affiliates' and advisors' due diligence and attorneys' fees and
expenses (the "Expenses"); provided, however, that the Company shall not be
obliged under this Section 4.7 to reimburse more than an aggregate of
$10,000.00 of such attorneys' fees and expenses. From time to time
thereafter, upon Purchaser's written request, the Company shall pay to
Purchaser such Expenses, if any, not so paid at Closing and/or covered by
such payment, in each case to the extent reasonably incurred by Purchaser up
to the $10,000.00 maximum amount.
4.8 Information. For so long as the Purchaser owns any of the
Securities or three (3) years from the Closing Date, whichever is sooner, the
Company agrees to send the following reports to Purchaser until Purchaser
transfers, assigns or sells all of its Securities: (a) within three (3) days
after the filing with SEC, a copy of its Annual Report on Form 10-KSB, its
Quarterly Reports on Form 10-QSB, any proxy statements and any Current
Reports on Form 8-KSB; and (b) within one (1) day after release, copies of
all press releases issued by the Company or any if its subsidiaries. The
Company further agrees to promptly provide to Purchaser or assignee thereof
(a "Holder") any information with respect to the Company, its properties, or
its business or Holder's investment as such Holder may reasonably request;
provided, however, that the Company shall not be required to give any Holder
any material nonpublic information. If any information requested by a Holder
from the Company contains material nonpublic information, the Company shall
inform the Holder in writing that the information requested contains material
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nonpublic information and shall in no event provide such information to
Holder without the express prior written consent of such Holder after being
so informed.
4.9 Reservation of Shares. The Company shall at times have authorized
and reserved for the purpose of issuance of a sufficient number of shares to
provide for the full exercise of the outstanding Warrants and issuance of the
Warrant Shares in connection therewith and as otherwise required by the
Warrants. The Company shall not reduce the number of shares reserved for
issuance upon exercise of the Warrants without the consent of Purchaser
holding a majority in interest of the Warrants then held by Purchaser (said
majority in interest to be determined based on the number of Warrant Shares
issuable upon exercise of said Warrants).
4.10 Listing. The Company shall promptly secure and maintain listing and
trading of the Common Shares and Warrant Shares on the NASDAQ and any other
national securities exchange or quotation system on which the Common Stock is
then listed and for so long as Purchaser owns any of the Securities or three
(3) years from the Closing Date, whichever is sooner, and comply in all
respects with the Company's reporting, filing and other obligations under the
by-laws or rules of the NASDAQ and any other national securities exchange or
quotation system on which the Common Stock is then listed.
4.11 Prospectus Delivery Requirement. Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common
Stock in connection with any sale thereof pursuant to a registration
statement under the Securities Act covering the resale by Purchaser of the
Common Stock being sold, and Purchaser shall use its reasonable efforts to
comply with the applicable prospectus delivery requirements of the Securities
Act, if any, in connection with any such sale.
4.12 Intentional Acts or Omissions. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which, if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
4.13 Corporate Existence. So long as Purchaser beneficially owns any
Securities or for three (3) years from the Closing Date, whichever is sooner,
the Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets,
where the surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on NASDAQ, NASDAQ SmallCap, NYSE, or
AMEX.
4.14 Hedging Transactions. The Company hereby expressly agrees that
Purchaser shall not in any way be prohibited or restricted from any purchases
or sales of any securities or other instruments of, or related to, the
Company or any of its securities, including, without limitation, puts, call,
futures contracts, short sales and hedging and arbitrage transactions as long
as Purchaser complies with applicable law.
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ARTICLE V
LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue a certificate without any legend to the holder of any Security
upon which such Legend is stamped, and a certificate for a security shall be
originally issued without any legend, if, unless otherwise required by
applicable state securities laws, (a) the sale of such Security is registered
under the Securities Act, (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions (the reasonable cost of which shall be
borne by the Company), to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act or (c)
such Security can be sold pursuant to Rule 144. Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and, if required, to deliver
a prospectus in connection with such sale or in compliance with an exemption
from the registration requirements of the Securities Act. In the event the
Legend is removed from any Security or any Security is issued without the
Legend and thereafter the effectiveness of a registration statement covering
the resale of such Security is suspended or the Company determines that a
supplement or amendment thereto is required by applicable securities laws,
then upon reasonable advance notice to Purchaser holding such Security, the
Company may require that the Legend be placed on any such Security that
cannot then be sold pursuant to an effective registration statement or Rule
144 or with respect to which the opinion referred to in clause (b) next above
has not been rendered, which Legend shall be removed when such Security may
be sold pursuant to an effective registration statement or Rule 144 or such
holder provides the opinion with respect thereto described in clause (b) next
above.
5.2 Transfer Agent Instructions. The Company shall irrevocably instruct
its transfer agent to issue certificates, registered in the name of Purchaser
or its nominee, for the Common Shares and Warrant Shares in such amounts as
specified from time to time by Purchaser to the Company. Such certificates
shall bear a legend only in the form of the Legend and only to the extend
permitted by Section 5.1 above. The Company warrants that no instruction
other than such instructions referred to in this Article V, and no stop
transfer instructions other than stop transfer instructions to give effect to
Section 2.6 hereof in the case of the Common Shares and Warrant Shares prior
to registration thereof under the Securities Act, will be given by the
Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way Purchaser's obligations and agreement
set forth in Section 5.1 hereof to resell the Securities pursuant to an
effective registration statement and to deliver a prospectus in connection
with such sale or in compliance with an exemption from the registration
requirements of applicable securities laws. Without limiting the foregoing,
if (a) Purchaser provides the Company with an opinion of counsel, which
opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions (the reasonable cost of which
shall be borne by the Company), to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration or (b) Purchaser transfers Securities to an affiliate or
pursuant to Rule 144, the Company shall permit the transfer, and, in the case
of the Common Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name
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and in such denomination as specified by Purchaser in order to effect such a
transfer or sale. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Purchaser by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Article V will be inadequate and agrees, in the event
of a breach of threatened breach by the Company of the provisions of this
Article V, that Purchaser shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Common Shares and Warrants to
Purchaser at the Closing is subject to the satisfaction, as of the date of
the Closing and with respect to Purchaser, of each of the following
conditions thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion:
(a) Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement and delivered the same to the
Company.
(b) Purchaser shall deliver the applicable Purchase Price for the Common
Shares and Warrants purchased at the Closing.
(c) The representations and warranties of Purchaser shall be true and
correct as of the date when made and as of the Closing as though made
at the that time, and Purchaser shall have performed, satisfied and
complied in all material respects with the covenants and agreements
required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated, or endorsed
by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters
contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
The obligation of Purchaser hereunder to purchase the Common Shares and
Warrants to be purchased by it on the date of the Closing is subject to the
satisfaction of each of the following conditions, provided that these
conditions are for Purchaser's sole benefit and may be waived by Purchaser
(with respect to it) at any time in Purchaser's sole discretion:
(a) The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement and delivered the same to
Purchaser.
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(b) The Company shall have delivered duly executed Warrants and
certificates for the Common Shares (in each case in such denominations
as Purchaser shall request) being so purchased by Purchaser at the
Closing.
(c) The Common Stock shall be listed on the NASDAQ and trading in the
Common Stock shall not have been suspended and no delisting or
suspension shall be reasonably likely for the foreseeable future.
(d) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing as though made
at that time and the Company shall have performed, satisfied and
complied with the covenants and agreements required by this Agreement
to be performed or complied with by the Company at or prior to the
Closing. Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing to the
foregoing effect and as to such other matters as may be reasonably
requested by Purchaser.
(e) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(f) Purchaser shall have received the officer's certificate described in
Section 3.3 as of the Closing.
(g) Purchaser shall have received opinions of the Company's counsel, dated
as of the Closing, in the form attached hereto as Exhibit C.
(h) The Company's transfer agent has agreed to act in accordance with
irrevocable instructions in the form attached hereto as Exhibit D.
(i) The Company shall have entered into agreements with each of Gilbert V.
Levin and M. Karen Levin restricting dispositions of Common Stock
beneficially owned by such persons and in the form attached hereto as
Exhibit E.
ARTICLE VIII
GOVERNING LAW: MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement 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 parties
hereto irrevocably consent to the jurisdiction of the United States federal
courts located in the State of Delaware and the state courts located in the
County of New Castle in the State of Delaware in any suit or proceeding based
on or arising under this Agreement or the transactions contemplated hereby
and irrevocably agree 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 further agrees that service of process upon the Company mailed by the
first class mail shall be deemed in every respect effective service of
process upon the Company in any suite or proceeding arising hereunder.
Nothing
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herein shall affect Purchaser's right to serve process in any other manner
permitted by law. The parties hereto agree 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.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all
of which counterparts shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered
by facsimile transmission, the party using such means of delivery shall cause
additional original executed signature pages to be delivered to the other
parties.
8.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
8.5 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor Purchaser makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and
no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
facsimile-machine 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: 301-210-4908/09
Attention: Dr. Gilbert V. Levin
with a copy to:
Smith, Somerville & Case, L.L.C.
Attorneys At Law
100 Light Street
Baltimore, MD 21202
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Telecopy: 410-385-8060
Attention: James Baker, Esq.
If to RGC International Investors, LDC:
c/o Rose Glen Capital Management, L.P.
251 St. Asaphs Road
Suite 200
3 Bala Plaza East
Bala Cynwyd, PA 19004
Telecopy: 610-617-0570
Attention: Wayne D. Bloch
with a copy to:
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Telecopy: 215-864-8999
Attention: Gerald J. Guarcini, Esq.
If to any other Purchaser, to such address set forth under Purchaser's name
on the signature page hereto executed by Purchaser. Each party shall provide
notice to the other parties of any change in address.
8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.
Neither the Company nor Purchaser shall assign this Agreement or any rights
or obligations hereunder without any prior written consent of the other.
Notwithstanding the foregoing, Purchaser may assign its rights and
obligations hereunder to any of its "affiliates," as that term is defined
under the Exchange Act, without the consent of the Company so long as such
affiliate is an accredited investor. This provision shall not limit
Purchaser's right to transfer the Securities pursuant to the terms of this
Agreement or to assign Purchasers' rights hereunder to any such transferee
(and all such rights may in fact be so assigned to any such transferee).
Notwithstanding anything to the contrary contained in this Agreement,
Purchaser may pledge the Securities in connection with a bona fide margin
arrangement.
8.8 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
8.9 Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Articles III, IV, V and VIII shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of Purchaser. The Company agrees to indemnify and
hold harmless Purchaser and each of Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or
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related to any breach by the Company of any of its representations or
covenants set forth herein, including advancement of expenses as they are
incurred.
8.10 Public Filings: Publicity. Immediately following execution on this
Agreement, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and Purchaser shall have the
right to approve before issuance any press releases (including the foregoing
press release), SEC or other filings, or any other public statements, with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of Purchaser, to make
any press release or SEC, NASDAQ, NASD or exchange filings with respect to
such transactions as is required by applicable law and regulations (although
Purchaser shall (to the extent time permits) be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof.
8.11 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy
to Purchaser shall limit any remedy which would otherwise be available to
Purchaser at law or in equity. Nothing in this Agreement shall limit any
rights Purchaser may have with any applicable federal or state securities
laws with respect to the investment contemplated hereby.
8.13 Termination. In the event that the Closing shall not have occurred
on or before December 12, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
8.14 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
* * * * *
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IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp., as General Partner
By: _____________________________
Its: _____________________________
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE NUMBER OF COMMON SHARES: 750,000
WARRANTS FOR AGGREGATE NUMBER OF WARRANT SHARES: 750,000
COMPANY:
BIOSPHERICS INCORPORATED
By: _____________________________
Its: _____________________________
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Exhibit (10.1)
SCHEDULES TO SECURITIES
PURCHASE AGREEMENT
These Schedules are being provided in connection with the Securities
Purchase Agreement dated as of December 12, 1997. All undefined
capitalized terms contained herein shall have the same meaning as set forth
in the Securities Purchase Agreement. It is understood and agreed that
disclosure of any item on any one of the following Schedules shall
constitute appropriate disclosure on all appropriate Schedules.
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Schedule 3.2
Authorization, Enforcement
There are no further consents or authorizations of the Company, its board
of directors, or its stockholders or any other person, body or agency required
with respect to any of the transactions contemplated by the Securities Purchase
Agreement.
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Schedule 3.3
Capitalization
This schedule includes the authorized capital stock, the number of shares
issued and outstanding, the number of shares reserved for issuance pursuant to
the Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Warrants) exercisable for, or convertible
into or exchangeable for any shares of Common Stock and the number of shares to
be initially reserved for issuance upon exercise of the Warrants:
<TABLE>
<CAPTION>
At September 30, 1997
-------------------------
Shares
----------
<S> <C>
Common Stock, $0.005 par value,
18,000,000 shares authorized
Issued, non-redeemable 6,518,837
Issued, redeemable 1,577,253
---------
8,096,090
Treasury Stock, at cost (69,006)
---------
8,027,084
---------
---------
</TABLE>
Nonqualified Stock Option Plan
Under the Company's Nonqualified Stock Option Plan dated May 15, 1997
(the 1987 plan), options may be granted to officers and other key employees
to purchase up to 4,400,000 shares of common stock in amounts determined by
the Board of Directors at a price not less than 50% of the fair market value
of the stock on the date the options are granted, and for a term not to
exceed five years and one month from the date of grant.
To date, all options granted, except for those part of an anti-hostile
takeover plan explained below, have been at the then-publicly quoted price of
the stock. The 1987 plan expired on May 14, 1997. On November 17, 1997, the
Company's Board of Directors approved the 1997 Stock Option Plan subject to
stockholders' approval. The 1997 plan provides 400,000 options for granting
to officers, directors, and other key employees and contains terms similar to
the 1987 plan.
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<PAGE>
Schedule 3.3
Capitalization (Continued)
Outstanding Options Granted Under the 1987 Nonqualified Stock Option Plan
Options as of September 30, 1997 2,731,250(1)
Price Range of Options Outstanding: $1.4375 to $7.25
Options Exercisable as of September 30, 1997: 554,750
(1) See attached summary of outstanding stock options.
Stock Redemption Agreement
The Company has agreements with two officers-stockholders who
beneficially own 39.7% of the outstanding common stock. Upon their deaths,
the Company may be required to redeem from their estates, the number of
shares of the Company's stock necessary to pay estate taxes and
administrative expenses of the estate, if any, up to $5,000,000. Shares
would be redeemed at the then current market price. The Company is the
beneficiary to an insurance policy on the lives of the two
officers-stockholders, which the Company maintains to provide benefits of
$5,000,000 for this agreement.
4
<PAGE>
Schedule 3.5
No Conflicts
None.
5
<PAGE>
Schedule 3.6
Registration and SEC Documents
Since January 1, 1995, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act.
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<PAGE>
Schedule 3.7
Absence of Certain Changes
Since December 31, 1996, there has been no material adverse change and no
material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company. The
Company has filed its quarterly report on Form 10-QSB for the three-month and
nine-month periods ended September 30, 1997 on November 13, 1997 with the
Securities and Exchange Commission. In such filing, the Company reclassified
deferred revenue of $1,000,000, which represents a non-refundable advance
against future royalties from the D-tagatose licensing agreement with MD
Foods Ingredients amba of Denmark from current to non-current. The advance
will be recoverable at 50% of such annual royalties. As commercialization of
D-tagatose is not anticipated prior to the summer of 1999, the deferred
revenue has accordingly been reclassified as non-current.
The Company's government contracts typically have a term of three to five
years. Several contracts were rebid in 1997, which represented over 25% of
consolidated revenues. The Company was successful in securing new contracts
for two of three contracts which were rebid. Both of these contract awards
are being protested by the unsuccessful bidder(s). The Company is
aggressively protesting the award of a contract that it had performed for the
last two years and was unsuccessful in securing award during the rebid
process. The Company believes that it will continue to provide services
under this contract through at least September 30, 1998, as the protest is
being resolved.
7
<PAGE>
Schedule 3.8
Litigation
Summarized below is a listing of all actions, suits, proceedings,
inquiries or investigations before or by any court, public board,
governmental agency or authority, or self-regulatory organization or body
pending or threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such:
In the fourth quarter of 1997, the Company collected the outstanding
amount owed to it by Tetra Technologies, Inc. ($100,000) and the Pennsylvania
Merchant Group. See Note 7 to the Company's Annual Report on 10-KSB for
further discussion on this Tetra matter. The Company has filed a lawsuit
against Forbes for an article printed about the Company. There have been
motions for dismissal of the suit and counter motions against dismissal; a
decision is pending from the judge on these motions.
The Company received a notice of potential liability from the U.S. EPA.
See Note 7 of the Company's Annual Report on Form 10-KSB for background on
this matter. There has been no correspondence between the Company and EPA
regarding this claim during 1997.
The Company is awaiting a final determination by the Department of Labor
on the wage rates paid to employees at the Company's Cumberland, Maryland
facility. The Government Accounting Office must rule/decide if the wage rates
are applicable to the Company. A decision is still pending. If there is an
unfavorable ruling to the Company, the Company has recourse through an
equitable adjustment claim under its contract with the GSA/Federal
Information Center.
8
<PAGE>
Schedule 3.18
Key Employees
Summarized below is a listing of Key Employees of Biospherics
Incorporated and the capacity in which they currently serve.
Dr. Gilbert Levin President & CEO; Chairman of the Board
Karen Levin VP, Communications & Corporate Secretary
Jeffrey W. Church Executive VP & Chief Financial Officer
Richard Levin VP, Planning
Raul Vera VP, Technology
9
<PAGE>
Schedule 3.19
Certain Transactions
Consulting Agreements: Each of Gilbert V. Levin and M. Karen Levin have
entered into Consulting Agreements with the Company pursuant to which such
individuals will provide post-employment consulting services to the Company.
Retirement Agreements: Each of Gilbert V. Levin and M. Karen Levin have
entered into Supplemental Executive Retirement Plan Agreements with the
Company pursuant to which such individuals would be entitled to certain
post-employment payments.
Copies of the above described Agreements have been furnished to Purchaser.
10
<PAGE>
Schedule 4.5
Restriction on Below Market
Issuance of Securities
The Company has an Employees' Nonqualified Stock Option Plan, whereby
options are granted to officers and key employees. See Schedule 3.3
Capitalization for further details regarding this plan.
The Company has an informal plan with its outside Board directors whereby
options are granted on an annual basis. Historically these grants have
averaged 4,000 options per outside directors. There are currently six (6)
outside directors on Biospherics' Board of Directors.
11
<PAGE>
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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<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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.
4
<PAGE>
(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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<PAGE>
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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<PAGE>
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"),
7
<PAGE>
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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<PAGE>
(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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<PAGE>
(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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<PAGE>
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
<PAGE>
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
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<PAGE>
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
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<PAGE>
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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<PAGE>
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:
----------------------------------
----------------------------------
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<PAGE>
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.
16
<PAGE>
Exhibit (10.3)
EXHIBIT A-2
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 $4.50 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
1
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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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<PAGE>
payable to the Company 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 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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<PAGE>
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"),
7
<PAGE>
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.
8
<PAGE>
(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
9
<PAGE>
(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
10
<PAGE>
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
<PAGE>
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
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<PAGE>
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
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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:
-------------------------------
-------------------------------
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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.
16
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Exhibit (10.4)
EXHIBIT B
to Securities Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made as of
December 12, 1997, by and among Biospherics Incorporated, a Delaware
corporation (the "Company"), with headquarters located at 12051 Indian Creek
Court, Beltsville, Maryland, and the undersigned (the "Purchaser").
RECITALS
A. In connection with the Securities Purchase Agreement dated of even
date herewith by and between the Company and Purchaser (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to
the conditions contained therein, to issue and sell to Purchaser (i) shares
of the Company's Common Stock, par value $.005 per share (the "Common Stock")
and (ii) warrants to purchase shares of Common Stock in the form attached as
Exhibits A-1 and A-2 to the Securities Purchase Agreement. The shares of
Common Stock being purchased under the Securities Purchase Agreement are
referred to herein as the "Common Shares". The warrants being purchased
under the Securities Purchase Agreement are referred to herein as the
"Warrants". The shares of Common Stock issuable upon the exercise of or
otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares".
B. To induce Purchaser to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, and Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Purchaser" means Purchaser and any transferees or assignees
who agree to become bound by the provisions of this Agreement in accordance
with Article IX hereof.
(b) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities
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Act and pursuant to Rule 415 under the Securities Act or any successor rule
providing for offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration Statement by
the United States Securities and Exchange Commission (the "SEC").
(c) "Registrable Securities" means the Common Shares and Warrant
Shares and any shares of capital stock issued or issuable, from time to time
(with any adjustments), on or in exchange for or otherwise with respect to
the Common Stock or any other Registrable Securities.
(d) "Registration Statement" means a registration statement of the
Company under the Securities Act.
1.2 Capitalized Terms. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
ARTICLE II
REGISTRATION
2.1 Mandatory Registration. The Company shall prepare, and, on or prior
to forty-five (45) days after the date of the Closing (the "Filing Date"),
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is
not then available, on such form of Registration Statement as is then
available to effect a registration of all of the Registrable Securities,
subject to the consent of Purchaser (as determined pursuant to Section 11.10
hereof)) covering the resale of all of the Registrable Securities, which
Registration Statement, to the extent allowable under the Securities Act and
the Rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants
pursuant to the so-called anti-dilution provisions thereof. The Registrable
Securities included in the Registration Statement shall be allocated among
Purchaser as set forth in Section 11.11 hereof. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration
of effectiveness thereof) shall be provided to (and subject to the approval
of (which approval shall not be unreasonably withheld or denied)) Purchaser
and their counsel prior to its filing or other submission.
2.2 Underwritten 0ffering. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering,
Purchaser who hold a majority in interest of the Registrable Securities
subject to such underwritten offering shall have the right to select a total
of one firm of legal counsel to represent Purchaser and an investment banker
or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
2.3 Payments by the Company. The Company shall cause the registration
statement to become effective as soon as practicable, but in no event later
than the ninetieth (90th) day following the date of the Closing (the
"Registration Deadline"). If (i) the registration statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to
Section 2.1 hereof is not declared effective by the SEC on or before the
Registration Deadline, or
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<PAGE>
(ii) after the registration statement has been declared effective by the SEC,
sales of all the Registrable Securities (including any Registrable Securities
required to be registered pursuant to Section 3.2 hereof) cannot be made
pursuant to the registration statement (by reason of a stop order or the
Company's failure to update the registration statement or any other reason
outside the control of Purchaser) or (iii) the Common Stock is not listed or
included or quotation on the NASDAQ National Market, NASDAQ SmallCap Market,
the New York Stock Exchange or the American Stock Exchange after being so
listed or included for quotation, then the Company will make payments to
Purchaser in such amounts and at such times as shall be determined pursuant
to this Section 2.3 as partial relief for the damages to Purchaser by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies
available at law or in equity). In such event, the Company shall pay to
Purchaser an amount equal to (i) (A) .02 times (B) the aggregate purchase
price of the Common Shares and Warrants held by Purchaser (including, without
limitation, Warrants that have been converted into Warrant Shares) times (ii)
the sum of: (A) the number of months (prorated per day for partial months)
following the Registration Deadline prior to the date the Registration
Statement filed pursuant to Section 2.1 is declared effective by the SEC plus
(B) the number of months (prorated per day for partial months) following the
Registration Deadline but prior to the termination of the Registration
Periods that sales cannot be legally made pursuant to the Registration
Statement after the Registration Statement has been declared effective plus
(c) the number of months (prorated per day for partial months) that the
Common Stock is not listed or included for quotations on the NASDAQ National
Market, NASDAQ SmallCap Market, New York Stock Exchange, or American Stock
Exchange or that trading thereon is halted after the Registration Statement
has been declared effective. Such amounts shall be paid in cash. Payments of
cash pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, payments shall be made for each such
thirty (30) day period within five (5) days after the end of such thirty (30)
day period.
2.4 Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), then the
Company shall send to Purchaser, who has a right to have Registrable
Securities covered by a Registration Statement pursuant to this Agreement
written notice of such determination and, if within fifteen (15) days after
the date of such notice, Purchaser shall so request in writing, the Company
shall include in such Registration Statement all or any part of the
Registrable Securities Purchaser requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriters) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)'judgment, marketing or other
factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable
Securities with respect to which Purchaser has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities
shall be made pro rata among Purchaser seeking to include Registrable
Securities, in proportion to the number of Registrable Securities sought to
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<PAGE>
be included by Purchaser; provided, however, that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not entitled to inclusion of
such securities in such Registration Statement or are not entitled to pro
rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of
other securities having the right to include such securities in the
Registration Statement. No right to registration of Registrable Securities
under this Section 2.4 shall be construed to limit any registration required
under Section 2.1 or 3.2 hereof. If an offering in connection with which
Purchaser is entitled to registration under this Section 2.4 is an
underwritten offering, then Purchaser whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
2.5 Eligibility for Form S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the
re-sale by Purchaser of the Registrable Securities. The Company covenants
and agrees that throughout the Registration Period (as herein defined), the
Company shall continue to be eligible to use Form S-3 for registration of
such re-sale and the Company shall file all reports required to be filed by
the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
ARTICLE III
OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly and file with the SEC not later
than the Filing Date the Registration Statement required by Section 2.1, and
cause such Registration Statement relating to Registrable Securities to
become effective as soon as practicable after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be
issued in the future) and (ii) the date on which all of the Registrable
Securities (in the reasonable opinion of counsel to Purchaser) may be
immediately sold to the public without registration and without restriction
as to the number with Registrable Securities to be sold, whether pursuant to
Rule 144 or otherwise (the "Registration Period"). The Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein not misleading.
3.2 The Company shall prepare and file with the SEC such amendments
(including post- effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement effective at
all times during the Registration Period, and, during such period, comply
4
<PAGE>
with the provisions of the Securities Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration
Statement until the termination of the Registration Period or, if earlier,
such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number
of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registerable Securities issued
pursuant to the Securities Purchase Agreement and exercise of the Warrants,
the Company shall amend the Registration Statement or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so
as to cover all of the Registerable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefore arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon
as practicable following the filing thereof. The provisions of Section 2.3
above shall be applicable with respect to such obligations, with the ninety
(90) days running from the day after the date on which the Company reasonably
first determines (or reasonably should have determined) the need therefor.
3.3 The Company shall furnish to Purchaser whose Registrable Securities
are included in the Registration Statement and its legal counsel (a) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2.1, each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion, if any, thereof which
contains information for which the Company has sought confidential
treatment), and (b) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as Purchaser may reasonably request in order to facilitate
the disposition of the Registrable Securities owned (or to be owned) by
Purchaser.
3.4 The Company shall use reasonable efforts to (a) register and qualify
the Registrable Securities covered by the Registration Statement under
securities laws of such jurisdictions in the United States as Purchaser who
holds (or has the right to hold) Registrable Securities being offered
reasonably requests, (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (c) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (d) take all other
actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.4, (ii) subject
itself to general taxation in any such jurisdiction, (iii) file a general
consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause the Company material expense or burden, or (v) make
any change in its charter or by-laws, which in each case the board of
directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
5
<PAGE>
3.5 In the event Purchaser who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a
Registration Statement or any amendment or supplement thereto under Section
2.1 or 3.2 hereof select underwriters for the offering, the, Company shall
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations. with the underwriters of such
offering.
3.6 As soon as practicable after becoming aware of such event, the
Company shall notify (by telephone and also by facsimile and reputable
overnight courier) Purchaser of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and use
its best efforts promptly (but in any event within five (5) days) to prepare
a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to Purchaser as Purchaser may reasonably request.
3.7 The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable time and to notify (by telephone and also
by facsimile and reputable overnight carrier) Purchaser who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution
thereof.
3.8 The Company shall permit a single firm of counsel designated by
Purchaser to review the Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement
without prior notice to such counsel. The sections of the Registration
Statement covering information with respect to the Investors, the Investors'
beneficial ownership of securities of the Company or the Investors' intended
method of disposition of the Registerable Securities shall conform to the
information provided to the Company by each of the Investors.
3.9 The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
3.10 At the request of Purchaser in connection with any underwritten
offer hereunder, the Company shall furnish, on the date of effectiveness of
the Registration Statement and thereafter from time to time on such dates as
Purchaser may reasonably request (a) an opinion, dated as of such applicable
date, from counsel representing the Company addressed to Purchaser and in
form, scope and substances as is customarily given in an underwritten public
offering and (b) a letter, dated as of such applicable date, from the
Company's independent certified public
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<PAGE>
accountants addressed to Purchaser and in form, scope and substance as
customarily given to underwriters in an underwritten public offering.
3.11 The Company shall make available for inspection during the
Registration Period by (i) Purchaser, (ii) any underwriter participating in
any disposition pursuant to the Registration Statement, (iii) one firm of
attorneys and one firm of accountants retained by Purchaser, and (iv) one
firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector and
cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in confidence and shall not make any
disclosure (except to Purchaser) of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified in writing, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (b) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or is otherwise required by applicable law or
legal process or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement (to the knowledge of Purchaser). The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and reasonable substance satisfactory to
the Company) with the Company with respect thereto, substantially in the form
of this Section 3.11. Purchaser agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and Purchaser) shall be deemed to limit
Purchaser's ability to sell Registrable Securities in a manner which is
consistent with applicable laws and regulations.
3.12 The Company shall hold in confidence and not make any disclosure of
information concerning Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or is otherwise
required by applicable law or legal process, (d) such information has been
made generally available to the public other than by disclosure in violation
of this or any other agreement (to the knowledge of the Company), or (e)
Purchaser consents to the form and content of any such disclosure. The
Company agrees that it shall, upon learning that disclosure of such
information concerning Purchaser is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
Purchaser prior to making such disclosure, and allow Purchaser, at its
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
7
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3.13 For so long as Purchaser owns any of the Securities or three (3)
years from the Closing Date, whichever is sooner, the Company shall cause the
listing and the continuation of listing of all the Registrable Securities
covered by the Registration Statement on the NASDAQ National Market System
and cause the Registrable Securities to be quoted or listed on each
additional national securities exchange or quotation system upon which the
Common Stock is then listed or quoted.
3.14 The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.15 The Company shall cooperate with Purchaser who hold Registrable
Securities being offered and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates
to be in such denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or Purchaser may reasonably request and
registered in such names as the managing underwriter or underwriters, if any,
or Purchaser may request, and, within one (1) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable Securities
(with copies to Purchaser whose Registrable Securities are included in such
Registration Statement) an instruction in the form attached hereto as Exhibit
1 and an opinion of such counsel in the form attached hereto as Exhibit 2.
3.16 At the request of Purchaser, the Company shall promptly prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the
plan of distribution set forth in such Registration Statement.
3.17 The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
by the Commission).
3.18 The Company shall take all such other actions as Purchaser or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
3.19 From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement or any
amendment or supplement thereto under Section 2.1 or 3.2 hereof without the
consent of the holders of a majority of the Registrable Securities.
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ARTICLE IV
OBLIGATIONS OF PURCHASER
In connection with the registration of the Registrable Securities,
Purchaser shall have the following obligations:
4.1 Purchaser shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may reasonably request. At least ten (10) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall
notify Purchaser of the information the Company requires from Purchaser.
4.2 Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the Registration
Statements hereunder, unless Purchaser has notified the Company in writing of
such Purchaser's election to exclude all of Purchaser's Registrable
Securities from the Registration Statement.
4.3 Purchaser whose Registrable Securities are included in a
Registration Statement understands that the Securities Act may require
delivery of a prospectus relating thereto in connection with any sale thereof
pursuant to such Registration Statement, and Purchaser shall use its
reasonable efforts to comply with the applicable prospectus delivery
requirements of the Securities Act in connection with any such sale.
4.4 Purchaser agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3.6,
such Purchaser will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 3.6 and, if so directed by the
Company, Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in Purchaser's possession (other than a limited number of
permanent file copies), of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
4.5 Without limiting Purchaser's rights under Section 2.1 or 3.2 hereof,
no Purchaser may participate in any underwritten distribution hereunder
unless Purchaser (a) agrees to sell Purchaser's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and
(c) agrees to pay its pro rata share of all underwriting discounts and
commissions and any expenses in excess of those payable by the Company
pursuant to Article V.
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ARTICLE V
EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to
Articles II and III, including, without limitation, all registration, listing
and qualification fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one firm of counsel selected by Purchaser pursuant to
Section 2.2, hereof shall be borne by the Company.
ARTICLE VI
INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) Purchaser who holds such Registrable Securities, (b)
each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any,
(each, an "Indemnified Person"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any
of them may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
if used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations"). Subject to the restrictions set
forth in Section 6.3 with respect to the number of legal counsel, the Company
shall reimburse Purchaser, each such underwriter and controlling person, and
each such other Indemnified Person, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.1: (x) shall not apply
to an Indemnified Person with respect to a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for
use in the Registration Statement or any such amendment thereof or supplement
thereto; (y) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (z) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior to the use giving rise to a Violation and such Indemnified
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Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by Purchaser pursuant to Article IX.
6.2 In connection with any Registration Statement in which Purchaser is
participating, Purchaser agrees to indemnify, hold harmless and defend, to
the same extent and in the same manner set forth in Section 6. 1, the
Company, each of its directors, each of its officers who signs the
Registration Statement, its employees, agents and persons, if any, who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and any other stockholder selling securities
pursuant to the Registration Statement, together with its directors, officers
and members, and any person who controls such stockholder or underwriter
within the meaning of the Securities Act or the Exchange Act (such an
"Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by
Purchaser expressly for use in connection with such Registration Statement;
and subject to Section 6.3 Purchaser will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6.2 shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld; provided, further, however,
that Purchaser shall be liable under this Agreement (including this Section
6.2 and Article VII) for only that amount as does not exceed the net proceeds
actually received by Purchaser as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by Purchaser pursuant to Article IX. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.2 with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended
or supplemented, and the Indemnified Party failed to utilize such corrected
prospectus.
6.3 Promptly after receipt by an Indemnified Person or Indemnified Party
under this Article VI of notice of the commencement of any action (including
any governmental action), such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to made against any indemnifying party under
this Article VI, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that such indemnifying party shall diligently pursue such
defense and that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right
to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would
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be inappropriate due to actual or potential conflicts of interest between
such Indemnified Person or Indemnified Party and any other party represented
by such counsel in such proceeding or the actual or potential defendants in,
or targets of, any such action include both the Indemnified Person or the
Indemnified Party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in
addition to those available to such indemnifvin2 party. The indemnifying
party shall pay for only one separate firm of legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Purchaser holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of Purchaser if they hold Registrable
Securities included in such Registration Statement), if Purchaser are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this
Article VI, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The indemnification
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
ARTICLE VII
CONTRIBUTION
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Article VI to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault
standards set forth in Article VI, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (iii)
contribution (together with any indemnification or other obligations under
this Agreement) by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
ARTICLE VIII
REPORTS UNDER THE EXCHANGE ACT
With a view to making available to Purchaser the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit Purchaser to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees,
during the Registration Period and for one year thereafter, to:
8.1 Make and keep public information available, as those terms are
understood and defined in Rule 144;
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8.2 File with the SEC in a timely manner and make and keep available all
reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4.3 of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is
required for the applicable provisions of Rule 144; and
8.3 Furnish to Purchaser so long as Purchaser holds Warrants or
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably
requested to permit Purchaser to sell such securities pursuant to Rule 144
without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of Purchaser hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by Purchaser to any transferee of all or any portion
of the Warrants or the Registrable Securities if: (a) Purchaser agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after
such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee, and (ii) the securities with respect
to which such registration rights are being transferred or assigned, (c)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities
Act or applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein, and (e) such
transfer shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement. Notwithstanding any provision to the
contrary herein, Purchaser shall have the right to pledge the Registrable
Securities and in the event that the pledgee forecloses on the pledged
Registrable Securities, then the pledgee shall be entitled to exercise the
rights of the Purchaser hereunder.
ARTICLE X
AMENDMENT OF REGISTRATION RIGHTS
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Purchaser who hold a majority interest of the Registrable Securities
(determined as if all Warrants then outstanding had been exercised for
Warrant Shares). Any amendment or waiver effected in accordance with this
Article X shall be binding upon Purchaser and the Company. Notwithstanding
the foregoing, no amendment or waiver shall retroactively affect Purchaser
without its consent or prospectively adversely affect Purchaser who no longer
owns any Warrants or Registrable Securities without its consent.
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<PAGE>
Neither Article VI nor Article VII hereof may be amended or waived in a
manner adverse to Purchaser without its consent.
ARTICLE XI
MISCELLANEOUS
11.1 A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
11.2 Any notices 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: 301-210-4908/09
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.
If to RGC International Investors, LDC:
c/o Rose Glen Capital Management, L.P.
251 St. Asaphs Road
Suite 200
3 Bala Plaza East
Bala Cynwyd, PA 19004
Telecopy: 610-617-0570
Attention: Wayne D. Bloch
with a copy to:
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Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Telecopy: 215-864-8999
Attention: Gerald J. Guarcini, Esq.
and if to Purchaser, at such address as Purchaser shall have provided in
writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11.2.
11.3 Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
11.4 This Agreement 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 federal courts located in the state of Delaware and the
state courts of the State of Delaware located in the County of New Castle in
the State of Delaware in any suit or proceeding based on or arising under
this Agreement 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 parties hereto further agree that service of process upon
the parties hereto mailed by first class mail shall be deemed in every
respect effective service of process upon each such party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve
process in any other manner permitted by law. The parties hereto agree 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.
11.5 This Agreement, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto and all certificates and
opinions required thereby) constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Warrants and
the Securities Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
11.6 Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto.
11.7 The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
11.8 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto, by facsimile
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<PAGE>
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
11.9 Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as the other party
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
11.10 All consents and other determinations to be made by Purchaser
pursuant to this Agreement shall be made by Purchaser holding a majority of
the Registrable Securities (determined as if all Warrants then outstanding
had been exercised for Warrant Shares) held by Purchaser.
11.11 The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable
Securities included thereon shall be allocated 100% to Purchaser based on the
number of Registrable Securities held by Purchaser at the time of such
establishment or increase, as the case may be. In the event Purchaser shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any
shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable
Securities shall be allocated to Purchaser, pro rata based on the number of
shares of Registrable Securities then held by Purchaser. Without implication
that the contrary would otherwise be true, for purposes, of this paragraph,
all Warrants then outstanding shall be assumed exercised for Warrant Shares.
11.12 If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement.
11.13 The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY:
BIOSPHERICS INCORPORATED
By: _______________________________
Name: _______________________________
Title: _______________________________
PURCHASER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp., as General Partner
By: _____________________________
Its: ______________________________
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EXHIBIT 1
to Registration
Rights Agreement
Date
American Stock Transfer and Trust Co.
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction to
you (1) to transfer or re-register (or at the holders request to reissue to
the holder thereof without any restrictive legend) the certificates for the
shares of Common Stock, par value $.005 per share (the "Common Stock"), of
Biospherics Incorporated, a Delaware corporation (the "Company"), represented
by certificate numbers _____ for an aggregate of _____ shares (the
"Outstanding Shares") of Common Stock presently registered in the name of
[Name of Investor] (the "Investor") (which shares were previously issued
pursuant to the Securities Purchase Agreement dated December 12, 1997 (the
"Agreement") or exercise of the Warrants (as hereinafter defined)), upon
surrender of such certificates to you, notwithstanding the legend appearing
on such certificates, and (2) to issue shares (the "Warrant Shares") of the
Common Stock to or upon the order of the registered holder from time to time
of the Warrants of the Company (the "Warrants") upon surrender to you of a
properly completed and duly executed Exercise Agreement and such Warrants
notwithstanding the legend appearing on such Warrants. The transfer or
re-registration of the certificates for the Outstanding Shares by you should
be made at such time as you are requested to do so by the record holder of
the Outstanding Shares. The certificate issued upon such transfer or
re-registration should be registered in such name as requested by the holder
of record of the certificate surrendered to you and should not bear any
legend which would restrict the transfer of the shares represented thereby.
In addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares. Certificates for the shares issued
pursuant to the Agreement and Warrant Shares should not bear any restrictive
legend and should not be subject to any stop-transfer restriction.
Pursuant to applicable securities laws or certain agreements between the
Company and the Investor, the Investor may be prohibited during certain
limited periods of time from selling its Outstanding Shares or other shares
of Common Stock issued pursuant to the Agreement or issuable upon exercise of
the Warrants under the Registration Statement; provided, however, that such
Investor may continue to sell such securities pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act").
The Company may, during such periods, deliver a notice to you advising you to
refrain from transferring any Outstanding Shares pursuant to such
Registration Statement, provided that such notice shall not prohibit the
transfer of such shares pursuant to an exemption from registration under the
1933 Act during such periods.
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<PAGE>
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ____________ as to registration of the
Outstanding Shares and the Conversion Shares under the Securities Act of
1933, as amended.
Should you have any questions concerning this matter, please contact me.
Very truly yours,
BIOSPHERICS INCORPORATED
________________________________
By:
Title:
Enclosures:
cc: [Name of Investor]
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<PAGE>
EXHIBIT 2
to Registration
Rights Agreement
Date
American Stock Transfer and Trust Co.
6201 15th Avenue, 3rd Floor
Brooklyn, NY 11219
RE: Biospherics Incorporated
Ladies and Gentlemen:
We are counsel to Biospherics Incorporated, a Delaware corporation (the
"Company"), and we understand that [Name of Purchaser] (the "Holder") has
purchased from the Company (i) shares of the Company's common stock, par
value $.005 per share (the "Common Stock") and (ii) warrants to purchase
shares of Common Stock. Such securities were purchased by the Holder
pursuant to a Securities Purchase Agreement, dated as of December 12, 1997,
by and among the Company and the signatories thereto (the "Agreement").
Pursuant to a Registration Rights Agreement, dated as of December 12, 1997,
by and among the Company and the signatories thereto (the "Registration
Rights Agreement"), the Company agreed with the Holder, among other things,
to register the Registrable Securities (as that term is defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the
Registration Rights Agreement, on ________ ___, 1998, the Company filed a
Registration Statement on Form S-_____ (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other customary introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate customary language to be included.]
Very truly yours,
cc: [Name of Purchaser]
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Exhibit (99)
For further details, call
Jeffrey W. Church, Executive VP, CFO
Biospherics Incorporated
December 17, 1997 at (301) 419-3900
BIOSPHERICS PLANS HEALTHCARE SUBSIDIARY,
RECEIVES PRIVATE FINANCING
Biospherics Incorporated (NASDAQ/BINC), Beltsville, Maryland, today
announced plans to enter the fast-growing healthcare information and
management industry. A newly formed subsidiary approved by the Company's
shareholders in its May 1997 meeting will provide health information and
guidance to HMOs, other group health organizations, and self-insured
employers. The venture will feature nurse triage, disease management, and
health risk assessment services.
The new organization will combine Biospherics' healthcare oriented call
center operations utilizing technology obtained from Clinical Solutions,
Incorporated (CSI) of Menlo Park, California. Biospherics and CSI have
signed a letter of agreement that provides CSI an equity interest in the
subsidiary. The subsidiary will have the benefit of CSI's outstanding staff
of medical and marketing personnel, and its proprietary algorithm software,
which will be used by call center nurses to give accurate and fast
information to callers with health problems. The CSI algorithm system has
been evaluated by medical experts as superior to the older and slower
protocol software. The two organizations are working out details of the new
venture pending a final agreement. Commencement of operations is also
dependent upon the new organization's obtaining permanent financing. Such
financing is currently anticipated near the end of the first quarter of 1998.
To help fund the subsidiary's start-up as well as support Biospherics'
general working capital and capital expenditure needs including software
development for future contracts, the Company completed a $3 million private
offering of units to a single institutional investor. The Company sold
375,000 units, each unit consisting of two shares of common stock and two
warrants with exercise prices of $4.00 and $4.50 per share, respectively.
The transaction was effected in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D, as established by
the U.S. Securities and Exchange Commission (SEC) and the Securities Act of
1933. The warrants are exercisable for a three-year period after the date of
closing. Should all the warrants be exercised, the Company will receive an
additional $3.2 million. The initial net proceeds from the sale of $3
million of units will come to approximately $2.7 million. The Company has
agreed to file a Registration Statement on Form S-3 with the SEC for the
resale of all registrable securities covered by this transaction.
Dr. Gilbert V. Levin, President of Biospherics, said "The capabilities of
CSI combined with our Company's extensive medical call center experience
places the new enterprise in the forefront of this dramatically growing
industry. The Nation's medical bills now top $1 trillion, and the market is
wide open for firms who can control costs while improving healthcare."
Those from CSI joining the new organization will be: Dennis McShane,
M.D., Stanford University, principal inventor of the algorithm system, and
Clinical Professor of Medicine in Immunology at Stanford; Glenn Laffel, M.D.,
University of Miami, Ph.D. from MIT, formerly Senior Attending Physician
Cardiac Transplantation Program, Director of Quality Care Management at
Brigham's and Women's Hospital, editor of QUALITY MANAGEMENT IN HEALTH CARE;
David Hodges, M.D., NYU, M.P.H., Harvard School of Public Health; and Harry
Harrington, B.A., University of California, Berkeley, and an M.Ed., San Jose
State University, formerly vice president for business development at
Healthtrac, Incorporated, and director of strategic marketing for Blue Shield
of California. Mr. Harrington is Associate Editor for the AMERICAN JOURNAL
OF HEALTH PROMOTION.
<PAGE>
Under its motto, "Technologies for Information and Health," Biospherics'
mission is to provide guidance and products to improve the quality of life.
The Firm offers telecommunications and database management information
systems and proprietary food and medical innovations.
Our Internet address is: http://www.biospherics.com
# # # # # #
