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As filed with the Securities and Exchange Commission on May 28, 1999,
REGISTRATION NO. 333-____
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BIOSPHERICS(R) INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 52-0849320
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12051 Indian Creek Court, Beltsville, Maryland, 20705, (301) 419-3900
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Gilbert V. Levin, President and Chief Executive Officer,
Biospherics Incorporated
12051 Indian Creek Court, Beltsville, Maryland 20705, (301) 419-3900
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
James E. Baker, Jr.
Baxter, Baker, Sidle & Conn, P.A.
120 E. Baltimore Street
Baltimore, Maryland 21202
(410) 385-8122
(410) 230-3801 (Fax)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, as amended, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
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CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered (1) Share (2) Price (2) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock,
$.005 par value 625,000 $6.4375 $4,023,438 $1,119
</TABLE>
(1) Includes up to 625,000 shares of Common Stock to be issued upon exercise of
stock purchase warrants. Also includes an indeterminate number of
additional shares of Common Stock as may from time to time become issuable
upon exercise of the stock purchase warrants by reason of stock splits,
stock dividends and antidilution provisions, which shares are registered
hereunder pursuant to Rule 416 under the Securities Act.
(2) Estimated in accordance with Rule 457(c) for the purpose of computing the
amount of the registration fee based on the average of the high and low
prices of Common Stock on the NASDAQ National Market System on May 24,
1999.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission (SEC), acting
pursuant to said Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, dated May 28, 1999
PROSPECTUS
Biospherics Incorporated
625,000 Shares of Common Stock
The selling stockholder of Biospherics Incorporated identified on page 2 may
offer and sell the shares covered by this prospectus from time to time. The
selling stockholder has been issued a stock purchase warrant to acquire up to
250,000 shares of Biospherics' common stock at $8.00 per share and a stock
purchase warrant to acquire up to 375,000 shares of Biospherics' common stock at
$6.4005 per share (collectively, the "Warrants"). Such purchases may occur at
any time during the period ending May 21, 2002. The selling stockholder will
receive all of the proceeds from the sale of the shares and will pay all
underwriting discounts and selling commissions, if any, applicable to the sale
of the shares. Biospherics will pay the expenses of registration of the sale of
the shares. The selling stockholder may also offer for sale additional shares of
common stock acquired upon exercise of the Warrants as a result of stock splits
or similar events.
Our common stock trades on the NASDAQ National Market System under the symbol
"BINC." On May 24, 1999, the last reported sale price of our common stock on the
Nasdaq National Market was $6.31 per share.
Our principal offices are located at 12051 Indian Creek Court, Beltsville,
Maryland 20705. Our telephone number is (301) 419-3900.
BEGINNING ON PAGE 2, WE HAVE LISTED SEVERAL "RISK FACTORS" WHICH YOU SHOULD
CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR
INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY OTHER SECURITIES
COMMISSION, HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________, 1999.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, ALONG WITH THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN
DECIDING WHETHER TO INVEST IN OUR SHARES. THESE FACTORS, AMONG OTHERS, MAY CAUSE
ACTUAL RESULTS, EVENTS OR PERFORMANCE TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN ANY FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS.
WE CONTINUE TO BE DEPENDENT ON OUR INFORMATION SERVICES DIVISION FOR NEARLY ALL
OF OUR REVENUE. Since the products developed by our BioTech Division have not
yet been brought to market, we are almost entirely dependent on the Information
Services Division. This business is typically comprised of relatively large
contracts, which usually are for terms not longer than one or two years. Some of
this business is awarded by competitive bidding. In many cases, the apparent low
bidder is subject to a protest action by the unsuccessful bidders that delays
the award of the contract and sometimes results in a rebidding. There can be no
assurance that we will continue to win and successfully defend these awards.
OUR INFORMATION SERVICES BUSINESS IS CURRENTLY DEPENDENT UPON LOWER-MARGIN
GOVERNMENT CONTRACTS. While our Information Services business is comprised of
both government and commercial business, the mix of such business changes from
period to period. Government business traditionally generates lower operating
margins than commercial business. In 1998, the government to commercial business
mix was 2.5 to 1.
WE HAVE RECENTLY REALIGNED AND SCALED BACK OUR EFFORTS TO ENTER THE DEMAND
MANAGEMENT BUSINESS. After incurring significant losses in 1998 attempting to
establish a stand-alone demand management operation, we have reduced our
marketing and administrative costs. Future demand management opportunities will
be pursued in our Information Services Division. While we anticipate that this
will minimize our risks, there can be no assurance that we will be successful in
this business.
D-TAGATOSE HAS NOT YET COME TO MARKET. We have granted an exclusive worldwide
license to MD Foods Ingredients amba of Denmark for the manufacture, marketing
and distribution of D-tagatose as a food ingredient. Our receipt of future
payments from MD Foods is dependent upon MD Foods' efforts to bring this product
to market. In lieu of FDA qualification, MD Foods has assembled an expert panel
to review the safety of D-tagatose. MD Foods has yet to commence construction of
a plant to manufacture D-tagatose. We have been advised that construction will
not begin until D-tagatose has been certified by the expert panel to be a
generally regarded as safe product. Accordingly, the sale of D-tagatose as a
food product is largely outside of our control.
OTHER BIOTECH PRODUCTS ARE STILL IN THE DEVELOPMENT STAGE. While we are in the
process of attempting to develop other potential uses of D-tagatose as well as
to develop other BioTech products, none has been developed to a stage where any
significant revenue has been generated. Development of products will require
significant additional research and development. Such additional effort will
require substantial funding which may not be available to us. There can be no
assurance that our research and development activities will result in any
saleable products. Further, it is possible that we will license or seek an
affiliation with a third party to bring such products to market. In such an
event, we would likely have minimal control over the manufacture and marketing
of such products.
OUR ABILITY TO MARKET ANY BIOTECH PRODUCTS WE DEVELOP WILL LIKELY DEPEND ON
OBTAINING FDA AND FOREIGN REGULATORY APPROVALS. Research, testing,
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manufacture, labeling, distribution, marketing and advertising of new products
are subject to extensive regulation by governmental regulatory authorities in
the United States and other countries. These rigorous regulatory approval
processes can take from 5 to 10 years or more and require the expenditure of
substantial resources. There can be no assurance that we will be able to obtain
the necessary approvals for clinical testing or for the marketing of products.
OUR SUCCESS WILL DEPEND, IN PART, ON OUR ABILITY TO OBTAIN AND MAINTAIN PATENT
PROTECTION FOR OUR PRODUCTS. We have several patents for D-tagatose and other
products under development. No assurance can be given that any additional
patents will be issued, that the protection of any patents that may be issued in
the future will be significant, or that current or future patents will be held
valid if subsequently challenged.
WE HAVE SUSTAINED LOSSES IN THE PAST AND WE MAY SUSTAIN LOSSES IN THE FUTURE. We
have incurred losses in prior years, including last year. Our net loss for the
year ended December 31, 1998 was $1.98 million and our loss for the first
quarter of 1999 was $1.0 million.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING THAT WE WILL NEED. During 1998
and the first quarter of 1999 our working capital decreased by $4.2 million to
approximately $74,000 as a result of the losses incurred and substantial
investments by us in hardware and software for our Information Services
business. We believe that we will need to raise more money to continue to
finance our product development operations. We may also need to raise additional
money to fund operations if the sales of D-tagatose as a food product continue
to be delayed or are not as successful as we anticipate. We may not be able to
obtain additional financing on acceptable terms, or at all.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL ADVANCES BY COMPETITORS. Our
competitors in the Information Services business are numerous. Many of our
competitors have significantly greater financial, marketing and distribution
resources than we do. Our competitors may succeed in developing or marketing
technologies and products that are more effective than ours. In addition, an
alternative sweetener has been found to be generally regarded as safe and is
poised to enter the United States market prior to D-tagatose.
THE PRICE OF BIOSPHERICS' COMMON STOCK HAS BEEN HIGHLY VOLATILE DUE TO SEVERAL
FACTORS, WHICH WILL CONTINUE TO EFFECT THE PRICE OF OUR STOCK. Our common stock
has traded as low as $3.25 and as high as $8.50 between January 1, 1998 and May
14, 1999. Some of the factors leading to this volatility include:
- price and volume fluctuations in the stock market at large, which do
not relate to our operating performance;
- fluctuations in our operating results;
- announcements of technological innovations or new products, which we
or our competitors make;
- developments with respect to patents or proprietary rights; and
- the status of MD Foods' efforts to obtain approval to begin to sell
D-tagatose in the United States.
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BIOSPHERICS AND THE PRICE OF BIOSPHERICS SHARES MAY BE ADVERSELY AFFECTED BY THE
PUBLIC SALE OF A SIGNIFICANT NUMBER OF THE SHARES ELIGIBLE FOR FUTURE SALE. All
outstanding shares of our common stock are freely tradeable. Sales of common
stock in the public market could materially adversely affect the market price.
Such sales also may inhibit our ability to obtain future equity related
financing on acceptable terms.
WE MAY BE REMOVED FROM THE NASDAQ NATIONAL MARKET SYSTEM IF WE FAIL TO MAINTAIN
CERTAIN MAINTENANCE CRITERIA. NASDAQ inquired on one occasion whether we
continue to meet the net tangible assets criterion for trading on the NASDAQ
National Market System. We currently meet all requirements but our ability to
continue to do so will depend on our future operations. The public trading
volume of our common stock and the ability of our stockholders to sell their
shares could be significantly impaired if we fail to meet the criteria and are
removed from the NASDAQ National Market System.
OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER. Certain provisions of our Amended
and Restated Certificate of Incorporation, Bylaws and stock options could:
- discourage potential acquisition proposals;
- delay or prevent a change in control of Biospherics;
- diminish stockholders' opportunities to participate in tender offers
for our common stock, including tender offers at prices above the
then current market price; or
- inhibit increases in the market price of our common stock that could
result from takeover attempts.
WE MAY NOT BE ABLE TO RETAIN OUR KEY EXECUTIVES AND RESEARCH AND DEVELOPMENT
PERSONNEL. As a small company, our success depends on the services of key
employees in executive and research and development positions. The loss of the
services of one or more of such employees could have a material adverse effect
on us.
WE HAVE NOT COMPLETED OUR YEAR 2000 COMPLIANCE PROGRAM, SO THE POTENTIAL COSTS
AND COMPLICATIONS ASSOCIATED WITH YEAR 2000 COMPLIANCE CANNOT BE DETERMINED AT
THIS TIME. We estimate that total Year 2000 costs to upgrade systems for our
facilities will be less than $450,000. However, Biospherics is continuing to
assess and develop alternatives that will require refinement of its cost
estimate over time. There can be no assurance that there will not be a delay in,
or increased costs associated with, our Year 2000 compliance program. Since our
program is ongoing, all potential Year 2000 complications have not yet been
identified. Therefore, the potential impact of possible complications on
Biospherics' financial condition and results of operations cannot be determined
at this time.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
documents with the Securities and Exchange Commission. You may read and copy any
document we file at the SEC's public reference room at Judiciary Plaza Building,
450 Fifth Street, NW, Room 1024, Washington, D.C. 20549 or at its regional
public reference rooms in New York, New York or Chicago, Illinois. You should
call 1-800-SEC-0330 for more information on the public reference rooms. The SEC
maintains an Internet site at http://www.sec.gov, where certain information
regarding issuers (including Biospherics) may be found.
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This prospectus is part of a registration statement that we filed with the SEC
(Registration No. 333-______). The registration statement contains more
information than this prospectus regarding Biospherics and its common stock,
including certain exhibits and schedules. You can get a copy of the registration
statement from the SEC at the address listed above or from the SEC's Internet
site.
The SEC allows us to "incorporate" into this prospectus information we file with
the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus and which update and supersede the information you read in this
prospectus. We incorporate by reference the documents listed below, except to
the extent that information in those documents is different from the information
contained in this prospectus, and all future documents filed with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, until
we terminate the offering of these shares. The documents are:
- Annual Report on Form 10-KSB for the Year ended December 31, 1998
- Current Report on Form 8-K filed on March 26, 1999
- Current Report on Form 8-K filed on April 15, 1999
- Proxy Statement filed on April 15, 1999
- Form 10-QSB filed on May 17, 1999
- Current Report on Form 8-K filed on May 24, 1999
You may request a copy of these documents, at no cost, by writing or
telephoning us at:
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, Maryland 20705
Attention: Richard C. Levin, Vice President
Telephone: (301) 419-3900
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other than the date
on the front of those documents.
FORWARD-LOOKING INFORMATION
Some of the statements made in this prospectus or in the documents incorporated
by reference herein are not statements of historical fact but are
forward-looking statements. A number of risks and uncertainties, including those
discussed under the caption "Risk Factors" above and the documents incorporated
by reference herein could affect such forward-looking statements and could cause
actual results to differ materially from the statements made.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," and "continue" or the negative of such terms or other
comparable terminology.
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Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance or achievements. We do not intend to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results.
SELLING STOCKHOLDER
The selling stockholder, RCG International Investors, L.D.C., acquired 750,000
shares of common stock and warrants to purchase an additional 750,000 shares of
common stock in a December 1997 private placement. All of such shares were
registered by Biospherics Incorporated pursuant to Registration No. 333-44973.
Prior to March 31, 1999, the selling stockholder sold all 750,000 shares
initially acquired in the December 1997 offering; acquired 125,000 shares
pursuant to exercise of some of the December 1997 warrants; and sold all of such
125,000 shares. Accordingly, prior to March 31, 1999, the selling stockholder
owned unexercised December 1997 warrants for 250,000 shares at $4.00 and 375,000
shares at $4.50.
On March 31, 1999, the selling stockholder agreed to exercise December 1997
warrants for 250,000 additional shares of common stock at $4.00 per share. In
consideration, we issued to the selling stockholder a new warrant permitting the
purchase of up to 250,000 shares of common stock at $8.00 per share.
On May 21, 1999, the selling stockholder agreed to exercise December 1997
warrants for 375,000 additional shares of common stock at $4.50 per share. In
consideration, we issued to the selling stockholder an additional warrant
permitting the purchase of 375,000 shares of common stock at $6.4005 per share.
The following information is based upon information provided by the selling
stockholder. There are currently no agreements, arrangements or understandings
with respect to the sale of any of the shares. The shares are being registered
to permit public secondary trading of the shares, and the selling stockholder
may offer the shares for resale from time to time.
The following table sets forth the name of the selling stockholder, the number
of shares of common stock owned beneficially as of May 25, 1999 and the number
of shares that may be offered pursuant to this prospectus. Because the selling
stockholder may offer all, some or none of its common stock, no definitive
estimate as to the number of shares thereof that will be held by the selling
stockholder after such offering can be provided.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NAME OF SELLING BENEFICIALLY OWNED PRIOR TO NUMBER OF SHARES BENEFICIALLY OWNED
STOCKHOLDER OFFERING (1) (2) OFFERED HEREBY (3) AFTER OFFERING
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<S> <C> <C> <C>
RCG International
Investors, LDC 993,900 625,000 368,900
</TABLE>
(1) Except as otherwise noted, the information contained in the table above
reflects "beneficial" ownership of the common stock within the meaning
of Rule 13d-3 under the Exchange Act. On May 25, 1999, Biospherics had
9,612,584 shares of common stock outstanding.
(2) The 993,900 shares consist of 368,900 held by RCG International
Investors, L.D.C., and 625,000 shares that may be acquired by exercise
of the Warrants.
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(3) The number of shares set forth in the table represents an estimate of
the number of shares of common stock to be offered by the selling
stockholder. The actual number of shares of common stock issuable upon
exercise of the stock purchase warrant is indeterminate, is subject to
adjustment and could be materially less or more than such estimated
number, depending on factors that cannot be predicted by Biospherics at
this time. The actual number of shares of common stock offered hereby,
and included in the Registration Statement of which this prospectus is
a part, includes such additional number of shares of common stock as
may be issued or issuable upon exercise of the stock purchase warrant
by reason of the adjustment mechanisms described therein or by reason
of any stock split, stock dividend or similar transaction involving the
common stock, in order to prevent dilution, in accordance with Rule 416
under the Securities Act. Pursuant to the terms of the stock purchase
warrant, it is exercisable only to the extent that the number of shares
of common stock thereby issuable, together with the number of shares of
common stock owned by such holder and its affiliates (but not including
shares of common stock underlying any unexercised portion of the stock
purchase warrant) would not exceed 9.9% of the then outstanding common
stock as determined in accordance with Section 13(a) of the Exchange
Act. Accordingly, the number of shares of common stock set forth in the
table for the selling stockholder exceeds the number of shares of
common stock that this selling stockholder could own beneficially at
any given time through its ownership of the stock purchase warrant. In
that regard, beneficial ownership of the selling stockholder set forth
in the table is not determined in accordance with Rule 13d-3 under the
Exchange Act.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 18,000,000 shares of common stock,
$.005 par value, and 2,000,000 shares of preferred stock, $.01 par value. As of
the close of business on May 25, 1999, there were 9,612,584 shares of common
stock outstanding and no shares of preferred stock outstanding.
The holders of common stock are entitled to receive dividends when and as
declared by the Board of Directors out of funds legally available therefore. In
the event of the dissolution of Biospherics, the holders of common stock are
entitled to share ratably in the assets legally available for distribution to
its shareholders after the payment of the liquidation preference of any
outstanding preferred stock. The holders of the common stock have no preemptive,
subscription, conversion or redemption rights, and are not subject to further
calls or assessments. The common stock currently outstanding is, and the common
stock issued in this offering will be, validly issued, fully paid and
nonassessable.
Except as otherwise provided in our charter or required by law, the holders of
shares of common stock are entitled to one vote per share on all matters to be
voted on by shareholders and do not have the right of cumulative voting in
connection with elections for Directors, which means the holders of more than
half the outstanding shares of common stock can elect all of the Directors.
We are also authorized to issue 2,000,000 shares of preferred stock. Our Board
of Directors is authorized to issue the preferred stock in one or more series
and, with respect to each series, to determine the preferences and rights and
the qualifications, limitations, or restrictions thereof, including the dividend
rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting each series and the designation of such series. The Board of
Directors could, without shareholder approval, issue preferred stock with voting
and other rights that could adversely affect the voting rights of the holders of
the common stock.
One of the effects of the preferred stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to obtain control
of Biospherics by means of a merger, tender offer, proxy contest or otherwise,
and thereby to protect the continuity of the management.
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PLAN OF DISTRIBUTION
The selling stockholder, or its pledgee, donee, transferee, or other successor
in interest, may offer its shares at various times in one or more of the
following transactions:
- on the Nasdaq National Market (or any other exchange on which the
shares may be listed);
- in the over-the-counter market;
- in negotiated transactions other than on such exchanges;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions, in covering previously
established short positions and in settlement of other transactions
in standardized or over-the-counter options; or
- in a combination of any of the above transactions.
The selling stockholder may sell its shares at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices. The selling stockholder may use broker-dealers to
sell its shares. The broker-dealers will either receive discounts or commissions
from the selling stockholder, or they will receive commissions from purchasers
of shares.
Under certain circumstances the selling stockholder and any broker-dealers that
participate in the distribution may be deemed to be "underwriters" within the
meaning of the Securities Act. Any commissions received by such broker-dealers
and any profits realized on the resale of shares by them may be considered
underwriting discounts and commissions under the Securities Act. The selling
stockholder may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition,
Biospherics has agreed to indemnify the selling stockholder with respect to the
shares offered hereby against certain liabilities, including certain liabilities
under the Securities Act. Alternatively, Biospherics may contribute toward
amounts paid due to such liabilities.
Under the rules and regulations of the Exchange Act, any person engaged in the
distribution of the resale of shares may not simultaneously engage in market
making activities with respect to the Biospherics' common stock for a period of
two business days prior to the commencement of such distribution. The selling
stockholder will also be subject to applicable provisions of the Exchange Act
and regulations under the Exchange Act, which may limit the timing of purchases
and sales of shares of Biospherics' common stock by the selling stockholder.
The selling stockholder will pay all commissions, transfer taxes, and other
expenses associated with the sale of securities by it. The shares offered hereby
are being registered pursuant to contractual obligations of Biospherics, and
Biospherics has paid the expenses of the preparation of this prospectus. We have
not made any underwriting arrangements with respect to the sale of shares
offered hereby.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling stockholder, but will receive the exercise price in the event warrants
held by the selling stockholder are exercised.
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LEGAL MATTERS
Baxter, Baker, Sidle & Conn, P.A. of Baltimore, Maryland, our counsel in
connection with the offering, has issued an opinion about the validity of the
securities being offered.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-KSB for the year ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Risk Factors................................................ 2
Where You Can Find More Information......................... 4
Forward Looking Information................................. 5
Selling Stockholder......................................... 6
Description of Capital Stock................................ 7
Plan of Distribution........................................ 8
Use of Proceeds............................................. 8
Legal Matters............................................... 9
Experts..................................................... 9
</TABLE>
625,000 Shares
Biospherics Incorporated
Common Stock
___________, 1999
PROSPECTUS
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the sale
and distribution of the securities being registered. All of the amounts shown
are estimates, except for the Securities and Exchange Commission registration
fee and the NASDAQ National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $1,119
Legal fees and expenses $7,500
Accounting fees and expenses $3,900
NASDAQ National Market listing fee $12,500
Miscellaneous $1,000
Total $26,019
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers and directors of Biospherics to the fullest extent permitted by
Delaware law.
Article TENTH of Biospherics' Certificate of Incorporation provides that a
director shall not be personally liable to Biospherics or its stockholders for
monetary damages for breach of fiduciary duty except to the extent that
elimination or limitation of liability is not permitted under Delaware law.
ITEM 16. EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
4.1A Stock Purchase Warrant dated as of March 31, 1999
4.1B Stock Purchase Warrant dated as of May 21, 1999
5.1 Opinion of Baxter, Baker, Sidle & Conn, P.A.
23.1 Consent of Baxter, Baker, Sidle & Conn, P.A. (filed as part of
Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
10
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ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
PROVIDED, HOWEVER, that paragraphs A(1)(i) and A(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
11
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Beltsville, State of Maryland, on May 21, 1999.
BIOSPHERICS INCORPORATED
By: /s/ Gilbert V. Levin
-------------------------------
Gilbert V. Levin
Chair, CEO, President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-3 has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ Gilbert V. Levin Chair, CEO, President and Treasurer May 21, 1999
- ------------------------------------
Gilbert V. Levin
/s/ M. Karen Levin Director, Vice President for May 21, 1999
- ------------------------------------ Communications, Secretary
M. Karen Levin
/s/ Lionel V. Baldwin Director May 21, 1999
- ------------------------------------
Lionel V. Baldwin
/s/ David A. Blake Director May 21, 1999
- ------------------------------------
David A. Blake
/s/ A. Bruce Cleveland Director May 21, 1999
- ------------------------------------
A. Bruce Cleveland
/s/ George S. Jenkins Director May 21, 1999
- ------------------------------------
George S. Jenkins
/s/ Anne S. Macleod Director May 21, 1999
- ------------------------------------
Anne S. MacLeod
/s/ Robert L. Clayton Controller May 21, 1999
- ------------------------------------
Robert L. Clayton
</TABLE>
12
<PAGE>
BIOSPHERICS INCORPORATED
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.1A Stock Purchase Warrant dated as of March 31, 1999
4.1B Stock Purchase Warrant dated as of May 21, 1999
5.1 Opinion of Baxter, Baker, Sidle & Conn, P.A.
23.1 Consent of Baxter, Baker, Sidle & Conn, P.A. (filed as part of
Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
13
<PAGE>
Exhibit 4.1A
VOID AFTER 5:00 P.M. BELTSVILLE, MARYLAND
TIME ON MARCH 31, 2002
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
REQUIREMENTS OF THOSE LAWS.
Right to Purchase 250,000 Shares of
Common Stock, par value $.005 per share
Date: March 31, 1999
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, 250,000 fully paid and
nonassessable shares of the Company's common stock, par value $.005 per share
(the "COMMON STOCK"), at an exercise price of $8.00 per share (the "EXERCISE
PRICE"). 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 dated as of December 12, 1997 between the Company and the signature
thereto (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 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:
14
<PAGE>
(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 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
15
<PAGE>
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 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
16
<PAGE>
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.
(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.
17
<PAGE>
(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, 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.
18
<PAGE>
(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 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"), 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
19
<PAGE>
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.
(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.
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<PAGE>
(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
(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.
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<PAGE>
(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 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.
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<PAGE>
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 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)
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<PAGE>
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
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:
Baxter, Baker, Sidle & Conn, P.A.
120 E. Baltimore Street, Suite 2100
Baltimore, MD 21202
Telecopy: 410-230-3801
Attention: James E. Baker, Jr.
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.
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<PAGE>
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 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: /s/ David Affeldt
-----------------------------
Name: David Affeldt
-----------------------------
Title: Executive Vice President
-----------------------------
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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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<PAGE>
Exhibit 4.1B
VOID AFTER 5:00 P.M. BELTSVILLE, MARYLAND
TIME ON MAY 21, 2002
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
REQUIREMENTS OF THOSE LAWS.
Right to Purchase 375,000 Shares of
Common Stock, par value $.005 per share
Date: May 21, 1999
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 equal to $6.4005 per share (the
"EXERCISE PRICE"). 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 dated as of December 12, 1997 between the Company and the
signature thereto (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 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:
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<PAGE>
(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 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
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<PAGE>
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 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
29
<PAGE>
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.
(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.
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(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, 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.
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(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 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"), 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
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<PAGE>
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.
(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.
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<PAGE>
(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
(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.
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(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 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.
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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 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)
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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
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:
Baxter, Baker, Sidle & Conn, P.A.
120 E. Baltimore Street, Suite 2100
Baltimore, MD 21202
Telecopy: 410-230-3801
Attention: James E. Baker, Jr.
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.
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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 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.
* * * * *
38
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
BIOSPHERICS INCORPORATED
By: /s/ David Affeldt
----------------------------
Name: David Affeldt
----------------------------
Title: Executive Vice President
----------------------------
39
<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:
---------------------------------
---------------------------------
40
<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.
41
<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.
42
<PAGE>
Baxter, Baker, Sidle & Conn, P.A.
Attorneys at Law
120 E. Baltimore Street, Suite 2100
Baltimore, Maryland 21202-1643
James E. Baker, Jr. Telephone (410) 230-3800
Direct Line (410) 385-8122 Facsimile (410) 230-3801
e-mail: [email protected]
EXHIBIT 5.1
May 21, 1999
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, MD 20705
Ladies and Gentlemen:
We have acted as counsel to Biospherics Incorporated, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, of 625,000 shares of Common Stock of the Company, $.005
par value per share, pursuant to a Registration Statement on Form S-3 to be
filed with the Securities and Exchange Commission (the "Registration
Statement").
In rendering the opinions contained herein, we have examined originals
or photostatic or certified copies of all certificates, documents, agreements
and other instruments as we have deemed appropriate.
Based upon the foregoing, we are of the opinion that each of the
625,000 shares of the Common Stock of the Company covered by the Registration
Statement, when issued by the Company in accordance with the Stock Purchase
Warrant dated as of March 31, 1999 and May 21, 1999, and for not less than the
par value thereof, will be duly authorized, validly issued, fully paid and
nonassessable.
43
<PAGE>
Biospherics Incorporated
May 21, 1999
Page 2
This opinion is furnished by us solely for the benefit of the Company
in connection with the filing of the Registration Statement. We consent to the
use of this opinion as an exhibit to the Registration Statement.
Very truly yours,
Baxter, Baker, Sidle & Conn, P.A.
By: /s/ James E. Baker, Jr.
-----------------------------------
James E. Baker, Jr., Vice President
44
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Biospherics Incorporated of our report dated March 24,
1999 relating to the financial statements, which appears in Biospherics
Incorporated's Annual Report on Form 10-KSB for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
Baltimore, Maryland
May 28, 1999
45
