SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 17, 1999
PROCEPT, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21134 04-2893483
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
840 Memorial Drive, Cambridge, Massachusetts 02139
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(617) 491-1100
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Item 2. Acquisition or Disposition of Assets
On March 17, 1999, Procept, Inc. ("Procept") completed its acquisition
of Pacific Pharmaceuticals, Inc. ("Pacific"). The acquisition was structured as
a merger (the "Merger") of a wholly- owned subsidiary of Procept with and into
Pacific pursuant to an Agreement and Plan of Merger dated as of December 10,
1998, as amended (the "Merger Agreement"). The merger was a tax-free
reorganization and is being accounted for using the purchase method of
accounting. The aggregate purchase price of $3.8 million, plus estimated
acquisition costs of $1.5 million, assumed liabilities of $6.4 million and $1.0
million for the value of the stock options and warrants being issued to the
Pacific holders were allocated to the acquired tangible and intangible assets
based on their estimated respective fair values. Approximately $8.1 million of
the purchase price has been allocated to in-process research and development
and expensed in the first quarter of 1999.
The outstanding shares of common stock of Pacific, $0.02 par value,
("Pacific Common Stock") and the outstanding shares of preferred stock of
Pacific, $25 par value, ("Pacific Preferred Stock" and together with the Pacific
Common Stock, the "Pacific Stock"), were converted into the right to receive an
aggregate of approximately 2,755,000 shares of Procept common stock, $0.01 par
value ("Procept Common Stock"). The holders of Pacific Preferred Stock also
received an aggregate of approximately 414,584 shares of Procept Common Stock
pursuant to certain contractual rights that were granted to such holders in the
merger. Procept assumed all outstanding options and warrants to purchase Pacific
Stock by issuing Procept options and warrants for approximately 1,773,078 shares
of Procept Common Stock. Concurrently with the merger, Procept issued
approximately 1,125,032 shares of Procept Common Stock to certain third parties
and assumed obligations of Pacific which may involve the issuance of additional
shares of Procept Common Stock.
The number of shares of Procept Common Stock delivered as the merger
consideration was determined through arms-length negotiation between the
parties. The Boards of Directors of Pacific and Procept, however, were aware of
several potential conflicts of interest of certain officers and directors.
Michael Weiss and Elliot Vernon serve on both the Boards of Directors of Procept
and Pacific and were initially appointed to these respective board positions
pursuant to contractual rights of Paramount Capital LLC or its affiliates
("Paramount"). In addition, Michael Weiss is an employee of Paramount. Paramount
controls significant stockholders of both Procept and Pacific and is entitled to
receive a fee in connection with the merger as well as certain milestone
payments in the future pursuant to a Financial Advisory Agreement and an
Introduction Agreement, both by and between Pacific and Paramount. Mr. Weiss and
Mr. Vernon were not on the Procept Special Committee of the Board of Directors
which authorized the merger, and they abstained from voting when the Pacific
Board of Directors voted to approve the merger.
The licenses and other assets acquired in the Merger were used by
Pacific in the development and commercialization of medical products. Procept
intends that Pacific, as a wholly-owned subsidiary of Procept, will continue to
engage primarily in the development and commercialization of medical products
based on biotechnological research regarding the treatment and detection of
cancer and other diseases.
Item 7. Financial Statement, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The financial statements and accountants' report required to
be filed under this item were previously filed as part of
Procept's Registration Statement on Form S-4 (File No.
333-69821), declared effective on February 10, 1999 and
incorporated herein by reference.
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(b) Pro Forma Financial Information.
The pro forma financial information required to be filed under
this item was previously filed as part of Procept's
Registration Statement on Form S-4 (File No. 333-69821),
declared effective on February 10, 1999 and incorporated
herein by reference.
(c) Exhibits.
2.1 Agreement and Plan of Merger between Procept, Inc.,
Procept Acquisition Corp. and Pacific
Pharmaceuticals, Inc. dated December 10, 1998, as
amended, previously filed as Annex A and Annex A-1 to
Procept's Registration Statement on Form S-4 (File
No. 333-69821), declared effective on February 10,
1999 and incorporated herein by reference.
4.1 Form of 1995 Unit Purchase Warrant. Filed herewith.
4.2 Form of 1997 Unit Purchase Option. Filed herewith.
4.3 Form of Class A Warrant. Filed herewith.
4.4 Form of Class B Warrant. Filed herewith.
4.5 Form of Warrant to Purchase Shares of Common Stock
issued to Aries Trust and Aries Domestic Fund, L.P.
Filed herewith.
99.1 Press release dated March 18, 1999. Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 30, 1999 PROCEPT, INC.
By: /s/ John F. Dee
-------------------------------------
John F. Dee
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description
- - ------- -----------
2.1 Agreement and Plan of Merger between Procept, Inc., Procept Acquisition
Corp. and Pacific Pharmaceuticals, Inc. dated December 10, 1998, as
amended, previously filed as Annex A and Annex A-1 to Procept's
Registration Statement on Form S-4 (File No. 333-69821), declared
effective on February 10, 1999 and incorporated herein by reference.
4.1 Form of 1995 Unit Purchase Warrant. Filed herewith.
4.2 Form of 1997 Unit Purchase Option. Filed herewith.
4.3 Form of Class A Warrant. Filed herewith.
4.4 Form of Class B Warrant. Filed herewith.
4.5 Form of Warrant to Purchase Shares of Common Stock issued to Aries
Trust and Aries Domestic Fund, L.P. Filed herewith.
99.1 Press release dated March 18, 1999. Filed herewith.
Form of 1995 Unit Purchase Warrant
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On March 17, 1998, Procept, Inc. ("Procept") completed a merger (the "Merger")
with Pacific Pharmaceuticals, Inc. ("Pacific"). In accordance with the Agreement
and Plan of Merger Between Procept, Procept Acquisition Corp. and Pacific dated
December 10, 1998, as amended, each outstanding option and warrant to purchase
Pacific common stock, $0.02 par value, ("Pacific Common Stock") held by
investors and corporate partners has been assumed by Procept. Each such option
and warrant will continue to have, and be subject to, the terms and conditions
set forth in such option or warrant immediately prior to the Merger except that
(i) each option and warrant shall be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Procept common stock,
$0.01 par value, ("Procept Common Stock") equal to the product of the number of
shares of Pacific Common Stock that were issuable upon exercise of such option
or warrant immediately prior to the Merger multiplied by 0.10865, rounded down
to the nearest whole number of shares, and (ii) the per share exercise price for
the Procept Common Stock issuable upon exercise of such option and warrant shall
be equal to the quotient, rounded down to the nearest whole cent, determined by
dividing the exercise price per share of Pacific Common Stock at which such
option or warrant was exercisable immediately prior to the Merger by 0.10865.
As of March 25, 1999 there are outstanding 1995 Unit Purchase Warrants to
purchase an aggregate of (i) 47,331 Class A Warrants to purchase Procept Common
Stock and (ii) 37,865 shares of Procept Common Stock.
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Warrant to Purchase
[ ] Units
Pacific Pharmaceuticals, Inc.
Form of Unit Purchase Warrant
Dated: November 27, 1995
THIS CERTIFIES THAT [ ] and/or his/its designees
(herein sometimes called the "Holder") is entitled to purchase from PACIFIC
PHARMACEUTICALS, INC., a Delaware corporation (hereinafter called the
"Company"), at the prices and during the periods as hereinafter specified, up to
[ ] Units (the "Units") of the Company at a purchase price of
$110,000 per Unit (the "Exercise Price'), with each Unit consisting of 80,000
shares of Common Stock, $.02 par value, of the Company (the "Common Stock") and
100,000 warrants (the "Warrants") to purchase 100,000 shares of Common Stock at
an exercise price of $1.00 (subject to adjustment pursuant to the Warrants, the
"Warrant Exercise Price") and exercisable for a period often years from the date
of issuance.
This Unit Purchase Warrant to purchase [ ] Units (the "Purchase
Warrant"), Subject to adjustment in accordance with Section 6 of this Agreement,
was issued pursuant to a private placement conducted by Paramount Capital, Inc.
Except as specifically otherwise provided herein, the Common Stock and
the Warrants issued pursuant to the Purchase Warrant herein granted shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Confidential Private Placement Memorandum dated September 18,
1995 (as supplemented and amended October 11, 1995 and October 12, 1995) and the
Warrants issued pursuant to the Purchase Warrant shall be governed by the terms
of the Warrant Agreement dated as of October 13, 1995 executed in connection
with the Offering (the "Warrant Agreement"), and the Holder shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Common Stock and the Warrants included in the Purchase Warrant, and the
shares of Common Stock underlying the Warrants (the "Warrant Shares"). The
Company has listed the Common Stock and the Warrant Shares underlying this
Purchase Warrant on the American Stock Exchange ("AMEX"). In the event of any
extension of the expiration date or reduction of the Warrant Exercise Price of
the Warrants issued to the Purchasers of the Units, the same changes to the
Warrants included in this Purchase Warrant shall be simultaneously effected.
1. (a) The rights represented by this Purchase Warrant may be exercised
at any time in whole or in part, by (i) the surrender of this Purchase Warrant
(with the purchase form at the end hereof properly executed) at the principal
executive office of the Company (or such other office or agency of the Company
as it may designate by notice in writing to the Holder at the address of the
Holder appearing on the books of the Company); and (ii) payment to the Company
of the Exercise Price of 110,000 per Unit for the number of Units specified in
the above-mentioned purchase form together with applicable stock transfer taxes,
if any. This Purchase Warrant shall be deemed to have been exercised, in whole
or in part to the extent specified,
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immediately prior to the close of business on the date this Purchase Warrant is
surrendered and payment is made in accordance with the foregoing provisions of
this Section 1, and the person or persons in whose name or names the
certificates for shares of Common Stock and Warrants shall be issuable upon such
exercise shall become the holder or holders of record of such Common Stock and
Warrants at that time and date. The certificates for the Common Stock and
Warrants so purchased shall be delivered to the Holder as soon as practicable
but not later than ten (10) days after the rights represented by this Purchase
Warrant shall have been so exercised.
(b) At any time during the period above specified, during which this
Purchase Warrant may be exercised, the Holder may, at its option, exchange this
Purchase Warrant, in whole or in part (an "Purchase Warrant Exchange"), into the
minter of Units determined in accordance with this Section (b), by surrendering
this Purchase Warrant at the principal office of the Company or at the office of
its stock transfer agent, accompanied by a notice stating such Holder's intent
to effect such exchange, the number of Units into which this Purchase Warrant is
to be exchanged and the date on which the Holder requests that such Purchase
Warrant Exchange occur (the "Notice of Exchange"). The Purchase Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares of Common Stock and Warrants issuable upon
such Purchase Warrant Exchange and, if applicable, a new Purchase Warrant of
like tenor evidencing the balance of the Units remaining subject to this
Purchase Warrant, shall be issued as of the Exchange Date and delivered to the
Holder within seven (7) days following the Exchange Date. In connection with any
Purchase Warrant Exchange, this Purchase Warrant shall represent the right to
subscribe for and acquire the number of Units (rounded to the next highest
integer) equal to (x) the number of Units specified by the Holder in its Notice
of Exchange up to the maximum number or Purchase Warrant Units subject to this
option (the "Total Number") less (y) the number of Purchase Warrant Units equal
to the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the Fair Market Value of the Common Stock plus
the Fair Market Value of the Warrants. "Fair Market Value" shall mean first, if
there is a trading market as indicated in Subsection (1) below for the Units,
such Fair Market Value of the Units and if there is no such trading market in
the Units, then Fair Market Value shall have the meaning indicated in
Subsections (ii) through (v) below for the aggregate value of all shares of
Common Stock and Warrants which comprise a Unit:
(i) If the Units are listed on a national securities exchange
or listed or admitted to unlisted trading privileges on such exchange
or listed for trading on the AMEX, the Fair Market Value shall be the
average of the last reported sale prices or the average of the means of
the last reported bid and asked prices, respectively, of the Units on
such exchange or market for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
(ii) if the Common Stock or Warrants are listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the AMEX, the Fair Market Value shall
be the average of the last reported sale prices or the average of the
means of the last reported bid and asked prices, respectively, of
Common Stock or Warrants, respectively, on such exchange or market for
the twenty (20) business days ending on the last business day prior to
the Exchange Date; or
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(iii) If the Common Stock or Warrants are not so listed or
admitted to unlisted trading privileges, the Fair Market Value shall be
the average of the means of the last reported bid and asked prices of
the Common Stock or Warrants, respectively, for the twenty (20)
business days ending on the last business day prior to the Exchange
Date; or
(iv) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less than book
value thereof as at the end of the most recent fiscal year of the
Company ending prior to the Exchange Date, determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company; or
(v) If the Warrants are not so listed or admitted to unlisted
trading privileges, and bid and asked prices are not so reported for
Warrants, then Fair Market Value for the Warrants shall be an amount
equal to the difference between (i) the Fair Market Value of the shares
of Common Stock which may be received upon the exercise of the
Warrants, as determined herein, and (ii) the Warrant Exercise Price.
2. This Purchase Warrant may not be sold, transferred, assigned or
hypothecated by the Holder except in compliance with the provisions of the Act.
The Company may treat the registered Holder of this Purchase Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Purchase Warrant or his duly authorized
attorney, upon written request during ordinary business hours, to inspect and
copy or make extracts from its books showing the registered holders of Purchase
Warrants. All Purchase Warrants issued upon the transfer or assignment of this
Purchase Warrant will be dated the same date as this Purchase Warrant, and all
rights of the Holder thereof shall be identical to those of the Holder.
3. (a) The Holder represents, by accepting this Warrant, that he
understands that this Warrant and any securities obtainable upon exercise of
this Purchase Warrant have not been registered for sale under Federal or state
securities laws and are being offered and sold to the Holder pursuant to one or
more exemptions from the registration requirements of such securities laws. The
Holder understands that he must bear the economic risk of his investment in this
Purchase Warrant and any securities obtainable upon exercise of this Purchase
Warrant for an indefinite period of time, as this Purchase Warrant and such
securities have not been registered under Federal or state securities laws and
therefore cannot be sold unless subsequently registered under such laws, unless
an exemption from such registration is available.
(b) The Holder, by his acceptance of this Purchase Warrant,
represents to the Company that he is acquiring this Purchase Warrant and will
acquire any securities obtainable upon exercise of this Purchase Warrant for his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities Act of 1933. The
Holder agrees that this Purchase Warrant and any such securities will not be
sold or otherwise transferred unless (i) a registration statement with respect
to such transfer its effective under the Act and any applicable state securities
laws or (ii) the Holder delivers to the Company
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an opinion of counsel reasonably satisfactory to the Company that such
registration statement is not required.
(c) Notwithstanding the foregoing, this Purchase Warrant may be
sold, transferred, assigned or hypothecated (i) to any firm or corporation that
succeeds to all or substantially all of the business of Paramount, (ii) to any
of the officers or employees of Paramount or of any such successor firm or (iii)
in the case of an individual, pursuant to such individual's last will and
testament or the laws of descent and distribution, and is so transferable only
upon the books of the Company which it shall cause to be maintained for such
purpose. The Company may treat the registered Holder of this Purchase Warrant as
he or it appears on the Company's books at any time as the Holder for all
purposes. The Company shall permit any Holder of a Purchase Warrant or his duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Purchase Warrants. All warrants issued upon the transfer or assignment of
this Purchase Warrant will be dated the same date as this Purchase Warrant, and
all rights of the holder thereof shall be identical to those of the Holder.
(d) The Holder represents that the Holder is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the questions contained in Section 9 hereof, and that Holder is
able to hear the economic risk of an investment in the Units.
4. This Purchase Warrant shall not entitle the Holder to any voting
rights or any other rights, or subject to the Holder to any liabilities, as a
stockholder of the Company.
5. (a) The Holder shall with respect to the shares of Common Stock and
the Warrant Shares underlying this Purchase Warrant, have the right to
participate in the registration rights granted to purchasers of the Units
pursuant to Section 4 of the subscription agreements (the "Subscription
Agreements") between such purchasers and the Company that were entered into at
the time of the initial sale of the Units. By acceptance of this Purchase
Warrant, the Holder agrees to comply with the provisions in Section 4 of the
Subscription Agreement to same extent as if it were a party thereto.
(b) Until all shares of Common Stock and the Warrant Shares
underlying this Purchase Warrant have been sold under a Registration Statement
or pursuant to Rule 144, the Company shall use its reasonable best efforts to
file with the Securities and Exchange Commission all current reports and the
information as may be necessary to enable the Holder to effect sales of its
shares in reliance upon Rule 144 promulgated under the Act.
6. The Exercise Price in effect at any time and the number and kind
of securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common Stock
(ii) subdivide or reclassify its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine, or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the Exercise
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Price in effect at the time of the record date for such dividend or distribution
or the effective date of such subdivision, combination or reclassification shall
be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be successively whenever
any event listed above shall occur.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than (i) the current market price of the Common Stock (as
defined in Subsection (d) below) on the record date mentioned below, or (ii) the
Exercise Price on a per share basis giving no value to the Warrants included in
the Units (the "Per Share Exercise Price") on such record date, the Exercise
Price shall be adjusted so that the same shall equal the lower of (i) the price
determined by multiplying the number of shares then comprising a Unit by the
product of the Per Share Exercise Price in effect immediately prior to the date
of such issuance multiplied by a fraction, the numerator of which shall be the
sum of the number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible) or (ii) in the event the
Subscription Price is equal to or higher than the current market price but is
less than the Per Share Exercise Price, the price determined by multiplying the
number of shares then comprising a Unit by the product of the Per Share Exercise
Price in effect immediately prior to the date of issuance multiplied by a
fraction, the numerator of which shall be the sum of the number of shares
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Per Share Exercise
Price in effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding an the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.
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(c) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of shares
then comprising a Unit by the product of the Per Share Exercise Price in effect
immediately prior thereto multiplied by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (d)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) For the purpose of any computation under Subsections (b) or (c)
above, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing prices for 30 consecutive business
days before such date. The closing price for each day shall be the last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange, including the AMEX. on which the
Common Stock is admitted to trading or listed, or if not listed or admitted to
trading on such exchange or market, the average of the highest reported bid and
lowest reported asked prices as reported by AMEX, or other similar organization
if AMEX is no longer reporting such information, or if not so available, the
fair market price as determined by the Board of Directors.
(e) Whenever the Exercise Price payable upon exercise of each
Purchase Warrant is adjusted pursuant to Subsection (a), (b) and (c) above, the
number of Shares purchasable upon exercise of this Purchase Warrant shall
simultaneously be adjusted by multiplying the number of shares initially
issuable upon exercise of this Purchase Warrant by the Exercise Price in effect
on the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease oft least five cents
(0.05) in such price; provided, however, that any adjustments which by reason of
this Subsection (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 6 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 6 as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the Registered Holder of Common Stock or securities convertible
into Common Stock (including Warrants).
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(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 20 days after any request for such an
adjustment by the Registered Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of shares issuable upon exercise of each
Purchase Warrant, and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Registered Holder at his
last address appearing in the warrant register of the Warrant Agent, and shall
cause a certified copy thereof to be mailed to its Warrant Agent. The Company
may retain a firm of independent certified public accountants selected by the
Board of Directors (who may be the regular accountants employed by the Company)
to make any computations required by this Section 6. and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Registered Holder of the Purchase Warrants
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of the Purchase Warrants shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsection (a) above.
(i) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Purchase Warrant Units issuable upon exercise of
each Purchase Warrant and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders, at the address set
forth herein, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 6, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(j) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Purchase Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Purchase Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (a) to (i) inclusive above.
(k) In case any event shall occur as to which the other provisions
of this Section 6 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Purchase Warrant in accordance with the essential intent and principles
hereof then, in each such case, the Holders of Purchase Warrants representing
the right to purchase a majority of the Purchase Warrant Units may appoint a
firm of independent public accountants reasonably acceptable to the Company,
which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Purchase Warrants.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the
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Holder of this Purchase Warrant and shall make the adjustments described
therein. The fees and expenses of such independent public accountants shall be
borne by the Company.
7. In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of the Purchase Warrant) or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the holder shall have the right
thereafter by exercising this Purchase Warrant at any time prior to the
expiration of the Purchase Warrant to purchase the kind and amount of shares of
stock and other securities and property receivable upon such reclassification,
capital reorganization and other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock which might have
been purchased upon exercise of this Purchase Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Purchase Warrant. The foregoing provisions of this Section 7 shall similarly
apply to successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other that Common Stock any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection 6(a) hereof.
8. This Agreement shall be governed by and in accordance with the laws
of the State of New York, without giving effect to the principles of conflicts
of law thereof.
8
<PAGE>
IN WITNESS WHEREOF, Pacific Pharmaceuticals, Inc. has caused this
Purchase Warrant to be signed by its duly authorized officers under its
corporate seal, and this Purchase Warrant to be dated November 27, 1995.
PACIFIC PHARMACEUTICALS, INC.
By:
-------------------------
Name:
Title:
(Corporate Seal)
Attest:
- - ----------------------------
HOLDER
- - ----------------------------
9
<PAGE>
PURCHASE FORM
-------------
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Purchase Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Purchase
Warrant for, and to purchase thereunder, ________ Units of Pacific
Pharmaceuticals Inc., each Unit consisting of _________ shares of $_______ Par
Value Common Stock and ________ Warrant(s) to purchase _________ share(s)
________ of Common Stock and herewith makes payment of $_______ thereof.
<TABLE>
<S> <C>
Dated: , 19 . Instructions for Registration of Stock and Warrants
---------------- ----
---------------------------------------------------
Print Name
---------------------------------------------------
Address
---------------------------------------------------
Signature
</TABLE>
10
<PAGE>
PURCHASE WARRANT EXCHANGE
-------------------------
The undersigned, pursuant to the provisions of the foregoing Purchase
Warrant, hereby elects to exchange its Purchase Warrant for _________ Units of
__________, each Unit consisting of shares of $_________ Par Value Common Stock
and _________ Warrant(s) to purchase _________ share(s) _________ of Common
Stock, pursuant to the Purchase Warrant Exchange provisions of the Purchase
Warrant.
<TABLE>
<S> <C>
Dated: , 19
---------------- ---
--------------------------------------------------
Print Name
--------------------------------------------------
Address
--------------------------------------------------
Signature
</TABLE>
11
<PAGE>
TRANSFER FORM
-------------
(To be signed only upon transfer of the Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________the right to purchase Units represented by the
foregoing Purchase Warrant to the extent of Units, and appoints _____________
attorney to transfer such rights on the books of __________, with full power of
substitution in the premises.
Dated: , 19
[ ]
By:
-------------------------------
-----------------------------------
Address
In the presence of:
12
Form of 1997 Unit Purchase Option
---------------------------------
On March 17, 1998, Procept, Inc. ("Procept") completed a merger (the "Merger")
with Pacific Pharmaceuticals, Inc. ("Pacific"). In accordance with the Agreement
and Plan of Merger Between Procept, Procept Acquisition Corp. and Pacific dated
December 10, 1998, as amended, each outstanding option and warrant to purchase
Pacific common stock, $0.02 par value, ("Pacific Common Stock") held by
investors and corporate partners has been assumed by Procept. Each such option
and warrant will continue to have, and be subject to, the terms and conditions
set forth in such option or warrant immediately prior to the Merger except that
(i) each option and warrant shall be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Procept common stock,
$0.01 par value, ("Procept Common Stock") equal to the product of the number of
shares of Pacific Common Stock that were issuable upon exercise of such option
or warrant immediately prior to the Merger multiplied by 0.10865, rounded down
to the nearest whole number of shares, and (ii) the per share exercise price for
the Procept Common Stock issuable upon exercise of such option and warrant shall
be equal to the quotient, rounded down to the nearest whole cent, determined by
dividing the exercise price per share of Pacific Common Stock at which such
option or warrant was exercisable immediately prior to the Merger by 0.10865.
As of March 25, 1999, there are outstanding 1997 Unit Purchase Options to
purchase an aggregate of (i) 135,817 Class A Warrants to purchase Procept Common
Stock and (ii) 395,065 shares of Procept Common Stock.
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NEITHER SUCH SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR
CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
PACIFIC PHARMACEUTICALS, INC.
Form of Unit Purchase Option for the Purchase of Units Consisting of
Shares of preferred Stock and Warrants
No. Option Units
FOR VALUE RECEIVED, PACIFIC PHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), hereby certifies that [ ], or permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing on September 7, 1997 and prior to 5:00 P.M., New York City time, on
September 7, 2007, up to [ ] Units, each Unit consisting of (a) five hundred
(500) shares of Premium Preferred Stock (the "Series A Preferred Stock") of the
Company, par value $25.00 per share and stated value $200.00 per share, (the
"Preferred Stock") and (b) fifty thousand (50,000) Class A Warrants (the "Class
A Warrants") to purchase 50,000 shares of Common Stock of the company, for an
aggregate Unit purchase price of $[ ] (computed on the basis of $110,00 per
Unit). (Hereinafter, (i) said Units are referred to as the "Units", (ii) said
Series A Preferred Stock, together with any other equity securities which may be
issued by the company with respect thereto (other than on conversion thereof) or
in substitution therefor, is referred to as the "Preferred Stock", (iii) said
Class A Warrants are referred to as the "Warrants", (iv) the Common Stock
purchasable upon exercise of the Warrants and into which the Preferred Stock is
convertible, is referred as the "Common Stock", (v) the shares of the Preferred
Stock purchasable hereunder or under any other Option (as hereinafter defined)
are referred to as the "Preferred Shares", (vi) the shares of Common Stock
purchasable upon exercise of the Warrants hereunder or under any other Option
(as hereinafter defined) are referred to as the "Warrant Shares", (vii) the
shares of Common Stock purchasable hereunder or under any other Option (as
hereinafter defined) following the conversion of all shares of Preferred Stock
underlying this Option into Common Stock, or other capital stock of the Company
as the case may be, and each share of Common Stock, or other capital stock of
the Company as the case may be, receivable upon the exercise of the Warrants
underlying this Option are referred to as the "Conversion Shares", (viii) the
aggregate purchase price payable for the Units hereunder is referred to as the
"Aggregate Option Price", (ix) the price payable (initially $110,000 per Unit,
subject to adjustment) for each of the Units, hereunder is referred to as the
"Per Unit Price", (x) this Option, all similar Options issued on the date hereof
and all warrants hereafter issued in exchange or substitution for this Option or
such similar Options are referred to as the "Options" and (xi) the holder of
this Option is referred to as the "Holder" and the holder of this Option and all
other Options are referred to as the " Holders" and Holders of more than fifty
percent (50%) of the outstanding Options are referred to as the "Majority of the
Holders." The Aggregate
<PAGE>
Option Price is not subject to adjustment. The Per Unit Price is subject to
adjustment as hereinafter provided, in the event of any such adjustment, the
number of Preferred Shares, Conversion Shares of Warrant Shares, as the case may
be, deliverable upon exercise of this Option shall be adjusted in accordance
with paragraph 3(j) below.
This Option, together with options of like tenor, constituting in the
aggregate Options to purchase 10,0003 Units, was originally issued pursuant to
an agency agreement between the Company and Paramount Capital, Inc., as
placement agent the ("Placement Agent") in connection with a private placement
(the "Offering") of 100.003 Units (the "Offering Units") each Offering Unit
consisting of (a) 500 shares of Series A Preferred Stock (the "Offering
Preferred") and (b) 50,000 Class A Warrants (the "Offering Warrants"), for which
the Placement Agent acted as Placement Agent.
1. Exercise of Option.
(a) this Option may be exercised, in whole at any time or in part
from time to time, commencing on September 7, 1997 and prior to 5:00 P.M., New
York City time, on September 7, 2007 by the Holder:
(i) by the surrender of this Option (with the
subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment of
the Aggregate Option Price, or the proportionate part thereof if
this Option is exercised in part, with payment for the number of
Units made by certified or official bank check payable to the order
of the Company; or
(ii) by the surrender of this Option (with the cashless
exercise form at the end hereof duly executed) (a "Cashless
Exercise") at the address set forth in Subsection 9(a) hereof. The
Option Exchange shall take place on the date specified in the
Cashless Exercise Form or, if later, the date the Cashless Exercise
Form is surrendered to the Company (the "Exchange Date"). Such
presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay the Aggregate Option Price, or the proportionate
part thereof if this Option is exercised in part. In the event of a
Cashless Exercise this Option shall represent the right to subscribe
for and acquire the number of Units (rounded to the next highest
integer) equal to (x) the number of Units specified by the Holder in
its Cashless Exercise Form (the "Total Number") (such number not to
exceed the maximum number of Units subject to this Option, as may be
adjusted from time to time) less (y) the number of Units equal to
the quotient obtained by dividing (A) the product of the total
Number and the existing Per Unit Price by (b) the Market Price Per
Unit. "Market Price Per Unit" shall mean first, if there is a
trading market as indicated in Subsection (a) below for the Units,
such Market Price Per Unit and if there is no such trading market in
the Units, then Market Price Per Unit shall equal the sum of the
aggregate Market Price of all shares of Preferred Stock (the "Market
Price Per Share of Preferred Stock") (or, as the case may be, if
after the Conversion Date (as hereinafter defined), the Common
Stock) (the "Market Price Per Share of Common Stock") and Warrants
(the "Market Price Per Warrant") which comprise a Unit, with the
meanings indicated in Subsections (b) through (G) below:
-2-
<PAGE>
(A) If the Units are listed on a national
securities exchange or listed or admitted to unlisted
trading privileges on such exchange of listed for
trading on the Nasdaq Nation Market or the Nasdaq
Smallcap Market, the Market Price Per Unit shall be the
last reported sale price (or if no last sale, the last
quoted ask price) of the Units on such exchange or
market for the trading day immediately preceding the
Exchange Date; or
(B) If the Preferred Stock or Warrants are
listed on a national securities exchange or admitted to
unlisted trading privileges on such exchange or listed
for trading on the Nasdaq Nation Market or the Nasdaq
Smallcap Market, the Market Price Per Share of Preferred
Stock, or Market Price Per Warrant, respectively, shall
be the last reported sale price (or if no last sale, the
last quoted ask price) of the Preferred Stock or
Warrants, respectively, on such exchange or market for
the trading day immediately preceding the Exchange Date;
or
(C) If the Preferred Stock or Warrants are
not so listed or admitted to unlisted trading
privileges, the Market Price Per Share of Preferred
Stock, or Market Price Per Warrant, respectively, shall
be the last reported sale price (or if no last sale, the
last quoted ask price) of the Preferred Stock or
Warrants in the over-the-counter market as reported by
the National Quotation Bureau or similar organization or
in the Pink Sheets for the trading day immediately
preceding the Exchange Date; or
(D) If the Preferred Stock is not so listed
or admitted to unlisted trading privileges and the sale
price (or if no last sale, the last quoted ask price) is
not so reported, the Market Price Per Share of Preferred
Stock shall be the Market Price Per Share of the Common
Stock (as set forth in paragraphs (F) and (G) below)
multiplied by the then effective "conversion rate" for
the Preferred Stock (as defined and used in the
Certificate of Designations for the Series A Preferred
Stock), or if the Market Price Per Share of Common Stock
is not so available, the fair market value of the
Preferred Stock as determined by agreement between the
Board of Directors of the Company and a Majority of the
Holders; or
(E) If the Warrants are not so listed or
admitted to unlisted trading privileges, and the sale
price (or if no last sale, the last quoted ask price) is
not so reported for the Warrants, then Market Price Per
Warrant shall be an amount equal to the difference
between (i) the Market Price Per Share of Common Stock
which may be received upon the exercise of the Warrants,
as determined in paragraphs (F) and (G) below, and (ii)
the Warrant Exercise Price.
(F) (i) If the Common Stock is listed on a
national securities exchange or admitted to unlisted
trading privileges on such exchange or listed for
trading on the Nasdaq National Market or the Nasdaq
Smallcap Market, the Market Price Per Share of Common
Stock shall be the last reported sale price (or if no
last sale, the last quoted ask price) of the Common
Stock on such exchange or market for the trading day
immediately preceding the Exchange Date; or (ii) if the
Common Stock is not so listed or admitted to unlisted
trading privileges, the Market Price
-3-
<PAGE>
Per Share of Common Stock shall be the last reported
sale price (or if no last sale, the last quoted ask
price) of the Common Stock in the over-the-counter
market as reported by the National Quotation Bureau or
similar organization or in the Pink Sheets, as the case
may be, for the trading day immediately preceding
Exchange Date;
(G) If the Common Stock is not so listed or
admitted to unlisted trading privileges and the sale
price is (or if no last sale, the last quoted ask price)
not so reported, the Market Price Per Share of Common
Stock shall be the fair market value as determined by
agreement between the Board of Directors of the Company
and a Majority of the Holders; or
(H) If the Company and the Majority of the
Holders are unable to reach agreement on any valuation
matter, such valuation shall be submitted to and
determined by a nationally recognized independent
investment bank selected by the Board of Directors of
the Company and the Majority of the Holders (or, if such
selection cannot be agreed upon promptly, or in any
event within ten days, then such valuation shall be made
by a nationally recognized independent investment
banking firm selected by the American Arbitration
Association in New York City in accordance with its
rules), the costs of which valuation shall be paid for
by the Company.
(iii) by the surrender of this Option (with the
subscription (promissory note) form at the end hereof duly executed)
at the address set forth in Subsection 9(a) hereof, together with
the presentation of a promissory note made payable to the
corporation, duly executed and in the form at the end hereof; such
promissory note shall bear interest annually at a rate equal to 5%
and accrued interest shall be payable on an annual basis. Such
promissory note shall be secured by the securities underlying this
Option, which shall be held in safe-keeping by the Company as
collateral for such indebtedness and shall be due and payable, if
not earlier prepaid in accordance with the terms of the promissory
note, on the date which is ten (10) years from the date hereof.
(b) If this Option is exercised in part, the Holder is entitled to
receive a new Option covering the Units, which have not been exercised and
setting forth the proportionate part of the Aggregate Option Price applicable to
such Units. Upon surrender of this Option, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Preferred Stock (or the Conversion Shares following the
conversion Date) and Warrants to which the Holder shall be entitled and, if this
Option is exercised in whole, in lieu of any fractional shares of the Preferred
stock (or the Conversion Shares following the Conversion Date) or Warrants to
which the Holder shall be entitled, pay to the Holder cash in an amount equal to
the fair value of such fractional shares (determined in such reasonable manner
as the Board of Directors of the company shall determine), and (ii) deliver the
other securities and properties receivable upon the exercise of this Option, or
the proportionate part thereof if this Option is exercised in part, pursuant to
the provisions of this Option; provided, however that if this Option is
exercised pursuant to paragraph 1(a)(iii), the Company will issue but shall not
deliver such shares until such time as the promissory note and all accrued
interest thereon shall have been paid in full.
-4-
<PAGE>
(c) If this Option is exercised on or after the date on which all
shares of Preferred Stock have been converted into conversion Shares (the
"Conversion Date"), then this Option shall be exercisable only for Units
consisting of Warrants and Conversion Shares at the then applicable Per Unit
Price (including any adjustment pursuant to Section 3 below).
2. Reservation of Warrant Shares, Preferred Shares and Conversion
Shares Listing. The Company agrees that, prior to the expiration of this Option,
the Company will at all times (a) have authorized and in reserve, and will keep
available, solely for issuance and delivery upon the exercise of this Option,
the Units, the Warrants and the Preferred Shares underlying such Units (and,
after the Conversion Date, the Conversion Shares underlying such Units) and
other securities and properties as from time to time shall be receivable upon
the exercise of this Option, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal and (b) have authorized and
in reserve, and will keep available solely for issuance or delivery upon
exercise of the Warrants and conversion of the Preferred Shares, the shares of
Common Stock, the Warrant Shares and the Conversion Shares and other securities
and properties as from time to time shall be receivable upon such exercise and
conversion, free and clear of all restrictions on sale or transfer, other than
under Federal or state securities laws, and free and clear of all preemptive
rights and rights of first refusal; and (c) if the Company is listed or
hereafter lists its Common Stock on any national securities exchange, the Nasdaq
National Market or the Nasdaq Smallcap Market, use its best efforts to keep the
Conversion Shares authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution.
(a) The anti-dilution provisions of the Warrant Agreement shall
protect the Holder from dilution of the purchase rights represented by the
Warrants. Prior to the Conversion Date and in addition to the protection set
forth in the Articles and the protection set forth in 3(a)(iv), the following
anti-dilution provisions shall protect the Holder from dilution resulting from
the issuance of Preferred Stock, Common Stock and Common Stock equivalents:
(i) if at any time or from time to time after the date
of this Option, the Company shall issue or distribute to the holders
of shares of Preferred Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets
(excluding a subdivision, combination or reclassification, or
dividend or distribution payable in shares of Preferred Stock,
referred to in Subsection 3(a)(ii), and also excluding cash
dividends or cash distributions paid out of net profits legally
available therefor in the full amount thereof (any such non-excluded
event being herein called a "Preferred Stock Special Dividend")),
the Per Unit Price shall be adjusted by multiplying the Per Unit
Price then in effect by a fraction, (A) the numerator of which shall
be (x) the then current Market Price Per Share of Preferred Stock in
effect on the record date of such issuance or distribution less (y)
the fair market value (as determined in good faith by the Company's
Board of Directors) of the evidence of indebtedness, cash,
securities or property, or other assets issued or distributed in
such Preferred Stock Special Dividend applicable to one share of
Preferred Stock and (B) the denominator of which shall be the then
current Market Price Per Share of Preferred Stock in effect on the
record date of such issuance or
-5-
<PAGE>
distribution. An adjustment made pursuant to this Subsection 3(a)(i)
shall become effective immediately after the record date of any such
Preferred Stock Special Dividend.
(ii) In case the Company shall hereafter (A) pay a
dividend or make a distribution on its capital stock in shares of
Preferred Stock, (B) subdivide its outstanding shares of Preferred
Stock into a greater number of shares, (C) combine its outstanding
shares of Preferred Stock into a smaller number of shares or (D)
issue by reclassification of its Preferred Stock any shares of
capital stock of the Company (other than the Conversion Shares), the
Per Unit Price shall be adjusted by multiplying the Per Unit Price
by a fraction, the numerator of which shall be the number of shares
of Preferred Stock or other capital stock of the Company which this
Option was convertible into prior to such action and the denominator
of which shall be the number of shares of Preferred Stock or other
capital stock of the Company which he would have owned immediately
following such action had such Option been exercised immediately
prior thereto. An adjustment made pursuant to this Subsection
3(a)(ii) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(iii) Except as provided in Subsections 3(a)(i) and
3(f), in case the company shall hereafter issue or sell any
Preferred Stock, any securities convertible into Preferred Stock,
any rights, options of warrants to purchase Preferred Stock or any
securities convertible into Preferred Stock, in each case for a
price per share or entitling the holders thereof to purchase
Preferred Stock at a price per share (determined by dividing (A) the
total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the
total consideration, if any, payable to the Company upon exercise or
conversion thereof (the "Preferred Stock Total Consideration") by
(B) the number of additional shares of Preferred Stock issued, sold
or issuable upon exercise or conversion of such securities) which is
less than either (x) the then current Market Price Per Share of
Preferred Stock in effect on the date of such issuance or sale or
(y) the original stated value per share of Preferred Stock, the Per
Unit Price shall be adjusted as of the date of such issuance or sale
by multiplying the Per Unit Price then in effect by a fraction, the
numerator of which shall be (x) the sum of (A) the number of shares
of Preferred Stock outstanding on the record date of such issuance
or sale plus (B) the Preferred Stock Total Consideration divided by
the Market Price of the Preferred Stock or the original stated value
per share of Preferred Stock, whichever is greater, and the
denominator of which shall be (y) the number of shares of Preferred
Stock outstanding on the record ate of such issuance or sale plus
the maximum number of additional shares of Preferred Stock issued,
sold or issuable upon exercise or conversion of such securities.
(iv) Notwithstanding the anti-dilution provisions set
forth in Subsections 39a)(i)-(iii), if an event set forth in
Subsections 3(a)(i)-(iii) (a "Trigger Event") shall occur, and
provided that the anti-dilution provisions of the Preferred stock,
as set forth in the Certificates of Designation for the Series A
Preferred Stock (the "Certificate"), shall apply to such Trigger
Event, then any adjustments as a result of the Trigger Event shall
occur as follows: (A) first, the anti-dilution provisions, as set
forth in the Certificate shall
-6-
<PAGE>
apply; and (B) second, the anti-dilution provisions set forth in
Subsections 39a)(i)-(iii) shall apply to the extent that the
application of such provisions shall result in the Holder receiving
additional shares of capital stock of the Company, having the Per
Unit Price reduced or otherwise further improve the economic
position of the Holder.
(b) Upon the Conversion Date this Option shall be exercisable per
each underlying Unit into the number of shares of Common Stock that the Holder
would have received had it exercised this Option with respect to such Unit and
all the underlying Preferred Stock into Common Stock immediately prior to such
Conversion Date, subject to any adjustment. In addition, after the Conversion
Date, the following anti-dilution provisions shall protect the Holder from
dilution resulting from the issuance of Common Stock and/or Common Stock
equivalents:
(i) If the Company shall issue or distribute to the
holders of shares of Common Stock evidence of its indebtedness, any
other securities of the Company or any cash, property or other
assets (excluding a subdivision, combination or reclassification, or
dividend or distribution payable in shares of Common Stock, referred
to in Subsection 3(b)(II), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in
the full amount thereof (any such non-excluded event being herein
called a "Common Stock Special Dividend")), the Per Unit Price shall
be adjusted by multiplying the Per Unit Price then in effect by a
fraction, (A) the numerator of which shall be (x) the then current
Market Price Per Share of Common Stock in effect on the record ate
of such issuance or distribution less (y) the fair market value (as
determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other
assets issued or distributed in such Common Stock Special Dividend
applicable to one share of Common Stock and (B) the denominator of
which shall be the then current Market Price Per share of Common
Stock in effect on the record ate of such issuance or distribution.
An adjustment made pursuant to this Subsection 3(b)(i) shall become
effective immediately after the record ate of any such Common Stock
Special Dividend.
(ii) If the Company shall (A) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (B)
subdivide its outstanding shares of Common Stock into a greater
number of shares (C), combine its outstanding shares of Common stock
into a smaller number of shares or (D) issue by reclassification of
its Common Stock any shares of capital stock of the Company (other
than the Conversion Shares), the Per Unit Price shall be adjusted by
multiplying the Per Unit Price by a fraction, the numerator of which
shall be number of shares of Common Stock or other capital stock of
the Company which this Option was convertible into prior to such
action and the denominator of which shall be the number of shares of
Common Stock or other capital stock of the Company which he would
have owned immediately following such action had such Option been
exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(b)(ii) shall become effective immediately after
the record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of
a subdivision, combination or reclassification.
-7-
<PAGE>
(iii) Except as provided in Subsections 3(b)(i) and
3(f), in case the Company shall issue or sell any common Stock, any
securities convertible into Common Stock, any rights, options or
warrants to purchase Common Stock or any securities convertible into
Common Stock, in each case for a price per share or entitling the
holders thereof to purchase Common Stock at a price per share
(determined by dividing (A) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to
the company upon exercise or conversion thereof (the Common Stock
Total Consideration"), by (B) the number of additional shares of
Common Stock issued, sold or issuable upon exercise or conversion of
such securities) which is less than either (i) the then current
Market Price Per Share of Common Stock in effect on the date of such
issuance or sale or (ii) the Per Unit Price divided by the number of
shares of Common Stock that each Unit is then exercisable for, the
Per Unit Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Unit Price then in effect by a fraction,
the numerator of which shall be (x) the sum of (1) the number of
shares of Common Stock outstanding on the record date of such
issuance or sale plus (2) the Total Consideration divided by the
then current Market Price of the Common Stock or the Per Unit Price
divided by the number of shares of Common Stock that each Unit is
then exercisable for, whichever is greater, and the denominator of
which shall be (y) the number of shares of Common Stock outstanding
on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities.
(c) No adjustment in the Per Unit Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
Unit; provided, however, that any adjustments which by reason of this Section
39(c) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment; provided, further, however, that
adjustments shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(c) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
Holder of this Option. All calculations under this Section 3 shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.
Anything in this Section 3 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Per Unit Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(d) Whenever the Per Unit Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Options in
accordance with this Section 3, the company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Options. The Company may, but shall not be obligated to unless
requested by a majority of the Holders of more than fifty percent (50%) of the
outstanding Options, obtain, at its expense, a certificate of a firm or
independent public accountants of recognized standing selected by the Board of
Directors (who may be the regular auditors of the Company) setting forth the Per
Unit Price and the number of Warrants and Preferred Shares of Conversion Shares,
as the case may be, after such adjustment or the effect of such modification,
-8-
<PAGE>
a brief statement of the facts requiring such adjustment or modification and the
manner of computing the same and cause copies of such certificate to be mailed
to the Holders of the Options.
(e) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Preferred Stock or Common
Stock other than a cash distribution out of earned surplus, the Company shall
mail notice thereof to the Holders of the Options not less than 10 days prior to
the record date fixed for determining stockholders entitled to participate in
such dividend or other distribution.
(f) No adjustment in the Per Unit Price shall be required in the
case of the issuance by the Company of Preferred Stock (or, if after the
Conversion Date, common Stock) (i) pursuant to the exercise of any Option of
(ii) pursuant to (A) the exercise of any stock options or warrants currently
outstanding or (B) securities issued after the date hereof pursuant to any
Company benefit plan provided such issuances were approved by the Company's
Board of Directors and were issued at a price not less than the fair market
value of such securities on the date of issuance; provided, however, that with
respect to Subsection 3(i)(ii), the issuance of such securities were approved by
the board of Directors of the Company and were issued at a price no less than
the "Conversion Price or the Market Price of the securities on the date of
issuance.
(g) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in case
of any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Option shall have the right thereafter to receive on the exercise of
this Option the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Option been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests hereafter of
the Holder of this Option to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Option. The above
provisions of this Subsection 3(g) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The Company shall require the issuer of any
shares of stock or other securities or property thereafter deliverable on the
exercise of this Option to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Options not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
-9-
<PAGE>
(h) If as a result of an adjustment made pursuant to this Section 3,
the Holder of any Option thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Preferred Stock (or if after the Conversion Date, Common Stock) and other
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a written notice to the Holder of any
Option promptly after such adjustment) shall determine the allocation of the
adjusted Per Unit Price between or among shares or such classes of capital stock
or shares of Preferred Stock (or if after the Conversion Date, Common Stock) and
other capital stock.
(i) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the number of
Units purchasable upon exercise of this Option, to the extent this Option has
not then been exercised, shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been originally adjusted (or
had the original adjustment not been required, as the case may be) on the basis
of (i) the fact that Common Stock, or the Preferred Stock, as the case may be,
if any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion privileges, and (ii) the fact that such shares of Common
Stock or the Preferred Stock, as the case may be, if any, were issued or sold
for the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for the issuance,
sale or grant of all such rights. Options, warrants or conversion privileges
whether or not exercised; provided, however, that no such readjustment shall
have the effect of decreasing the number of Units purchasable upon exercise of
this Option by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion privileges.
(j) Whenever the Per Unit Price payable upon exercise of each Option
is adjusted pursuant to this Section 3, (i) the number of shares of Preferred
Stock (or if after the Conversion Date, Common Stock) included in an Unit shall
simultaneously be adjusted by multiplying the number of shares of Preferred
Stock (or if after the Conversion Date, Common Stock) included in an Unit
immediately prior to such adjustment by the Per Unit Price in effect immediately
prior to such adjustment and dividing the product so obtained by the Per Unit
Price, as adjusted and (ii) the number of shares of Common Stock or other
securities issuable upon exercise of the Warrants included in the Units and the
exercise price payable for each of the Warrant Shares (initially $0.96 per
Warrant Share, subject to adjustment) pursuant to the Warrant terms shall be
adjusted in accordance with the applicable terms of the Warrant Agreement.
4. Fully Paid Stock; Taxes. The company agrees that the shares of
the Preferred Stock represented by each and every certificate for Preferred
Shares delivered on the exercise of this Option and the shares of Common Stock
delivered upon the exercise of the Warrants or the conversion of the Preferred
Shares or the exercise of this Option following the conversion of all shares of
Preferred Stock into Common Stock, shall at the time of such delivery, be
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights or rights of first refusal, and the Company will take all such
actions as may be necessary to assure that the par value or stated value, if
any, per share of the Preferred Stock and the Common Stock is at all times equal
to or less than the then Per Unit Price. The Company further covenants and
agrees that it will pay, when due and payable, any and all Federal and state
stamp, original issue
-10-
<PAGE>
or similar taxes which may be payable in respect of the issue of any Warrant
Share, Preferred Share, Conversion Share or any certificate thereof to the
extent required because of the issuance by the Company of such security.
5. Registration Under Securities Act of 1933.
(a) The Holder shall, with respect to the Conversion Shares only,
have the right to participate in the registration rights granted to holders of
Registrable Securities pursuant to Section 5 of the subscription agreements (the
"Subscription Agreements"" between such holders and the Company that were
entered into at the time of the initial sale of the Preferred Stock. By
acceptance of this Option, the Holder agrees to comply with the provisions in
Section 5 of the Subscription Agreement to same extent as if it were a party
thereto.
(b) Until all Conversion Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon rule 144 promulgated under the Act.
6. Investment Intent; Limited Transferability.
(a) The Holder represents, by accepting this Option, that it
understands that this Option and any securities obtainable upon exercise of this
Option or upon conversion of such securities have not been registered for sale
under Federal or state securities laws and are being offered and sold to the
Holder pursuant to one or more exemptions from the registration requirements of
such securities laws. In the absence of an effective registration of such
securities or an exemption therefrom, any certificates for such securities shall
bear the legend set forth on the first page hereof. The Holder understands that
it must bear the economic risk of its investment in this Option and any
securities obtainable upon exercise of this Option or upon conversion of such
securities for an indefinite period of time, as this Option and such securities
have not be registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available.
(b) The Holder, by his acceptance of its Option, represents to the
Company that is acquiring this Option and will acquire any securities obtainable
upon exercise of this Option for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Act"). The Holder agrees that
this Option and any such securities will not be sold or otherwise transferred
unless (i) a registration statement with respect to such transfer is effective
under the Act any applicable state securities laws or (ii) such sale or transfer
is made pursuant to one or more exemptions from the Act.
(c) This Option may not be sold, transferred, assigned or
hypothecated for six months from the date hereof except (i) to any firm or
corporation that succeeds to all or substantially all of the business of
Paramount Capital, Inc., (ii) to any of the officers, employees, associates of
affiliated companies of Paramount Capital, Inc., or of any such successor firm,
(iii) to any NASD member participating in the Offering or any officer or
employee of any such
-11-
<PAGE>
NASD member or (iv) in the case of an individual, pursuant to such individual's
last will and testament or the laws of descent and distribution, and is so
transferable only upon the books of the company which it shall cause to be
maintained for such purpose. The Company may treat the registered Holder of this
Option as he or it appears on the Company's books at any time as the Holder for
all purposes. The Company shall permit any Holder of an Option or its duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Options. All Options issued upon the transfer or assignment of this Option
will be dated the same date as this Option, and all rights of the holder thereof
shall be identical to those of the Holder.
7. Loss, etc., of Option. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Option, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Option, if mutilated, the Company
shall execute and deliver to the Holder a new Option of like date, tenor and
denomination.
8. Option Holder Not Stockholder. This Option does not confer upon
the Holder of any right to vote or to consent to or receive notice as a
stockholder of the Company, as such, in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Option does, however, confer certain rights and require certain notices to
Holders as set forth herein.
9. Communication. No notice or other communication under this Option
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at Pacific Pharmaceuticals, Inc., 6730 Mesa Ridge
Road, San Diego, CA 92121 Attn: President or such other address as the company
has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787 Seventh
Avenue, New York, NY 10019 or other such address as the Holder has designated in
writing to he Company
10. Headings. The headings of this Option have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Option shall be governed by and construed
in accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
12. Amendment, Waiver, etc. Except as expressly provided herein,
neither this Option nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the then current
Majority of the Holders of the Options only.
-12-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Option to be signed
by its President and attested by its Secretary this [ ] day of [ ], 1997.
PACIFIC PHARMACEUTICALS, INC.
By:
-------------------------
Name:
Title:
ATTEST:
- - ----------------------------------
Secretary
-13-
<PAGE>
SUBSCRIPTION
------------
The undersigned, __________________________, pursuant to the
provisions of the foregoing Option, hereby agrees to subscribe for and purchase
______________________ Units of Pacific Pharmaceuticals, Inc., each Unit
consisting of one share of the Preferred Stock, $25.00 par value, and one Class
A Warrant covered by said Option, and makes payment therefor in full at the
price per share provided by said Option. The undersigned hereby confirms the
representations and warranties made by it in the Option.
Dated:___________________________ Signature:____________________________
Address:______________________________
SUBSCRIPTION
------------
(promissory note)
The undersigned, __________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
______________________ shares of the {referred Stock, par value $.001 per share,
of Pacific Pharmaceuticals, Inc., covered by said Option, and makes payment
therefor in full at the price per share provided by said Option by delivery of
the attached Promissory Note. The undersigned hereby confirms the
representations and warranties made by it in the Promissory Note.
Dated:____________________________ Signature:____________________________
Address:______________________________
CASHLESS EXERCISE
-----------------
The undersigned ________________________________, pursuant to
the provisions of the foregoing Option, hereby elects to exchange its Option for
__________ Units each Unit consisting of one share of the Preferred Stock,
$25.00 par value, and one Class A Warrant pursuant to the cashless exercise
provisions of the Option. The undersigned hereby confirms the representations
and warranties made by it in the Option.
Dated:_____________________________ Signature:____________________________
Address:______________________________
-14-
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ________________________ hereby sells,
assigns and transfers unto ______________________________ the foregoing Option
and all rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Option on the books of Pacific
Pharmaceuticals, Inc.
Dated:___________________________ Signature:_____________________________
Address:_______________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________________ hereby sells,
assigns and transfers unto ______________________________ the right to purchase
______ Units of Pacific Pharmaceuticals, Inc., each Unit consisting of one share
of Preferred Stock, $26.00 par value, and one Class A Warrant covered by the
foregoing Option, and a proportionate part of said Option and the rights
evidenced thereby, and does irrevocably constitute and appoint _______________,
attorney, to transfer that part of said Option on the books of Pacific
Pharmaceuticals, Inc.
Dated:____________________________ Signature:_____________________________
Address:_______________________________
-15-
Form of Class A Warrant
-----------------------
On March 17, 1998, Procept, Inc. ("Procept") completed a merger (the "Merger")
with Pacific Pharmaceuticals, Inc. ("Pacific"). In accordance with the Agreement
and Plan of Merger Between Procept, Procept Acquisition Corp. and Pacific dated
December 10, 1998, as amended, each outstanding option and warrant to purchase
Pacific common stock, $0.02 par value, ("Pacific Common Stock") held by
investors and corporate partners has been assumed by Procept. Each such option
and warrant will continue to have, and be subject to, the terms and conditions
set forth in such option or warrant immediately prior to the Merger except that
(i) each option and warrant shall be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Procept common stock,
$0.01 par value, ("Procept Common Stock") equal to the product of the number of
shares of Pacific Common Stock that were issuable upon exercise of such option
or warrant immediately prior to the Merger multiplied by 0.10865, rounded down
to the nearest whole number of shares, and (ii) the per share exercise price for
the Procept Common Stock issuable upon exercise of such option and warrant shall
be equal to the quotient, rounded down to the nearest whole cent, determined by
dividing the exercise price per share of Pacific Common Stock at which such
option or warrant was exercisable immediately prior to the Merger by 0.10865.
As of March 25, 1999, there are 864,870 Class A Warrants to purchase Procept
Common Stock outstanding.
<PAGE>
VOID AFTER ___________
FORM OF CLASS A WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
PACIFIC, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Class A Warrants ("Warrants") specified above. Each Warrant initially entitles
the Registered Holder to purchase, subject to the terms and conditions set forth
in this Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.02 par value ("Common
Stock"), of PACIFIC, Inc., a Delaware corporation (the "Company"), at any time
commencing _________ and prior to the Expiration Date (as hereinafter defined),
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate office
of American Stock Transfer & Trust Company, as Warrant Agent, or its successor
(the "Warrant Agent"), accompanied by payment of an amount equal to $1.00 for
each Warrant (the "Purchase Price") in lawful money of the United States of
America in cash or by official bank or certified check made payable to Pacific,
Inc. The Company may, at its election, reduce the Purchase Price.
REFERENCE HEREBY IS MADE TO THE FURTHER PROVISIONS OF THIS WARRANT
CERTIFICATE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR
ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
_________ by and between the Company and the Warrant Agent and Paramount
Capital, Inc.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted thereon.
PACIFIC, INC.
By:
-----------------------------
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
-----------------------------
<PAGE>
PACIFIC, INC.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price of the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby are exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Agent shall countersign, for the balance
of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________, 2005. If such date shall in the State of New York be a holiday or a
day on which the banks are authorized to close. The Company may, at its
election, extend the Expiration Date.
This Warrant is not redeemable at the option of the Company prior to
November 27, 1996 unless the closing bid quotation for the Common Stock as
reported on the American Stock Exchange, or on such other exchange on which the
Common Stock is then traded, exceeds 600% of the Purchase Price for twenty (20)
consecutive trading days ending three days prior to the date of redemption.
Thereafter, the Company may redeem in whole but not in part all the Warrants on
60 days prior notice at $.10 per Warrant at any time, provided that the closing
bid quotation for the Common Stock as reported on the American Stock Exchange,
or on such other exchange which the Common Stock is then traded, exceeds 400% of
the Purchase Price for twenty (20) consecutive trading days ending three days
prior to the date of redemption.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized office
of the Company) for all purposes and shall not be affected by any notice to the
contrary.
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise ________ Warrants represented by the Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requires that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
(please print or type name and address)
and to be delivered to
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
--------------------------------------------------
(please type or print name and address)
and if such number of Warrants shall not be all of the Warrants evidenced by the
Warrant Certificates, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member,
then it will be assumed that the exercise was solicited by Paramount Capital,
Inc.
Name of NASD Member if other than Paramount Capital, Inc.
Dated:
-------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Address
- - --------------------------------------------------------------------------------
Social Security or Taxpayer ID number
- - --------------------------------------------------------------------------------
Signature Guaranteed
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Signature guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN ON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.
Form of Class B Warrant
-----------------------
On March 17, 1998, Procept, Inc. ("Procept") completed a merger (the "Merger")
with Pacific Pharmaceuticals, Inc. ("Pacific"). In accordance with the Agreement
and Plan of Merger Between Procept, Procept Acquisition Corp. and Pacific dated
December 10, 1998, as amended, each outstanding option and warrant to purchase
Pacific common stock, $0.02 par value, ("Pacific Common Stock") held by
investors and corporate partners has been assumed by Procept. Each such option
and warrant will continue to have, and be subject to, the terms and conditions
set forth in such option or warrant immediately prior to the Merger except that
(i) each option and warrant shall be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Procept common stock,
$0.01 par value, ("Procept Common Stock") equal to the product of the number of
shares of Pacific Common Stock that were issuable upon exercise of such option
or warrant immediately prior to the Merger multiplied by 0.10865, rounded down
to the nearest whole number of shares, and (ii) the per share exercise price for
the Procept Common Stock issuable upon exercise of such option and warrant shall
be equal to the quotient, rounded down to the nearest whole cent, determined by
dividing the exercise price per share of Pacific Common Stock at which such
option or warrant was exercisable immediately prior to the Merger by 0.10865.
As of March 25, 1999, there are 33,653 Class B Warrants to purchase Procept
Common Stock outstanding.
<PAGE>
VOID AFTER ___________
FORM OF CLASS B WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
PACIFIC, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Class B Warrants ("Warrants") specified above. Each Warrant initially entitles
the Registered Holder to purchase, subject to the terms and conditions set forth
in this Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.02 par value ("Common
Stock"), of PACIFIC, Inc., a Delaware corporation (the "Company"), at any time
commencing _________ and prior to the Expiration Date (as hereinafter defined),
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate office
of American Stock Transfer & Trust Company, as Warrant Agent, or its successor
(the "Warrant Agent"), accompanied by payment of an amount equal to $22.00 for
each Warrant (the "Purchase Price") in lawful money of the United States of
America in cash or by official bank or certified check made payable to Pacific,
Inc. The Company may, at its election, reduce the Purchase Price.
REFERENCE HEREBY IS MADE TO THE FURTHER PROVISIONS OF THIS WARRANT
CERTIFICATE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR
ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
_________ by and between the Company and the Warrant Agent.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted thereon.
PACIFIC, INC.
By:
----------------------------
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
----------------------------
<PAGE>
PACIFIC, INC.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price of the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby are exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Agent shall countersign, for the balance
of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________, 2001. If such date shall in the State of New York be a holiday or a
day on which the banks are authorized to close. The Company may, at its
election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized office
of the Company) for all purposes and shall not be affected by any notice to the
contrary.
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise ________ Warrants represented by the Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requires that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
(please print or type name and address)
and to be delivered to
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
--------------------------------------------------
(please type or print name and address)
and if such number of Warrants shall not be all of the Warrants evidenced by the
Warrant Certificates, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member,
then it will be assumed that the exercise was solicited by Paramount Capital,
Inc.
Name of NASD Member if other than Paramount Capital, Inc.
Dated:
-------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Address
- - --------------------------------------------------------------------------------
Social Security or Taxpayer ID number
- - --------------------------------------------------------------------------------
Signature Guaranteed
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Signature guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN ON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.
Form of Warrant to Purchase Common Stock Issued to
Aries Trust and Aries Domestic Fund, L.P.
On March 17, 1998, Procept, Inc. ("Procept") completed a merger (the "Merger")
with Pacific Pharmaceuticals, Inc. ("Pacific"). In accordance with the Agreement
and Plan of Merger Between Procept, Procept Acquisition Corp. and Pacific dated
December 10, 1998, as amended, each outstanding option and warrant to purchase
Pacific common stock, $0.02 par value, ("Pacific Common Stock") held by
investors and corporate partners has been assumed by Procept. Each such option
and warrant will continue to have, and be subject to, the terms and conditions
set forth in such option or warrant immediately prior to the Merger except that
(i) each option and warrant shall be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Procept common stock,
$0.01 par value, ("Procept Common Stock") equal to the product of the number of
shares of Pacific Common Stock that were issuable upon exercise of such option
or warrant immediately prior to the Merger multiplied by 0.10865, rounded down
to the nearest whole number of shares, and (ii) the per share exercise price for
the Procept Common Stock issuable upon exercise of such option and warrant shall
be equal to the quotient, rounded down to the nearest whole cent, determined by
dividing the exercise price per share of Pacific Common Stock at which such
option or warrant was exercisable immediately prior to the Merger by 0.10865.
As of March 25, 1999, there are 16,298 shares of Procept Common Stock underlying
the attached Warrants to Purchase Common Stock Issued to the Aries Trust and the
Aries Domestic Fund, L.P.
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
PACIFIC PHARMACEUTICALS, INC.
Form of Warrant for the Purchase of Shares of
Common Stock
No.[ ] Shares
FOR VALUE RECEIVED, PACIFIC PHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), hereby certifies that [ ], or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on October 8, 1996, and prior to 5:00 P.M., New York
City time, on October 8, 2001 (the "Termination Date"), [ ] fully
paid and non-assessable shares of the Common Stock, $.02 par value per share, of
the Company at an exercise price equal to the lesser of (x) $1 .875 and (y) the
initial conversion price for the Series A Preferred Stock of the Company, as set
forth in the Certificate of Designations of the Series A Preferred Stock and
issued in connection with the Company's current private placement offering
pursuant to the confidential private placement memorandum dated as of October 1,
1996 (the "PPM") (Hereinafter, (i) said Common Stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock", (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "Aggregate Warrant Price", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "Per Share Warrant Price", (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "Warrants" and (vi) the holder of this Warrant
is referred to as the "Holder" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "Holders"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing the Aggregate Warrant Price by the Per Share Warrant Price in effect
immediately after such adjustment.
1. Exercise of Warrant.
(a) This Warrant may be exercised, in whole at any time or in part
from time to time, commencing on October 8, 1996 and prior to the Termination
Date, by the holder:
(i) by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment of
the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part, with payment for Warrant Shares
made by certified or official bank check payable to the order of the
Company; or
(ii) by the surrender of this Warrant (with the cashless
exercise form at the end hereof duly executed) (a "Cashless
Exercise") at the address set forth in Subsection 9(a) hereof. Such
presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay the Aggregate Warrant Price, or the proportionate
part thereof if this Warrant is exercised in part. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of Warrant Shares subject to .such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the
difference between the then current Market Price per share (as
hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current Market
Price per share of Common Stock. For purposes of any computation
under this Section 1 (a)(ii), the then current market price per
share of the Common Stock at any date (the "Market Price") shall be
deemed to be the last sale price of the Common Stock on the business
day prior to the date of the Cashless Exercise or, in case no such
reported sales take place on such day, the average of the last
reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed
or admitted to trading on any such exchange, the representative
closing bid price of the Common Stock as reported by AMEX, or other
similar organization if AMEX is no longer reporting such
information, or if not so available, the fair market price of the
Common Stock as determined in good faith by the Board of
Directors.exercised (b) If this Warrant is exercised in part, this
Warrant must be for a number of whole shares of the Common Stock and
the Holder is entitled to receive a new Warrant covering the Warrant
Shares which have not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such
Warrant Shares. Upon surrender of this Warrant, the Company will (i)
issue a certificate or certificates in the name of the Holder for
the largest number of whole shares of the Common Stock to which the
Holder shall be entitled and, if this Warrant is exercised in whole,
in lieu of any fractional share of the Common Stock to which the
Holder shall be entitled, pay to the Holder cash in an amount equal
to the fair value of such fractional share (determined in such
reasonable manner as the Board of Directors of the Company shall
determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the
proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares: Listing. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and
2
<PAGE>
will keep available, solely for issuance or delivery upon the exercise of this
Warrant, the shares of the Common Stock and other securities and properties as
from time to time shall be receivable upon the exercise of this Warrant, free
and clear of all restrictions on sale or transfer, except for the restrictions
on sale or transfer set forth in the Securities Act of 1933, as amended (the
"Act"), and restrictions created by or on behalf of the Holder, and free and
clear of all preemptive rights and rights of first refusal; and (b) when the
Company prepares and files a registration statement covering the shares of
Common Stock issued or issuable upon exercise of this Warrant with the
Securities and Exchange Commission (the "SEC") which registration statement is
declared effective by the SEC under the Act and the Company lists its Common
Stock on any national securities exchange, it will use its reasonable best
efforts to cause the shares of Common Stock subject to this Warrant to be listed
on such exchange.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, which is equivalent to not more than 5% of the Company's net
worth) (any such non-excluded event being herein called a Special Dividend"),
the Per Share Warrant Price shall be adjusted by multiplying the Per Share
Warrant Price then in effect by a fraction, the numerator of which shall be the
then current Market Price of the Common Stock less the fair market value (as
determined in good faith by the Company's Board of Directors) of the evidence of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be the then current Market Price of the Common
Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which he would have owned immediately following
such action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3(b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the
Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any
3
<PAGE>
rights, options or warrants to purchase Common Stock or securities convertible
into Common Stock, in each case for a price per share or entitling the holders
thereof to purchase Common Stock at a price per share (determined by dividing
(i) the total amount, if any, received or receivable by the Company in
consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then either the current Market Price of the Common Stock or the current Per
Share Warrant Price in effect on the date of such issuance or sale, the Per
Share Warrant Price shall be adjusted by multiplying the Per Share Exercise
Price then in effect by a fraction, the numerator of which shall be (x) the sum
of (A) the number of shares of Common Stock outstanding on the date of such
issuance or sale plus (B) the Total Consideration divided by either the current
Market Price of the Common Stock or the current Per Share Exercise Price,
whichever is greater, and the denominator of which shall be (y) the number of
shares of Common Stock outstanding on the date of such issuance or sale plus the
maximum number of additional shares of Common Stock issued, sold or issuable
upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required
in the case of the issuance by the Company of (i) Common Stock pursuant to the
exercise or conversion of any Warrant or any other options, warrants or any
convertible securities currently outstanding or outstanding as a result of
securities issued pursuant to the PPM; provided, that the exercise price or
conversion price at which such options, warrants or convertible securities are
exercised or converted, as the case may be, is equal to the exercise price or
conversion price in effect as of the date of this Warrant or as of the date of
issuance with respect to securities issued pursuant to the PPM (except for
standard anti-dilution adjustments) and (ii) shares of Common Stock issued or
sold pursuant to stock purchase or stock option plans or other similar
arrangements that are approved by the Company's Board of Directors.
(e) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in case
of any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter
4
<PAGE>
deliverable on the exercise of this Warrant shall be responsible for all of the
agreements and obligations of the Company hereunder. Notice of any such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be made, shall be
mailed to the Holders of the Warrants not less than 30 days prior to such event.
A sale of all or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other provisions
of this Section 3 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof then,
in each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(g)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Chief Financial Officer of the Company
shall promptly prepare a certificate setting forth the Per Share Warrant Price
and the number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants. In the event of a
dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm) reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
5
<PAGE>
(i) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of earned surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than 1 5 days prior to the record date
fixed for determining stockholders entitled to participate in such dividend or
other distribution.
(j) If, as a result of an adjustment made pursuant to this Section
3, the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. Fully Paid Stock: Taxes. The Company agrees that the shares of
the Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
(a) The Company shall include the Warrant Shares on the Shelf
Registration Statement (as defined in the PPM) and the Holder shall otherwise
have the registration rights set forth in Section 5 of the subscription
agreement (the "Subscription Agreement") to be entered into between the
purchasers of units (as described in the PPM) and the Company. By acceptance of
this Warrant, the Holder agrees that it shall have the same obligations, and
otherwise comply with, the provisions in such Section 5 of the Subscription
Agreement to same extent as if it were a party thereto.
(b) Until all Warrant Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All warrants issued upon the
transfer or assignment
6
<PAGE>
of this Warrant will be dated the same date as this Warrant, and all rights of
the holder thereof shall be identical to those of the Holder.
7. Loss. etc.. of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
9. Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 6555 Nancy Ridge Drive, Suite 200, San Diego, CA,
92121, or other address as the Company has designated in writing to the Holder,
or
(b) the Holder at [ ] or other such address as the Holder has
designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed
in accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary this 8th day of October, 1996.
PACIFIC PHARMACEUTICALS, INC.
By:
------------------------------
President
ATTEST:
- - ---------------------------------
Secretary
[Corporate Seal]
8
<PAGE>
SUBSCRIPTION
------------
The undersigned, _________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
__________________ shares of the Common Stock, par value $.02 per share, of
Pacific Pharmaceuticals, Inc. covered by said Warrant, and makes payment
therefor in full at the price per share provided by said Warrant.
Dated:__________________________ Signature:_____________________________
Address:_______________________________
CASHLESS EXERCISE
-----------------
The undersigned __________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.02 per share, of Pacific Pharmaceuticals,
Inc. pursuant to the Cashless Exercise provisions of the Warrant.
Dated:__________________________ Signature:_____________________________
Address:_______________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________
attorney, to transfer said Warrant on the books of Pacific Pharmaceuticals, Inc.
Dated:__________________________ Signature:_____________________________
Address:_______________________________
9
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ______________ hereby assigns and transfers unto
___________________ the right to purchase _______ shares of the Common Stock,
par value $.02 per share, of Pacific Pharmaceuticals, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint,
_________________attorney, to transfer that part of said Warrant on the books of
Pacific Pharmaceuticals, Inc.
Dated:__________________________ Signature:_____________________________
Address:_______________________________
10
For Immediate Release
SHAREHOLDERS APPROVE PROCEPT AND PACIFIC PHARMACEUTICALS MERGER
- - -THREE INNOVATIVE TECHNOLOGIES IN HUMAN CLINICAL DEVELOPMENT-
Cambridge, MA, March 18, 1999 -- Procept, Inc. (Nasdaq SmallCap: PRCT) today
announced that the shareholders of both Procept and Pacific Pharmaceuticals,
Inc. have approved the proposed merger between the two companies, which was
consummated on March 17, 1999. Pacific, by virtue of the merger, will become a
wholly-owned subsidiary of Procept. The combined entity now has an expanded
product portfolio with a focus on anti-infectives and oncology, including three
novel drugs in Phase I and Phase I/II stages of human clinical trials, which may
be candidates for accelerated regulatory approval.
"This merger represents significant progress for our new clinical development
strategy," commented Mr. John F. Dee, President and Chief Executive Officer of
Procept, Inc. "Pacific Pharmaceuticals brings two cancer compounds in human
clinical trials to our drug development program. The merger will allow the
company to leverage its collective resources to advance product development and
improve the potential for securing corporate partnerships."
Terms of the Transaction
Under the terms of the agreement, 3,171,256 shares of Procept common stock will
be issued to Pacific shareholders. Of this number of shares, 2,755,000 shares of
Procept common stock represent approximately 0.11 share for each Pacific share
of common stock and preferred stock on an "as converted" basis. Also, 416,256
additional shares of Procept common stock will be issued to the Pacific
preferred shareholders in connection with certain contractual rights that they
will receive which are similar to those received by investors in Procept's April
1998 private placement. Procept will also assume a contractual obligation in
connection with a Pacific Pharmaceuticals subsidiary, BG Development Corp.
(BGDC) which, under certain circumstances, could result in Procept purchasing up
to a net amount of approximately $6.5 million of outstanding BGDC preferred
stock in June 2000 with cash or shares of Procept common stock at Procept's
option.
Drug Development Pipeline
PRO 2000 Gel
PRO 2000 Gel is a vaginal, topical microbicide designed to provide protection
against human immunodeficiency virus (HIV) infection and other sexually
transmitted diseases (STDs). PRO 2000 Gel was recently shown to protect female
monkeys from infection by an AIDS-causing virus. In earlier studies, PRO 2000
Gel protected mice from genital herpes simplex virus type 2 (HSV-2) infection.
Laboratory studies have also shown that the product is active against Chlamydia
trachomatis and Neisseria gonorrhea, two other important STD pathogens.
The promising monkey protection results support expanded human clinical
evaluation of PRO 2000 Gel. Two Phase I clinical trials, completed in 1997,
showed that daily intravaginal doses of 4% PRO 2000 Gel are safe and well
tolerated in healthy, sexually abstinent women. One of these
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studies was supported by the British Medical Research Council (MRC). A larger
study to evaluate the safety and acceptability of PRO 2000 Gel in healthy,
sexually active women and in HIV-infected women is scheduled to begin shortly in
the U. S. and South Africa, with support from the National Institute of Allergy
and Infectious Diseases, a unit of the National Institutes of Health (NIH).
Phase II safety studies are also under discussion with the MRC. Procept believes
that safety data from these trials, coupled with the promising animal protection
results, will make PRO 2000 Gel an attractive candidate for testing in a large,
government-funded Phase III clinical trial designed to demonstrate safety and
protective efficacy.
O6-Benzylguanine (BG)
BG is a biomodulator that may break down tumor resistance to a significant class
of commonly used chemotherapeutic agents known as O6-alkylating agents. BG
inactivates tumor AGT (O6 alkylguanine-DNA alkyltransferase), a tumor DNA repair
protein, which interferes with the effectiveness of some alkylating agents.
Human clinical data show that a correlation exists between low levels of AGT and
responsiveness to some treatments. Preclinical animal data demonstrate that
treatment with BG increased the anti-tumor activity of some alkylating agents. A
Phase I clinical trial of BG in brain cancer patients has been completed at the
Duke University Medical Center. This study established the dose of BG at which
the levels of tumor AGT protein are depleted by more than 90%. BG is being
studied in three other Phase I trials to determine the optimum dose of the O6
alkylating agent BCNU that can be combined with the previously determined
effective dose of BG. The trials are being sponsored by the National Cancer
Institute (NCI) of the NIH under a Cooperative Research and Development
Agreement (CRADA) executed between the NCI and Pacific Pharmaceuticals.
Following the completion of these trials, a Phase II development program will be
conducted in accordance with the CRADA. The Company believes that BG has the
potential to expand the indications for O6-alkylating agents to other cancers,
such as colon, prostate, and breast, which are currently considered unresponsive
to those cancer drugs.
Boronated Protoporphyrin Compound (BOPP)
The proprietary photodynamic therapy compound, BOPP, is currently in a Phase I
study in brain cancer patients at the Royal Melbourne Hospital, Australia under
a U.S. IND application filed with the FDA in March 1998. Photodynamic therapy
(PDT) is a platform technology which may be suitable for use in a variety of
disorders including cancers, cardiovascular and gastrointestinal disorders, and
pre-cancerous conditions such as Barrett's esophagus and cervical dysplasia.
Light is used to activate a photosensitizing drug selective to tumor cells,
resulting in tumor cell death. The Company believes that BOPP's apparent degree
of selectivity to tumor cells and low light activation requirements are a
significant competitive advantage and represent attractive properties for use in
PDT technology.
Cancer Immunotherapy
The cancer immunotherapy program is based on a unique treatment designed to
elicit an immune response against the cancer tumor. The treatment consists of
the co-injection of an infrared absorbing dye and an immunoadjuvant directly
into a tumor, followed by illumination with an infrared laser. Presentation of
preclinical data at a pre-IND meeting with the FDA resulted in an
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accelerated timetable to enter Phase I/II efficacy clinical trials. Preclinical
studies to date have demonstrated a prolonged immune response resulting in the
clearance of metastatic tumor. Rechallenge of surviving animals with tumor has
resulted in tumor rejection in 100% of the tested survivors.
This news release contains forward looking statements. There can be no
assurances that Procept, Inc., will develop commercially viable products, will
achieve strategic partnerships, or will complete clinical trials on a successful
basis. The actual results could vary from those expected due to a variety of
risks set forth from time to time in each of the companies' filings with the
Securities and Exchange Commission, including Pacific Pharmaceuticals' Form 10-K
for the year ended March 31, 1998 and Procept's Form 10-K/A for the year ended
December 31, 1997. Procept undertakes no obligation to publicly release the
results of any of these forward looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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