U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission file number 0-22872
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SYMBOLLON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Loring Drive, Framingham, MA 01702
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(Address of principal executive offices)
508-620-7676
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
November 13, 1999
-----------------
Class A Common Stock 4,334,183
Class B Common Stock 15,738
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- September 30, 1999 and December 31, 1998 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the nine and three months
ended September 30, 1999 and September 30, 1998 2
UnauditedCondensed Statements of Cash Flows - For the nine
months ended September 30, 1999
and September 30, 1998 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 8
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 9
INDEX TO EXHIBITS 10
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 2,424,378 $ 1,514,115
Restricted cash......................................................... 154,563 297,554
Accounts receivable..................................................... 220,972 207,172
Inventory............................................................... 148,982 69,382
Prepaid expenses........................................................ 26,348 83,104
----------- -----------
Total current assets.............................................. $ 2,975,243 $ 2,171,327
Equipment and leasehold improvements, net of
accumulated depreciation and amortization................................ 99,770 125,572
Other assets:
Patent and trademark cost, net of accumulated amortization............ 217,797 205,226
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL............................................................. $ 3,295,174 $ 2,504,489
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 219,763 $ 87,654
Accrued expenses........................................................ 361,903 4,403
Other current liabilities............................................... 1,450 19,149
------------ -----------
Total current liabilities......................................... 583,116 111,206
Redeemable common stock, Class A, par value $.001 per share, 93,334 and 669,545
shares issued at September 30, 1999 and December 31, 1998, respectively
(aggregate involuntary
liquidation value $175,000 and $850,000, respectively)................... 175,000 850,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares
authorized, none issued..................................................
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 3,962,464 and 2,919,786 shares issued at
September 30, 1999 and December 31, 1998, respectively................... 3,962 2,920
Convertible Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 15,738 shares issued at
September 30, 1999 and December 31, 1998, respectively................... 16 16
Additional paid-in capital................................................ 8,664,844 7,254,712
Deficit accumulated during the development stage.......................... (6,131,764) (5,714,365)
------------ -----------
Total stockholders' equity........................................... 2,537,058 1,543,283
------------ -----------
TOTAL............................................................. $ 3,295,174 $ 2,504,489
============ ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended Nine Months Ended (Inception) to
September 30, September 30, September 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Net product sales................................. $ 122,100 $ 59,675 $ 294,600 $ 170,176 $ 1,335,588
Contract revenue.................................. 98,872 19,085 287,751 19,085 932,501
License fee revenue............................... 750,000 400,000 750,000 400,000 2,940,000
----------- ----------- ----------- ----------- -----------
Total revenue............................. 970,972 478,760 1,332,351 589,261 5,208,089
Operating Expenses:
Cost of goods sold............................ $ 64,167 $ 36,087 $ 204,357 $ 109,295 $ 799,558
Research and development costs................ 384,885 278,512 1,298,993 812,407 6,580,707
General and administrative expenses........... 99,722 96,784 295,741 362,033 4,231,007
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 548,774 411,383 1,799,091 1,283,735 11,611,272
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations..................... 422,198 67,377 (466,740) (694,474) (6,403,183)
Interest income................................... 18,838 20,601 49,341 75,677 627,679
Interest expense and debt issuance costs.......... (356,260)
----------- ----------- ----------- ----------- -----------
Net Income (Loss)................................. $ 441,036 $ 87,978 $ (417,399) $ (618,797) $(6,131,764)
===========
Basic Net Income (Loss) per share of common stock. $ 0.15 $ 0.03 $ (0.14) $ (0.24)
=========== =========== =========== ===========
Diluted Net Income (Loss) per share of common stock $ 0.14 $ 0.03 $ (0.14) $ (0.24)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding...................................... 3,022,127 2,754,429 2,945,511 2,584,874
=========== =========== =========== ===========
Weighted average number of common shares and
potential dilutive common shares outstanding..... 3,148,439 2,754,429 2,945,511 2,584,874
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Nine Months Ended (Inception) to
September 30, September 30,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ (417,399) $ (618,797) $(6,131,764)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 34,383 35,299 462,762
Amortization of debt issuance costs................. 130,000
Accrued rent........................................
Loss on disposition of equipment.................... 19,542
Changes in:
Restricted cash................................... 142,991 (154,563)
Accounts receivable............................... (13,800) (9,726) (220,972)
Inventory......................................... (79,600) (30,072) (148,982)
Prepaid expenses.................................. 56,756 (169,153) (26,348)
Accounts payable and other current liabilities.... 471,910 44,748 640,291
----------- ----------- -----------
Net cash provided by (used in)
operating activities.............................. 195,241 (747,701) (5,430,034)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (3,563) (24,173) (368,389)
Patent and trademark costs............................ (17,590) (41,193) (442,783)
Proceeds from sale of equipment....................... 11,300
Deposit............................................... (2,364)
----------- ----------- -----------
Net cash provided by (used in) investing activities. (21,153) (65,366) (802,236)
----------- ----------- -----------
Cash flows from financing activities:
Warrant conversion.................................... 629,204
Borrowings from stockholders.......................... 253,623
Repayment to stockholders............................. (127,683)
Sale of common stock and units........................ 736,175 351,312 8,794,906
Sale of option to purchase units...................... 100
Public offering costs................................. (1,343,502)
Issuance of preferred stock........................... 450,000
----------- ----------- -----------
Net cash provided by financing activities........... 736,175 351,312 8,656,648
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... 910,263 (461,755) 2,424,378
Cash at beginning of period............................... 1,514,115 2,527,865
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 2,424,378 $ 2,066,110 $ 2,424,378
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Description of Business:
Symbollon Corporation ("Symbollon" or the "Company") was formed to
develop and commercialize proprietary iodine-based products for infection
control and treatment in biomedical and bioagricultural industries. The Company
is in the development stage and its efforts since inception have been
principally devoted to research and development, securing patent and trademark
protection and raising capital. Management of the Company anticipates that
additional losses will be incurred as these efforts are pursued. In 1995, the
Company signed a marketing and supply agreement for its first product and
commenced shipping.
Note B - Accounting Policies and Disclosure:
The accompanying unaudited financial statements do not contain all of
the disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes included
in the Company's Form 10-KSB for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments, all of which are of a normal recurring nature, to fairly present
the Company's financial position, results of operations and cash flows. The
results of operations for the nine and three-month periods ended September 30,
1999 are not necessarily indicative of the results to be expected for the full
year.
Note C - Capitalization:
Pursuant to stockholder approval received on May 26, 1999 at the 1999
Annual Meeting, the Company offered (the "Offering") in a private placement up
to 1,250,00 units (the "Units"), each Unit consisting of one share of Class A
Common Stock and one redeemable warrant exercisable for another share of Class A
Common Stock. The Company sold 836,685 Units for $1,464,199 ($1,357,466 net of
placement agents' commissions), of which 278,385 Units were sold in the fourth
quarter of 1999 (see Part II - Item 2. "Changes in Securities and Use of
Proceeds" below).
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Symbollon is a development stage company. Since inception of the
Company's predecessor in 1986, the Company's efforts have been principally
devoted to research and development, securing patent and trademark protection
and raising capital, most of which efforts commenced after May 1991. Except for
revenue earned since 1995 on sales of IodoZyme, the Company's sole revenue to
date has been from research and development contracts with corporate partners
and interest income.
Forward-Looking Statements
In addition to the historical information contained herein, this Quarterly
Report on Form 10-QSB contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including, but not
limited to statements concerning plans, objectives, goals, strategies,
prospects, revenues, liquidity and capital resources, financial needs, future
performance, costs and expenditures and Year 2000 matters. Such statements may
be identified or qualified, without limitation, by words such as "likely",
"will", "suggests", "may", "would", "could", "should", "expects", "anticipates",
"estimates", "plans", "projects", "believes", or similar expressions (and
variants of such words or expressions). Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance,
achievements and results may differ materially from those expressed, projected
or suggested in the forward-looking statements due to certain risks and
uncertainties, including, but not limited to, the Company's early stage of
development, dependence on collaborative partners, additional financing
requirements and availability, history (and expectation) of losses, uncertainty
of patent protection, uncertainty associated with preclinical and clinical
testing, market acceptance, intense competition, government regulation,
dependence on key personnel, lack of marketing and manufacturing experience,
reimbursement and drug pricing uncertainty, potential product liability,
material incompatibility, ability to maintain its Nasdaq SmallCap Market
listing, possible Year 2000 problems, hazardous materials, and the other risks
and uncertainties described or discussed in the section "Risk Factors" in the
Annual Report on Form 10-KSB for the period ended December 31, 1998. The
forward-looking statements contained herein represent the Company's judgment as
of the date of the Quarterly Report on Form 10-QSB, and the Company cautions
readers not to place undue reliance on such statements.
Results of Operations
Symbollon's net income for the three-month period ended September 30,
1999 was $441,036, reflecting an increase of $353,058 from a net income of
$87,978 in the comparable 1998 period. Symbollon's net loss for the nine-month
period ended September 30, 1999 was $417,399, reflecting a decrease of $201,398
from a net loss of $618,797 in the comparable 1998 period. The increased income
for the three-month period and the decreased loss for the nine-month period
resulted primarily from increased revenues, partially offset by increased
development costs related to the Company's ongoing Phase II clinical trial. The
Company expects to continue to incur operating losses for the foreseeable
future.
<PAGE>
Product revenues from sales of IodoZyme for the three and nine-month
periods ended September 30, 1999 were $122,100 and $294,600, respectively,
reflecting an increase of $62,425 and $124,424, respectively, from the product
sales in the comparable 1998 periods. Because the Company's exclusive marketing
partner orders IodoZyme a limited number of times each year, the changes between
periods reflect mostly timing differences in receipt of those orders from the
marketing partner, and the increased sales for the nine-month period do not
necessarily reflect correspondingly increased sales for the entire year.
The gross profit margin on product sales for the three and nine-month
periods ended September 30, 1999 were 47% and 31%, respectively, compared to 40%
and 36%, respectively, in the comparable 1998 periods. The decrease in the gross
profit margin on product sales for the nine-month period ended September 30,
1999 was primarily due to increased labor and component costs and overhead
expenses.
Contract revenues for the three-month period ended September 30, 1999
were $98,872, reflecting an increase of $79,787 from the contract revenues in
the comparable 1998 period. Contract revenues for the nine-month period ended
September 30, 1999 were $287,751, reflecting an increase of $268,666 from the
contract revenues in the comparable 1998 period. The contract revenues for the
three and nine-month periods ended September 30, 1999 were generated from
development activities related to the corporate relationship with Bausch & Lomb
Pharmaceuticals, Inc.
License fees for the three and nine-month periods ended September 30,
1999 were $750,000, reflecting an increase of $350,000 from the license fees in
the comparable 1998 periods. The increases for the three and nine-month periods
resulted from an increase in license fees from the Company's corporate
relationship with Bausch & Lomb in the field of ophthalmology.
Research and development expenses for the three and nine-month periods
ended September 30, 1999 were $384,885 and $1,298,993, respectively, reflecting
an increase of $106,373 and $486,586, respectively, from the research and
development expenses in the comparable 1998 periods. The increases resulted from
increased development expenses related to the Company's drug candidate for the
treatment of fibrocystic breast disease, including consulting fees and clinical
costs associated with the Company's ongoing Phase II clinical trial and
conducting a Phase I clinical trial. The Company anticipates that research and
development expenses will remain high over the remainder of 1999 as the Company
completes its ongoing Phase II clinical trial for its drug to treat fibrocystic
breast disease.
General and administrative expenses for the three-month period ended
September 30, 1999 was $99,722, reflecting an increase of $2,938, from the
general and administrative expenses in the comparable 1998 period. General and
administrative expenses for the nine-month period ended September 30, 1999 was
$295,741, reflecting a decrease of $66,292, from the general and administrative
expenses in the comparable 1998 period. The decreased expenses for the
nine-month period resulted primarily from decreased employee salaries and
<PAGE>
related costs and decreased investor and public relations expenses. The Company
anticipates that general and administrative expenses will remain at current
levels for the remainder of 1999.
Liquidity and Capital Resources
The Company has primarily funded its activities through proceeds from
private and public placements of equity. As of September 30, 1999, the Company
had working capital of $2,392,127.
The Company continues to incur operating losses and has incurred a
cumulative loss through September 30, 1999 of $6,131,764. However, the Company
believes that it has the necessary liquidity and capital resources, together
with anticipated future revenues, to sustain planned operations for the twelve
months following September 30, 1999. In the event that the Company's internal
estimates relating to its planned revenues or expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures.
During the remainder of 1999, the Company anticipates paying
approximately $76,250 as compensation for its current executive officers, and
approximately $7,763 for lease payments on its facilities. The Company
anticipates that the Phase II clinical trial for its drug to treat fibrocystic
breast disease will cost approximately $250,000 over the remainder of 1999. At
December 31, 1998, the Company had a net operating loss carryforward for Federal
income tax purposes of approximately $5,452,000 expiring through 2018.
The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to disruptions in
operations. The Company has identified three major areas determined to be
critical for successful Y2K compliance: (1) financial and information system
applications, (2) manufacturing applications and (3) third-party relationships.
In the financial and information system and manufacturing areas, the Company's
core financial and reporting systems, which were not Y2K compliant, have been
replaced with Y2K compliant systems. The Company is requesting assurances from
all software vendors from which it has purchased or from which it may purchase
software that such software will correctly process all date information at all
times. In the third-party area, the Company is in the process of identifying
areas of exposure. The Company is querying its suppliers and contractors as to
their progress in identifying and addressing problems that their computer
systems will face in correctly processing date information as the Year 2000
approaches. Through September 30, 1999, the Company estimates that it has spent
approximately $5,000 in its efforts to achieve Y2K compliance, all of which has
been recognized as an expense in the Company's Statement of Operations, and
estimates that such costs subsequent to September 30, 1999 will aggregate
$5,000. The Company has not determined what costs, if any, will be incurred in
connection with the third-party area. The failure by the Company or a third
party supplier or contractor to correct a material Y2K problem could result in
an interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Y2K problem, resulting in part from the uncertainty
<PAGE>
of the Y2K readiness of the Company's customers, suppliers, and other
third-party providers, the Company is unable to determine at this time whether
the consequences of any Y2K failures will have a material impact on the
Company's results of operations, liquidity or financial condition.
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
C.(i). During October 1999, the Company completed the sale in its
private placement ("Offering") to persons who qualify as "accredited investors"
as the term is defined in Rule 501 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), of an aggregate of 836,685 units (the
"Units") at a price of $1.75 per Unit, inclusive of 288,550 Units whose sale was
previously disclosed in the Company's Form 10-QSB for the quarterly period ended
June 30, 1999. Each Warrant will be exercisable for a four-year period ending on
August 10, 2003, to purchase one share of Class A Common Stock at exercise
prices per share of $3.00 during the first year, $4.00 during the second year,
$5.00 during the third year and $6.00 thereafter. The Warrants are redeemable at
the option of Company at $0.01 per Warrant in the event that the average closing
bid price as quoted by Nasdaq (the average last reported sales price if then
listed on any national securities exchange) of the Class A Common Stock over
twenty successive trading days is equal to or greater than $5.00 during the
first year, $6.00 during the second year, $7.00 during the third year and $8.00
thereafter, subject to the holder's right to exercise. If the Class A Common
Stock is neither quoted on the Nasdaq Market nor listed on any national
securities exchange, the Warrants are redeemable at the option of the Company if
the average closing bid price of the Common Stock as reported in the
over-the-counter market in the so-called "pink sheets" or the "OTC Bulletin
Board Service" over twenty successive trading days is $1.00 higher than the
price for each relevant redemption period set forth in the preceding sentence.
Indianapolis Securities, Inc., a National Association of Securities
Dealers (NASD) member, served as placement agent (the "Placement Agent") in
connection with the Offering of the Units on a "best efforts" basis. The Company
agreed to pay the Placement Agent a ten percent (10.0%) cash commission and
Warrants equal to 10.0% of the Units sold (the "Placement Agent Warrants") for
investors identified and brought to the Offering by the Placement Agent. For
investors identified and brought to the Offering by the Company, the Placement
Agent did not receive any cash commissions or Placement Agent Warrant
allocations.
The Units were offered in accordance with Rule 506 of Regulation D
promulgated under the Securities Act, and accordingly the securities offered in
the Offering were not registered under the Securities Act and may not be offered
or sold by the holders thereof absent registration or an applicable exemption
from the registration requirements. The Company did, however, undertake to use
its commercially reasonable best efforts to file a registration statement under
the Securities Act to register for resale the shares of the Class A Common Stock
included in the Units and issuable upon exercise of the Warrants no later than
eight (8) months following the final closing of the Offering.
<PAGE>
The Company received gross proceeds of $1,464,199 from the sale of the Units.
Total Placement Agent commissions were $106,733, resulting in proceeds to the
Company of $1,357,466 net of the Placement Agent's commissions.
Item 5. Other Information
On September 23, 1999, Symbollon was granted a qualifications exception
by the Nasdaq Listing Qualifications Panel. In accordance with that decision, on
or before October 15, 1999, the Company was obligated to make a public filing
with the Securities and Exchange Commission (the "SEC") and Nasdaq evidencing a
minimum of $2,700,000 in net tangible assets. The filing was to contain a
balance sheet with pro forma adjustments for any significant events or
transactions occurring on or before the filing date. On October 13, 1999, the
Company filed a Form 8-K containing a balance sheet as of August 31, 1999,
including pro forma adjustments for any significant events or transactions
occurring on or before the filing date since August 31, 1999, evidencing over
$2,700,000 in net tangible assets. On October 21, 1999, the Company received a
letter from Nasdaq indicating that the Company had complied with the terms of
its exception; and therefore, the Company shall continue to be listed on The
Nasdaq SmallCap MarketSM under the listing symbol "SYMBA".
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on October 13, 1999.
The report contained an Item 5 disclosure concerning the Company's continued
listing on The Nasdaq SmallCap Market (see Part II - Item 5. "Other Information"
above).
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: November 10, 1999 By: /s/ Paul C. Desjourdy
---------------------------------------
Paul C. Desjourdy, Exec. Vice President/CFO
and authorized signatory
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
10.14 Form of Subscription Agreement, dated as of August 10, 1999,
between the Company and the purchasers of Units...................
10.15 Form of Redeemable Warrant for the purchase of shares of
Class A Common Stock, dated as of August 10, 1999, issued
to purchasers of Units............................................
27.1 Financial Data Schedule...........................................
Exhibit 10.14
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT made as of this 10th day of August, 1999
between Symbollon Corporation, a Delaware corporation with its principal offices
at 37 Loring Drive, Framingham, MA 01702 (the "Company"), and the undersigned
(the "Subscriber").
WHEREAS, the Company desires to issue and sell in a private
placement to accredited investors (the "Offering") a minimum of 100,000 Units
and a maximum of 1,250,000 Units (collectively, the "Units") for a purchase
price of $1.75 per Unit, each Unit consisting of (i) one share of Class A Common
Stock, par value $.001 per share (the "Common Stock"), and (ii) a warrant to
purchase one share of Common Stock (the "Warrants"), substantially in the form
set forth as Attachment V to the Confidential Private Placement Memorandum,
dated May 3, 1999, as it may be supplemented and amended (the "Memorandum"),
relating to an Offering, and the Subscriber desires to acquire the number of
Units set forth on the signature page hereof, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from the Company the
number of Units set forth upon the signature page hereof at a price equal to
$1.75 per Unit, and the Company agrees to sell such number of Units for said
purchase price. The purchase price is payable by (i) certified or bank check
made payable to Rubin, Baum, Levin, Constant & Friedman, as Escrow Agent F/B/O
Symbollon Corporation (the "Escrow Agent"), or (ii) wire transfer in accordance
with the wire transfer instructions set forth on Exhibit A hereto,
contemporaneously with the execution and delivery of this Subscription
Agreement. The Subscriber understands however, that this purchase of Units is
contingent upon the Company making sales of a minimum of 100,000 Units prior to
the Termination Date as defined in Article III hereof. This subscription is
submitted to the Company in accordance with and subject to the terms and
conditions described in this Agreement and the Memorandum. Further, the
Subscriber understands that the Company intends to submit for stockholder
consideration at the 1999 Annual Meeting of the Stockholders currently scheduled
to be held on May 26, 1999, for purposes of the shareholders approval policy of
the Nasdaq SmallCap Market, a proposal to approve the issuance and sale of any
Units beyond the first 340,000 Units (the "Stockholder Approval"), and
therefore, closings for the final 910,000 Units will not occur until after the
Shareholder Approval or assurance from Nasdaq that such sales are exempt from
the Nasdaq SmallCap Market listing requirements relating to stockholder approval
for certain share issuances.
1.2 The Subscriber recognizes that the purchase of Units
involves a high degree of risk in that (i) the Company has had only limited
operations, minimal revenues and requires substantial funds in addition to the
proceeds of this private placement, (ii) an investment in the Company is highly
speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units, (iii) he may
<PAGE>
not be able to liquidate his investment; (iv) transferability of the Units and
the components thereof is extremely limited; and (v) in the event of a
disposition, an investor could sustain the loss of his entire investment.
1.3 The Subscriber represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the United States Securities Act of 1933, as amended (the "Act"), as indicated
by his responses to the Confidential Purchaser Questionnaire, and that he is
able to bear the economic risk of an investment in the Units.
1.4 The Subscriber acknowledges that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney or accountant to
read all of the documents furnished or made available by the Company both to him
and to all other prospective investors in the Units and to evaluate the merits
and risks of such an investment on his behalf, and that he recognizes the highly
speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful review of
the Memorandum (which includes certain Risks Factors relating to the Company and
this Offering), the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998 and a Proxy Statement for the 1999 annual meeting of
stockholders of the Company (collectively, the "Offering Documents"), and hereby
represents that he has been furnished by the Company during the course of this
transaction with all information regarding the Company which he had requested or
desired to know, that all documents which could be reasonably provided have been
made available for his inspection and review; and that such information and
documents have, in his opinion, afforded the Subscriber with all of the same
information that would be provided him in a registration statement filed under
the Act; that he has been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of the
Company concerning the terms and conditions of the Offering, and any additional
information which he had requested.
1.6 The Subscriber hereby acknowledges that this Offering has
not been reviewed by the United States Securities and Exchange Commission
("SEC") because of the Company's representations that this is intended to be a
nonpublic offering pursuant to Section 4(2) of the Act. The Subscriber
represents that the Units are being purchased for his own account, for
investment and not for distribution or resale to others. The Subscriber agrees
that he will not sell or otherwise transfer such securities unless they are
registered under the Act or unless an exemption from such registration is
available.
1.7 The Subscriber understands that the shares of Common
Stock, the Warrants, and the shares of Common Stock issuable upon exercise of
the Warrants (the shares of Common Stock sold as part of the Units and the
shares of Common Stock issuable upon exercise of the Warrants collectively shall
be referred to as the "Shares"), comprising the Units have not been registered
under the Act by reason of a claimed exemption under the provisions of the Act
which depends, in part, upon his investment intention. In this connection, the
Subscriber understands that it is the position of the SEC that the statutory
basis for such exemption would not be present if his representation merely meant
<PAGE>
that his present intention was to hold such securities for a short period, such
as the capital gains period of tax statutes, for a deferred sale, for a market
rise, assuming that a market develops, or for any other fixed period. The
Subscriber realizes that, in the view of the SEC, a purchase now with an intent
to resell would represent a purchase with an intent inconsistent with his
representation to the Company, and the SEC might regard such a sale or
disposition as a deferred sale to which such exemptions are not available.
1.8 The Subscriber understands that Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a one-year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended, or
its dissemination to the public of any current financial or other information
concerning the Company, as is required by the Rule as one of the conditions of
its availability. The Subscriber understands and hereby acknowledges that the
Company is under no obligation (and does not intend) to register the Units or
the Warrants under the Act, and is under no obligation to the Shares under the
Act except as set forth in Article IV herein. The Subscriber consents that the
Company may, if it desires, permit the transfer of the Shares out of his name
only when his request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively "Securities Laws"). The Subscriber agrees to hold the Company
and its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by the Subscriber contained herein or in the Confidential
Purchaser Questionnaire or any sale or distribution by the undersigned
Subscriber in violation of any Securities Laws.
1.9 The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the securities comprising the Units
stating that they have not been registered under the Act and setting forth or
referring to the restrictions on transferability and sale thereof.
1.10 The Subscriber understands that the Company will review
this Subscription Agreement and the Confidential Purchaser Questionnaire and is
hereby given authority by the undersigned to call his bank or place of
employment or otherwise review the financial standing of the Subscriber; and it
is further agreed that the Company reserves the unrestricted right to reject or
limit any subscription and to close the offer at any time.
1.11 The Subscriber hereby represents that the address of
Subscriber furnished by him at the end of this Subscription Agreement is the
undersigned's principal residence if he is an individual or its principal
business address if it is a corporation or other entity.
1.12 The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.13 The Subscriber hereby represents that, except as set
forth in the Offering Documents, no representations or warranties have been made
to the Subscriber by the Company or any agent (including, without limitation,
<PAGE>
any placement agent or syndicate participant), employee or affiliate of the
Company and in entering into this transaction, the Subscriber is not relying on
any information, other than that contained in the Offering Documents and the
results of independent investigation by the Subscriber.
1.14 If the Subscriber is a Georgia resident, the Subscriber hereby acknowledges
that the Units have been sold in reliance on Paragraph (13) of Code Section
10-5-9 of the Georgia Securities Act of 1973.
1.15 The Company has retained Indianapolis Securities, Inc.
(the "Placement Agents"), a NASD member firms as agent in connection with the
Offering of the Units on a "best efforts" basis. Richard M. Lilly, a principal
and employee of the Placement Agent, is the beneficial owner of more than five
percent (5%) of the Company's Common Stock. Additional NASD member firms may be
invited to participate as syndicate partners (together with the Placement Agent,
herein called the "Agents"). As consideration for its services, the Placement
Agent will receive a ten percent (10.0%) cash commission on Units sold by the
Agents and Warrants equal to 10.0% of the Units sold by the Agents (the
"Placement Agent Warrants"). In turn, the Placement Agent will reallow to the
other Agents 8.0% allocations of both the cash commissions and the Placement
Agent Warrants. The Agents did not prepare any of the information to be
delivered to prospective investors in connection with the Offering and do not
make any representation or warranty concerning the accuracy or completeness of
such information. Prospective investors are advised to conduct their own review
of the business, properties and affairs of the Company before subscribing to
purchase Units.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that:
(a) The Company is a corporation duly organized, existing
and in good standing under the laws of the State of Delaware and has the
corporate power to conduct the business which it conducts and proposes to
conduct.
(b) The execution, delivery and performance of this
Subscription Agreement by the Company has been duly approved by the Board of
Directors of the Company and, subject to the Stockholder Approval, all other
actions required to authorize and effect the offer and sale of the Units will
have been duly taken and approved.
(c) The Shares and Warrants comprising the Units
(including the Shares issuable upon exercise of the Warrants) have been duly and
validly authorized and when issued and paid for in accordance with the terms
hereof, and of the Warrants, will be fully paid and nonassessable.
(d) The Company will at all times so long as the Warrants
are outstanding have authorized and reserved a sufficient number of shares of
the Common Stock to provide for exercise of the Warrants into the requisite
number of shares of Common Stock.
<PAGE>
(e) The Company has obtained, or is in the process of
obtaining, sufficient licenses, permits and other governmental authorizations
necessary to the conduct of its business; such licenses, permits and other
governmental authorizations obtained are in full force and effect; and the
Company is in all material respects complying therewith.
(f) Except as disclosed in the Offering Documents, the
Company knows of no pending or threatened legal or governmental proceedings to
which the Company is a party which could materially adversely affect the
business, property, financial condition or operations of the Company.
(g) The Company is not in violation of or default under,
nor will the execution and delivery of this Subscription Agreement, the issuance
of the Units and the consummation of the transactions herein contemplated,
result in a violation of, or constitute a default under, the certificate of
incorporation or by-laws of the Company, in the performance or observance of any
material obligations, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness to which the Company is a
party or by which it or any of its properties may be bound or in violation of
any material order, rule, regulations writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign.
(h) The financial information contained in the Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998 (audited)
furnished by the Company to the Subscriber present fairly, in all material
respects, the financial condition of the Company as of the date and for the
periods indicated.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin on May 3, 1999 and will
terminate upon the earlier to occur of (i) the sale of all of the Units or (ii)
11:59 PM Eastern time on October 30, 1999 unless (in the sole discretion of the
Company) extended by the Company for an additional period or periods or earlier
terminated by the Company (the "Termination Date"). The Units are offered on a
"best efforts" basis, and the acceptance of subscriptions is at the discretion
of the Company. The minimum subscription per subscriber shall be 10,000 Units
($17,500); provided, however, that smaller investments may be accepted at the
discretion of the Company.
3.2 Placement of the Units will be made by the Placement
Agent, who will receive (i) a placement fee in the amount of 10% of the purchase
price of the Units placed and (ii) Placement Agent Warrants equal to 10.0% of
the Units sold. The Placement Agent will reallow to other Agents 8.0%
allocations of both the cash commission and the Placement Agent Warrants.
3.3 Pending the sale of the Units, all funds paid hereunder
shall be deposited by the Company in escrow with the Escrow Agent. If the
Company shall not have obtained subscriptions (including this subscription) for
purchases of 100,000 Units, on or before the Termination Date, then this
subscription shall be void and all funds paid hereunder by the Subscriber,
without interest, shall be promptly returned to the Subscriber, subject to
paragraph 3.5 hereof. Sale of the Units shall occur in one or more closings,
provided at least the minimum number of Units are sold. Unless the Company has
<PAGE>
obtained a Nasdaq listing requirements exemption letter, Closings for the final
910,000 Units will not occur prior to the 1999 Annual Meeting of Stockholders
currently scheduled to be held on May 26, 1999 at which meeting the stockholders
will vote upon their issuance and sale.
3.4 The Subscriber hereby authorizes and directs the Company
to deliver the securities to be issued to such Subscriber pursuant to this
Subscription Agreement either to the residential or business address indicated
in the Confidential Purchaser Questionnaire, or as instructed by the Placement
Agent.
3.5 The Subscriber hereby authorizes and directs the Escrow
Agent to return any funds for unaccepted subscriptions to the same account from
which the funds were drawn, including any customer account maintained with the
Placement Agent.
IV. REGISTRATION RIGHTS
4.1 Registration. The Company hereby agrees with the holders
of the Units, or their permitted transferees (collectively, the "Holders") who
shall have agreed in writing with the Company to be bound by the provisions
hereof applicable to the Holders, to use its commercially reasonable best
efforts to file within eight (8) months following the final closing of this
Offering a registration statement under the Act covering the resale of the
Shares included in the Units and issuable upon exercise of the Warrants (the
"Registrable Securities") by the Holders.
4.2 Registration Procedures. In connection with the
registration of Registrable Securities under the Act pursuant to Section 4.1,
the Company will use its commercially reasonable best efforts to:
(a) prepare and file with the SEC a registration
statement with respect to such securities, and cause such registration
statement to become effective, and to cause the same to remain effective
for such period as may be reasonably necessary to effect the sale of such
securities, provided that such period need not extend beyond the date that all
the Registrable Securities are eligible for sale under Rule 144 under the Act
(the "Registration Termination Date").
(b) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such securities,
but not beyond the Registration Termination Date.
(c) furnish to the security holders participating
in such registration such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
they may reasonably request in order to facilitate the public offering of such
securities;
(d) register or qualify the securities covered by
such registration statement under such state securities or blue sky laws of
such jurisdictions as such participating holders may reasonably request in
writing within ten (10) days following the original filing of such registration
<PAGE>
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the
request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required under the
Act or the rules and regulations thereunder in connection with the distribution
of Common Stock by such holder,
(h) prepare and promptly file with the SEC and
promptly notify such holders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4.3 Expenses.
(a) With respect to the registration pursuant to
Section 4.1 hereof, all fees, costs and expenses of and incidental to such
registration (as specified in paragraph (b) below) shall be borne by the
Company, provided, however, that any security holders participating in such
registration shall bear their pro rata share of any underwriting discount and
commissions and transfer taxes.
(b) The fees, costs and expenses of registration
to be borne by the Company as provided in paragraph (a) above shall include,
without limitation, all registration, filing, and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, and expenses
of complying with state securities or blue sky laws of any jurisdictions in
which the securities to be offered are to be registered and qualified, including
blue sky legal fees and expenses of Company counsel. Fees and disbursements of
<PAGE>
counsel and accountants for the selling security holders and any other expenses
incurred by the selling security holders not expressly included above shall
be borne by the selling security holders.
4.4 Indemnification.
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each holder of Registrable Securities which are
included in a registration statement pursuant to the provisions of Section 4.1,
its directors and officers, and any underwriter (as defined in the Act) for such
holder and each person, if any, who controls such holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such holder
and each such underwriter and controlling person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(b) Each holder of Registrable Securities included
in a registration pursuant to
the provisions of Section 4.1 hereof will indemnify and hold harmless the
Company, its directors and officers, any controlling person and any underwriter
and any person which controls such underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling person and
any underwriter and any person which controls such underwriter with respect to,
any and all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter or controlling person thereof may
become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written information
furnished by or on behalf of such holder specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of
paragraph (a) or (b) of this Section 4.4 of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph (a) or (b),
promptly notify the indemnifying party of the commencement thereof; but the
<PAGE>
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnifying party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.
4.5 Additional Provisions.
(a) Each Holder agrees that, upon receipt of any
notice from the Company of the
happening of any event requiring the preparation of a supplement or amendment to
a prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
registration statement contemplated by Section 4.1 until its receipt of copies
of the supplemented or amended prospectus from the Company and, if so directed
by the Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Each Holder agrees to suspend, upon request of
the Company, any disposition of
Registrable Securities pursuant to the Registration Statement and prospectus
contemplated by Section 4.1 during (A) any period not to exceed two 30-day
periods within any one 12-month period the Company requires in connection with a
primary underwritten offering of equity securities and (B) any period, not to
exceed one 60-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should not be
made by reason of the presence of material undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
<PAGE>
(c) As a condition to the inclusion of its
Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing or as
shall be required in connection with any registration, qualification or
compliance referred to in this Article IV.
(d) Each Holder hereby covenants with the Company (1)
not to make any sale of the
Registrable Securities without effectively causing the prospectus delivery
requirements under the Act to be satisfied, and (2) if such Registrable
Securities are to be sold by any method or in any transaction other than on a
national securities exchange, in the over-the-counter market, in privately
negotiated transactions, or in a combination of such methods, to notify the
Company at least five (5) business days prior to the date on which the Holder
first offers to sell any such Registrable Securities.
(e) Each Holder acknowledges and agrees that the
Registrable Securities sold
pursuant to the Registration Statement described in this Article IV are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by a
certificate reasonably satisfactory to the Company to the effect that (A) the
Registrable Securities have been sold in accordance with such Registration
Statement and (B) the requirement of delivering a current prospectus has been
satisfied.
(f) Each Holder agrees not to take any action with
respect to any distribution
deemed to be made pursuant to such Registration Statement, that constitutes a
violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.
(g) At the end of the period during which the
Company is obligated to keep the
Registration Statement current and effective as described above, the Holders of
Registrable Securities included in the Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its address set forth on the
first page hereof, Attention: Paul C. Desjourdy, Executive Vice President and to
the Subscriber at his address indicated on the last page of this Subscription
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
5.2 This Subscription Agreement shall not be changed, modified
or amended except by a writing signed by the parties to be charged, and this
Subscription Agreement may not be discharged except by performance in accordance
with its terms or by a writing signed by the party to be charged.
<PAGE>
5.3 This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription Agreement may be executed
by any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the laws
of The Commonwealth of Massachusetts. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated before a court located in Boston,
Massachusetts and they hereby submit to the exclusive jurisdiction of the courts
of The Commonwealth of Massachusetts located in Boston, Massachusetts and of the
federal courts in the District of Massachusetts with respect to any action or
legal proceeding commenced by any party, and irrevocably waive any objection
they now or hereafter may have respecting the venue of any such action or
proceeding brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Subscription Agreement or
any acts or omissions relating to the sale of the securities hereunder, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall furnish
in writing to the other.
5.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement by
the Subscriber, this Subscription Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Units as herein provided;
subject, however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or to delete other persons
as subscribers.
5.6 The holding of any provision of this Subscription
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Subscription Agreement, which shall
remain in full force and effect.
5.7 It is agreed that a waiver by either party of a breach of
any provision of this Subscription Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
- ------------------------------ ------------------------------
Signature of Subscriber(s)
- ------------------------------ ------------------------------
Name of Subscriber(s)
[please print]
- ------------------------------ ------------------------------
Address of Subscriber(s)
- ------------------------------ ------------------------------
Social Security of Taxpayer
Identification Number of Subscriber(s)
- ------------------------------ ------------------------------
Number of Units Subscribed For
* If Subscriber is a Registered Representative with an NASD member firm, have
the following acknowledgment signed by the appropriate party: The undersigned
NASD member firm acknowledges receipt of the notice required by Article 3,
Sections 28(a) and (b) of the Rules of Fair Practice.
- ---------------------------------
Name of NASD Member Firm
- ---------------------------------
By: Authorized Officer
Subscription Accepted:
SYMBOLLON CORPORATION
By:_____________________________________
Paul C. Desjourdy,
ExecutiveVice President and
Chief Financial Officer
Date: _______________, 1999
<PAGE>
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
Subscribers may also pay the subscription amount by wire transfer to:
Chase Manhattan Bank
1211 Avenues of Americas
New York, NY 10036
Account Number 967-097940
ABA Routing Number 021000021
For the account of: "Rubin Baum Levin Constant & Friedman,
as Escrow Agent F/B/O Symbollon Corporation"
Name of Subscriber: [Insert Investor Name]
Exhibit 10.15
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN
ANY MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS.
SYMBOLLON CORPORATION
Redeemable Warrant for the Purchase of Shares of Class A Common Stock,
par value $.001 per share
This Warrant Expires on August 10, 2003
No. Shares
This is to verify that, FOR VALUE RECEIVED, , with an
address at , telephone no.
, or its registered permitted assigns (hereinafter referred to as the
"Holder") is entitled to purchase, subject to the terms and conditions hereof,
from Symbollon Corporation, a Delaware corporation (the "Company"),
( ) shares of the Class A Common Stock of the Company, par value $.001 per
share (the "Common Stock"), at any time from August 10, 1999 (the "Initial
Date") and ending (except as otherwise provided in paragraph 5(b) hereof) at
5:00 p.m. Eastern Standard Time on August 10, 2003 (the "Termination Date"), at
an exercise price per share of $3.00 until the first anniversary of the Initial
Date (the "First Year"), $4.00 from the first anniversary of the Initial Date
until the second anniversary of the Initial Date (the "Second Year"), $5.00 from
the second anniversary of the Initial Date until the third anniversary of the
Initial Date (the "Third Year") and $6.00 thereafter, as the same may hereafter
be adjusted in accordance with the terms hereof (as the same may be adjusted,
the "Exercise Price"). The number of shares of Common Stock purchasable upon
exercise of this Warrant (the "Warrant") shall be subject to adjustment from
time to time upon the occurrence of certain events as set forth below. The
shares of Common Stock issuable or issued upon exercise of this Warrant, as
adjusted from time to time, are sometimes referred to hereinafter as "Exercise
Shares."
<PAGE>
This Warrant is one of the warrants (collectively, including any
warrants issued upon the exercise or transfer of any such warrants in whole or
in part, the "Warrants") issued pursuant to an offering (the "Offering") by the
Company of Units, each consisting of one share of Common Stock and one Warrant
for one share of Common Stock, pursuant to a Confidential Private Placement
Memorandum, dated May 3, 1999, as it may be amended or supplemented. As used
herein the term "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrants. This Warrant may be exercised in
whole at any time or in part from time to time on or after the Initial Date
until and including the Termination Date, upon surrender of this Warrant on any
Business Day, as hereinafter defined, to the Company at its principal office,
presently located at the address of the Company set forth in Section 10 hereof
(or such other principal office of the Company, if any, as shall theretofore
have been designated by the Company by written notice to the Holder), together
with: (i) a completed and duly executed Notice of Warrant Exercise in the form
set forth in Exhibit A hereto and made a part hereof (an "Exercise Notice");
(ii) payment in full of the Exercise Price for the number of Exercise Shares set
forth in the Exercise Notice, in lawful money of the United States of America,
by certified check or bank cashier's check made payable to the order of the
Company, or by wire transfer of immediately available funds to an account
designated by the Company; and (iii) such other instruments or agreements duly
signed by the Holder as may, in the Company's discretion, be reasonably
necessary or advisable in order that the issuance of such Exercise Shares comply
with applicable rules and regulations under any applicable federal or state
securities laws or any requirement of any national securities exchange,
association or quotation system on which Common Stock may be traded
(collectively, "Related Instruments"). For purposes of this Warrant, the term
"Business Day" shall be understood to mean any day upon which commercial banks
in Middlesex County, Massachusetts are not required or authorized by law to be
closed. Upon such surrender of this Warrant and related Exercise Notice (and any
Related Instruments, if required) and payment of the Exercise Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Holder and in such name or names as
the Holder may designate, a certificate or certificates for the number of full
shares of Common Stock comprising the applicable number of Exercise Shares so
purchased upon the exercise of this Warrant. Such certificate or certificates
shall be deemed to have been issued, and any person so designated to be named
therein shall be deemed to have become a holder of record of the Exercise Shares
represented thereby, as of the date of surrender of this Warrant (accompanied by
the related Exercise Notice and Related Instruments, if any) and payment in full
of the Exercise Price, as aforesaid, notwithstanding that the certificates
representing such Exercise Shares shall not actually have been delivered or that
the transfer shall not have been reflected on the stock transfer books of the
Company. Upon any partial exercise of this Warrant, the Company shall issue to
the Holder a new Warrant in respect of the Exercise Shares as to which this
Warrant has not been exercised. This Warrant and all rights hereunder shall
expire on the Termination Date and shall be wholly null and void to the extent
this Warrant is not exercised prior to 5:00 p.m. Eastern Standard Time on the
Termination Date.
<PAGE>
(b) Exercise Shares Fully Paid and Non-Assessable. The Company
agrees and covenants that all Exercise Shares issuable upon the due exercise of
this Warrant will, upon issuance in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable and free and clear of
all taxes with respect to the issuance thereof (other than taxes which, pursuant
to Section 2 hereof, the Company shall not be obligated to pay) and any liens,
charges and security interests created by the Company.
(c) Reservation of Exercise Shares. The Company agrees and
covenants that at all times prior to the Termination Date it will have
authorized, and hold in reserve, a number of authorized but unissued shares of
Common Stock as shall from time to time be sufficient to permit the issuance of
all Exercise Shares issuable upon the full exercise of this Warrant.
2. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of Exercise Shares upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance of this Warrant or in respect of any certificates for Exercise
Shares issued pursuant hereto in a name other than that of the Holder upon the
exercise of this Warrant, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid
or is not required to be paid.
3. Limited Rights of Holder. The Holder shall not, by virtue of
anything contained in this Warrant or otherwise (except upon exercise of this
Warrant, with respect to the Exercise Shares purchased thereby), be entitled to
any right whatsoever, either in law or equity, of a stockholder of the Company,
including without limitation, the right to receive dividends or to vote or to
consent or to receive notice as a stockholder in respect of meetings of
stockholders or the election of directors of the Company or any other matter.
4. Registration of Transfers and Exchanges. This Warrant shall be
transferable, subject to the provisions of Section 8 hereof, upon the books of
the Company to be maintained by it for that purpose, upon surrender of this
Warrant to the Company at its principal office accompanied by a written
instrument or instruments of transfer in the form of Exhibit B hereto or in such
other form as may be satisfactory to the Company and duly executed by the Holder
or by the duly appointed legal representative thereof or by a duly authorized
attorney and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. In all cases of transfer by an attorney, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any such
registration of transfer, a new Warrant shall (subject to Section 2 hereof) be
<PAGE>
issued to the transferee named in such instrument of transfer, and the
surrendered Warrant shall be cancelled by the Company.
5. Adjustment of Warrant. The Exercise Price and the number and kind of
securities issuable upon exercise of this Warrant shall be subject to adjustment
from time to time as set forth below:
(a) Dividends, Subdivisions or Combinations. If the Company
shall at any time (i) pay a dividend or make a distribution on the Common Stock
in shares of its Common Stock, (ii) subdivide its outstanding Common Stock, or
(iii) combine its outstanding Common Stock into a smaller number of shares, the
number of shares of Common Stock which may be purchased upon exercise of this
Warrant thereafter shall be adjusted so that the number of shares thereafter
purchasable upon exercise of this Warrant shall be equal to the number of shares
which the Holder would have been entitled to receive after the happening of such
event had this Warrant been exercised immediately prior to such event. Any
adjustment made pursuant to this Paragraph 5(a) shall become effective
retroactively to the relevant record date in the case of a dividend and shall
become effective on the relevant effective date, in the case of any subdivision
or combination. No adjustment hereunder shall be made in respect of any cash
dividends.
(b) Reclassifications, Reorganizations and other Transactions.
In case of any reclassification, capital reorganization or other change of
outstanding Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock), or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary of the Company in
which the Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding Common
Stock of the class issuable upon exercise of this Warrant), or in case of any
sale, lease, transfer or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an entirety, the
Company shall, as a condition precedent to such transaction, cause such
successor or purchasing corporation, as the case may be (or, if the Company is
not the surviving or acquiring entity, shall use its reasonable efforts to
negotiate to cause such successor or acquiring corporation), to execute with the
Holder an agreement granting the Holder the right thereafter, upon payment of
the Exercise Price in effect immediately prior to such action, to receive upon
exercise of this Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or would have been entitled to
receive after the happening of such reclassification, capital reorganization,
change, consolidation, merger, sale, lease, transfer or conveyance had this
Warrant been exercised immediately prior to such action. Such agreement shall
provide for adjustments in respect of such shares of stock and other securities
and property which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section. As to any consolidation or merger, or
any conveyance or transfer of the assets and properties of the Company
substantially as an entirety, in which the Company shall not be the surviving or
acquiring party and in connection with which the Company, despite its reasonable
efforts to do so, is unable to negotiate the assumption of the obligations
represented by this Warrant by the surviving or acquiring entity, or any
transaction pursuant to which the Company shall have disposed of substantially
<PAGE>
all of its assets, or any transaction constituting the voluntary or involuntary
dissolution, liquidation or winding up of the Company, the right to exercise
this Warrant shall expire at the close of business on the later of the dates
specified in the notice of such transaction delivered by the Company to the
Holder pursuant to Section 6 hereof as the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective and the date as of which it is expected that holders of
record of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon the consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. If this
Warrant has not been exercised in such cases on or prior to such aforesaid date,
it shall, anything herein to the contrary notwithstanding, become void and all
rights under this Warrant shall cease.
(c) Corresponding Exercise Price Adjustments. After any
adjustment of the number or kind of shares or other securities or property
issuable upon exercise of this Warrant pursuant to the provisions of this
Section 5, the Exercise Price shall also be adjusted so that the aggregate
Exercise Price thereafter payable upon exercise of this Warrant shall be equal
to the aggregate Exercise Price which would have been payable upon exercise of
this Warrant immediately prior to such adjustment for the purchase of the number
or kind of shares or other securities or other property issuable upon exercise
of this Warrant.
(d) Adjustment Limitations. No adjustment in the number of
Exercise Shares issuable upon exercise of this Warrant, or of the Exercise
Price, shall be required to be made unless such adjustment would require an
increase or decrease of at least five percent (5%); provided, however, that any
adjustments which by reason of this Paragraph are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent or one-one
hundredth of a share, as the case may be, but in no event shall the Company be
obligated to issue fractional shares upon exercise of this Warrant or to make
any cash payment in lieu thereof, and any fractional shares issuable upon the
exercise hereof shall be rounded down to the immediately prior whole share.
(e) Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Exercise Shares, and this Warrant, and any warrant
thereafter issued in substitution for this Warrant, may continue to express the
same Exercise Price and number and kind of Exercise Shares as are stated in this
Warrant, as initially issued.
6. Rights of Holder. Without limiting anything contained
elsewhere herein, in case at any time:
(a) The Company shall declare any dividend upon its
Common Stock payable otherwise than in Common Stock of the Company; or
<PAGE>
(b) The Company shall offer for subscription to
all of the holders of its Common Stock any additional shares of stock of any
class or any other securities convertible into shares of stock or any rights
to subscribe thereto; or
(c) There shall be any capital reorganization or
reclassification of the capital
stock of the Company, or a sale of all or substantially all of the assets of the
Company, or a consolidation or merger of the Company with 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 or
change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of this Warrant other than a change in par value (or from
par value to no par value or from no par value to par value); or
(d) There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, at the earliest practicable time (and, in any event, not less than
10 days before any record date or other date set for definitive action), written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, subscription, reorganization,
reclassification, consolidation, merger, dissolution, liquidation or winding up,
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the kind and amount of the
shares of stock and other securities and property deliverable upon exercise of
this Warrant. Such notice shall also specify the date as of which the holders of
the Common Stock of record shall participate in said dividend or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be. Notwithstanding anything in this Section 6 to the contrary, however, it is
agreed that the failure of the Company to give any such notice of a corporate
action shall not invalidate such corporate action.
7. Registration Rights. Certain registration rights covering the
Exercise Shares are set forth in Article IV of the Subscription Agreement dated
August 10, 1999 between the Company and the Holder.
8. Restrictions on Transferability - Restrictive Legend. Neither this
Warrant nor any of the Exercise Shares (nor any interest herein or therein)
shall be sold, assigned, pledged, encumbered, or otherwise transferred or
disposed of except in accordance with the provisions of this Section:
(a) Restrictions on Transfer; Indemnification. Neither this
Warrant nor any Exercise Shares may be offered for sale or sold, or otherwise
transferred or disposed of, in any transaction which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended (the
"Act"), unless (i) such security has been registered for sale under the Act and
<PAGE>
registered or qualified under applicable state securities laws relating to the
offer and sale of securities, or (ii) exemptions from the registration
requirements of the Act and the registration or qualification requirements of
all such state securities laws are available and the Company shall have received
an opinion of counsel satisfactory to the Company that the proposed sale or
other transfer or disposition of such securities may be effected without
registration under the Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale. The Holder agrees to indemnify and hold harmless the
Company against any loss, damage, claim or liability (including, without
limitation, any legal costs or expenses incurred by the Company) arising from
the sale, transfer or other disposition of this Warrant or any Exercise Shares
held by the Holder, or any interest therein, in violation of the provisions of
this Section 8.
(b) Restrictive Legends. Unless and until otherwise permitted
by this Section 8, this Warrant, each warrant issued to the Holder pursuant
hereto or to any transferee or assignee of this Warrant, and each certificate
representing Exercise Shares issued upon exercise of this Warrant or any warrant
issued to the Holder pursuant hereto or to any transferee or assignee of this
Warrant, or to any transferee of the person to whom any Exercise Shares are
issued, shall bear a legend setting forth the requirements of Paragraph (a) of
this Section 8, together with such other legend or legends as may otherwise be
deemed necessary or appropriate by counsel to the Company.
(c) Notice of Proposed Transfers. Prior to any transfer, offer
to transfer or attempted transfer of this Warrant or any Exercise Shares, the
holder of such security shall give written notice to the Company of such
holder's intention to effect such transfer. Each such notice (i) shall describe
the manner and circumstances of the proposed transfer in reasonable detail, and
shall contain an undertaking by the person giving such notice to furnish such
other information as may be required, to enable counsel to the Company to make
the determinations referred to below, and (ii) shall designate the counsel for
the person giving such notice, such counsel to be reasonably satisfactory to the
Company. The person giving such notice shall submit a copy thereof to the
counsel designated in such notice, and the following provisions shall apply:
(i) If, in the opinion of counsel to the
Company, the proposed transfer of this
Warrant or Exercise Shares, as appropriate, may be effected without registration
of such security under the Act or under any applicable state law, the Company
shall, as promptly as practicable, so notify the holder of such security and
such holder shall thereupon be entitled to transfer such security in accordance
with the terms of the notice delivered by such holder to the Company. Each
certificate evidencing the securities thus to be transferred (and each
certificate evidencing any untransferred balance of the securities evidenced by
such certificate) shall bear the restrictive legends referred to in Paragraph
(b) of this Section 8, unless in the opinion of counsel to the Company such
legends are not required in order to ensure compliance with the Act.
(ii) If, in the opinion of counsel to the
Company, the proposed transfer of
securities may not be effected without registration under the Act or under any
applicable state law, the Company shall, as promptly as practicable, so notify
the holder thereof. However, except as referenced in Section 7 hereof, the
<PAGE>
Company shall have no obligation to register such securities under the Act.
The holder of the securities giving the notice under this
Paragraph (c) shall not be entitled to transfer any of the securities that are
the subject to such notice until receipt of notice from the Company under
subparagraph (i) of this Paragraph (c) or registration of such securities under
the Act, and under any applicable state law, has become effective.
(d) Removal of Legend. The Company shall, at the request of
any registered holder of this Warrant or any Exercise Share issued upon the
exercise hereof, exchange the certificate representing such security for a
certificate representing the same security not bearing the restrictive legends
required by Paragraph (b) of this Section 8 if, in the opinion of counsel to the
Company, such restrictive legends are no longer necessary.
9. Redemption of the Warrants.
(a) Redemption Right. On a date (the "Redemption Date") not
less than fifteen (15) days from the date notice (the "Notice of Redemption") is
given to the Holder, this Warrant may be redeemed, at the option of the Company,
at a redemption price of $.01 per Warrant (the "Redemption Price"), in the event
that during a period ending within thirty (30) days prior to the date on which
the Notice of Redemption is given, (i) (x) if the Common Stock is quoted on
Nasdaq, the average closing bid price or (y) if the Common Stock is listed on
any national securities exchange, the average last reported sales price on the
primary exchange on which the Common Stock is traded, over twenty (20)
successive trading days is equal to or greater than: $5.00 during the First
Year, $6.00 during the Second Year, $7.00 during the Third Year and $8.00
thereafter; or (ii) if the Common Stock is neither quoted on the Nasdaq Market
nor listed on any national securities exchange, the average closing bid price of
the Common Stock as reported in the over-the-counter market in the so-called
"pink sheets" or the "OTC Bulletin Board Service", over twenty (20) successive
trading days is equal to or greater than: $6.00 during the First Year, $7.00
during the Second Year, $8.00 during the Third Year and $9.00 thereafter (the
"Target Price"), subject to adjustment as set forth in Paragraph 9(e) below. The
date fixed for redemption of this Warrant is referred to herein as the
"Redemption Date".
(b) Notice of Redemption. If the conditions set forth in
Section 9(a) are met, and the Company desires to exercise its right to redeem
this Warrant, the Company shall mail the Notice of Redemption to the Holder,
first class, postage prepaid, at his address set forth on the first page hereof
(or such other address of the Holder, if any, as shall theretofore have been
designated by the Holder by written notice to the Company). Any notice mailed in
the manner provided herein shall be conclusively presumed to have been duly
given on the date mailed by the Company whether or not the Holder receives such
notice. The Notice of Redemption shall specify (i) the Redemption Price, (ii)
the Redemption Date, (iii) the place where the Warrant certificate shall be
delivered and the Redemption Price paid and (iv) that the right to exercise this
Warrant shall terminate at 5:00 p.m. Eastern Standard Time on the Business Day
immediately preceding the Redemption Date. An affidavit of the Company's
<PAGE>
Secretary or Assistant Secretary that the Notice of Redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(c) Right to Exercise Warrant. Any right to exercise this
Warrant shall terminate at 5:00 p.m. Eastern Standard Time on the Business Day
immediately preceding the Redemption Date. On and after the Redemption Date, the
Holder shall have no further rights except to receive, upon surrender of this
Warrant, the Redemption Price.
(d) Certificate Surrender; Payment of Redemption Price. From
and after the Redemption Price, the Company shall at the place specified in the
Notice of Redemption, upon presentation and surrender to the Company by or on
behalf of the Holder thereof of the Warrant certificate, deliver or cause to be
delivered to or upon the written order of the Holder a sum in cash equal to the
Redemption Price of this Warrant. From and after the Redemption Date and upon
the deposit or setting aside by the Company of a sum sufficient to redeem this
Warrant, this Warrant shall expire and become void and all rights hereunder and
under the Warrant certificate, except the right to receive payment of the
Redemption Price, shall cease.
(e) Target Price Adjustment. If the Exercise Price is adjusted
pursuant to Section 5 hereof, then the Target Price shall be correspondingly
adjusted so that there shall remain a $2.00 (or $3.00 in the case that the
Common Stock is then reported in the over-the-counter market in the so-called
"pink sheets" or the "OTC Bulletin Board Service") spread between the Target
Price and the Exercise Price.
10. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been (a) when received, if
delivered in person; (b) when sent, if sent by electronically confirmed
facsimile transmission; or (c) five Business (5) Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt request, in any such case as to the following addresses or facsimile
transmission numbers:
If to the Company, to:
Symbollon Corporation
37 Loring Drive
Framingham, Massachusetts 01702
Attention: Paul C. Desjourdy, Executive Vice President
Telephone: (508) 620-7676
Telecopier: (508) 620-7111
With a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10012
Attention: Norman Alpert, Esq.
<PAGE>
Telephone: (212) 698-7847
Telecopier: (212) 698-7825
If to the Holder, to the address and facsimile transmission number set forth on
the first page hereof, or in either case to such other address as the party
shall have furnished in accordance with the Paragraph 9(b) hereof.
10. Supplements and Amendments. The Company may from time to time
supplement or amend this Warrant without the approval of the Holder in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision, or to make any
other provisions in regard to matters or questions herein or arising hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder hereunder. Otherwise this Warrant
may be amended or any of its provisions waived only by a written consent or
consents executed by the Company and Holders of a majority of the then
outstanding unexercised Warrants. Any amendment or waiver shall be binding upon
all existing and future Holders.
11 Lost, Stolen or Mutilated Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses and indemnity reasonably
satisfactory to the Company, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor and denomination.
12 Successors and Assigns. This Warrant shall inure to the benefit of
and be binding on the respective successors, permitted assigns and legal
representatives of the Holder and the Company.
13 Severability. If for any reason any provision or term of this
Warrant is held to be invalid or unenforceable, all other valid provisions
herein shall remain in full force and effect and all terms and provisions of
this Warrant shall be deemed to be severable.
14 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
its conflict of laws provisions.
<PAGE>
15 Headings. Section and Paragraph headings used herein are included
herein for convenience of reference only and shall not affect the construction
of this Warrant nor constitute a part of this Warrant for any other purpose.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed as of the date and year first above written.
SYMBOLLON CORPORATION
By:_____________________________________
Paul C. Desjourdy, Executive Vice President
<PAGE>
EXHIBIT A
NOTICE OF WARRANT EXERCISE
Pursuant to a Warrant issued by Symbollon Corporation, a Delaware
corporation (the "Company"), to the undersigned dated as of August 10, 1999, the
undersigned hereby irrevocably elects to exercise its warrant to the extent of
purchasing _______________ shares of Class A Common Stock (the "Exercise
Shares") of the Company as provided for therein.
The undersigned hereby represents and agrees that the Exercise Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Exercise Shares have not been registered under the Securities Act of 1933,
as amended.
Payment of the full purchase price of the Exercise Shares is enclosed
herewith, in the form of a certified or cashiers check made payable to the
Company, or has been wired, in the form of immediately available funds, to an
account designated by the Company.
The undersigned requests that a certificate for the Exercise Shares be
issued in the name of:
------------------------------
------------------------------
------------------------------
(Please print name, address and social security number)
and, if said number of shares shall not be all the number of shares of Common
Stock purchasable hereunder, that a new Warrant certificate for the balance of
the number of shares of Common Stock
<PAGE>
purchasable under the Warrant be registered in the name of the undersigned and
delivered to the address set forth under the undersigned's signature below.
Date:_________________________________
Name of Warrantholder (or
registered assignee): ________________________
(Please Print)
Address:
----------------------------------------
----------------------------------------
----------------------------------------
Signature:______________________________________
Note: The above signature must correspond with the name as written upon the face
of the Warrant in every particular, without alteration or enlargement or any
change whatever unless this Warrant has been assigned on the records of the
Company.
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
____________________ Attorney to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: _______, ____ __________________________________
Signature of Registered Holder
Notice: The above signature must correspond
with the name as written upon the
face of the within Warrant
certificate in every particular,
without alteration or enlargement
or any change whatever.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
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175,000
0
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