COMMON STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED
UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR SUCH
SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
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APOLLON, INC.
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Name of Registered Holder: Genesis Merchant Group Securities
Date of Issuance: As of May 1, 1996
No. K1
Warrant for the Purchase of 266,480 Shares of Common Stock
For value received, Apollon, Inc., a Pennsylvania corporation (the
"Company"), hereby grants the rights herein specified to the initial registered
holder hereof (the "Initial Holder") and certifies that the Initial Holder or
any registered assignee of the Initial Holder (each of the Initial Holder and
any such registered assignee being hereinafter referred to as the "Holder") is
entitled, subject to the conditions and upon the terms of this Warrant, to
purchase from the Company, at any time or from time to time during the Exercise
Period (as defined in Section 1), the number of shares of Common Stock (as
defined in Section 1) set forth above. The Company hereby acknowledges receipt
from the Initial Holder of $266,480 in full payment for the issuance of this
Warrant. The number of shares of Common Stock to be received upon the exercise
of this Warrant and the Exercise Price (as defined in Section 1) are subject to
adjustment from time to time as hereinafter set forth.
Section 1. Certain Definitions. Terms defined in the preceding
paragraph and elsewhere in this Warrant have the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Warrant.
"Centocor Agreement" means the Stock Purchase Agreement, dated
September 20, 1994, by and between the Company and Centocor, Inc.
"Centocor Shares" means the 400,000 shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share, issued to Centocor, Inc.
pursuant to the Centocor Agreement.
"Commission" means the Securities and Exchange Commission and
includes any governmental body or agency succeeding to the functions thereof.
"Common Stock" means the fully paid and nonassessable shares of
Common Stock of the Company, $.01 par value per share, together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor, as provided herein.
"Conversion Agreement" means the Conversion Agreement, dated as of
April 23, 1996, by and among the Company and and the Investors listed on Exhibit
1.1 attached thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period beginning on the date of issuance
of this Warrant and ending on May 1, 2001.
"Exercise Price" means an amount per share equal to $4.00, subject
to change or adjustment pursuant to Section 9 hereof.
"Financing" means the Financing as defined in the Financial Advisory
Agreement, dated as of March 6, 1996, by and between the Company and GMGS.
"GMGS" means Genesis Merchant Group Securities, an Illinois limited
partnership.
"Note Shares" means the 1,600,000 shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share, issued pursuant to the
Conversion Agreement.
"Reorganization Event" means (i) any capital reorganization or
leveraged recapitalization of the Company or reclassification of the Common
Stock (other than a subdivision, combination or reclassification of the
outstanding Common Stock for which adjustment is provided in Subsection 9.1 and
other than a change in the par value of the Common Stock or an increase in the
authorized capital stock of the Company not involving the issuance of any shares
thereof), (ii) any consolidation of the Company with, or merger of the Company
with or into, another person or entity (other than a consolidation or merger
with a subsidiary of the Company in which the Company is the continuing
corporation and in which the Company issues securities representing, immediately
prior to such issuance, no more than 30% of the combined voting power of the
Company's then outstanding voting securities having power to vote in the
election of directors and for which no adjustment is required by Subsection 9.1)
or any sale, lease, transfer or conveyance of all or substantially all of the
property and assets of the Company or (iii) the announcement or commencement by
any "person" or "group" (within the meaning of Section 13(d) and Section 14(d)
of the
2
Exchange Act) of a bona fide tender offer or exchange offer in accordance with
the rules and regulations of the Exchange Act to purchase, or the acquisition of
securities in the Company, such that after such acquisition or proposed
purchase, the acquiror "beneficially owns" or would "beneficially own" (as
defined in Rule 13d-3 under the Exchange Act) securities in the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities having power to vote in the election of directors.
"Series A Agreement" means the Stock Purchase Agreement, dated as of
June 25, 1992, by and among the Company and the Investors listed on Exhibit 1(a)
attached thereto, as amended.
"Series B Agreement" means the Stock Purchase Agreement, dated as of
November 15, 1993, by and among the Company and the Investors listed on Exhibit
1.1 attached thereto, as amended.
"Series C Agreement" means the Stock Purchase Agreement, dated as of
May 1, 1996, by and among the Company and the Investors listed on Exhibit 1.1
attached thereto.
"Series A Registerable Common Stock" means Registerable Common Stock
as defined in the Series A Agreement.
"Series B Registerable Common Stock" means (i) Registerable Common
Stock as defined in the Series B Agreement, (ii) any Common Stock issued or
issuable upon conversion of the Note Shares and (iii) any Common Stock issued or
issuable upon conversion of the Centocor Shares.
"Series C Registerable Common Stock" means Registerable Common Stock
as defined in the Series C Agreement.
"Series A Securities" means Securities as defined in the Series A
Agreement.
"Series B Securities" means (i) Securities as defined in the Series
B Agreement, (ii) the Note Shares and any Common Stock issued upon conversion
thereof, but shall not include any such Note Shares or Common Stock sold in any
public offering or in any sale pursuant to Rule 144 under the Act, and (c) the
Centocor Shares and any Common Stock issued upon conversion thereof, but shall
not include any such Centocor Shares or Common Stock sold in any public offering
or in any sale pursuant to Rule 144 under the Act.
"Series C Securities" means Securities as defined in the Series C
Agreement.
"Subsidiary" means any person or entity at least the majority of the
equity securities (or equivalent interest) of which are, at the time as of which
any determination is being made, owned of record or beneficially by the Company,
directly or indirectly, through any Subsidiary or otherwise.
"Warrant" means this Warrant and any Warrant or Warrants which may
be issued pursuant to Section 4 or 6 hereof in substitution or exchange for or
upon transfer of this Warrant, any Warrant which may be issued pursuant to
Section 2 hereof upon partial exercise of this Warrant and any Warrant which may
be issued pursuant to Section 7 hereof upon the loss, theft, destruction or
mutilation of this Warrant.
3
"Warrant Register" means the register maintained at the principal
office of the Company, or at the office of its agent, in which the name of the
Holder of this Warrant shall be registered.
"Warrant Shares" means the shares of Common Stock, as adjusted from
time to time, deliverable or delivered upon exercise of this Warrant.
Section 2. Exercise of Warrant. This Warrant may be exercised, in
whole or in part, at any time or from time to time during the Exercise Period,
by presentation and surrender hereof to the Company at its principal office at
the address set forth on the signature page hereof (or at such other address of
the Company or any agent appointed by the Company to act hereunder as the
Company or such agent may hereafter designate in writing to the Holder), with
the purchase form annexed hereto (the "Purchase Form") duly executed and
accompanied by cash or a certified or official bank check drawn to the order of
"Apollon, Inc." (or its successor in interest, if any) in the amount of the
Exercise Price (unless the Holder has made a net issue election pursuant to, and
in accordance with, Section 10 of this Agreement) multiplied by the number of
Warrant Shares specified in such Purchase Form. If this Warrant should be
exercised in part only, the Company or its agent shall, upon surrender of this
Warrant, execute and deliver a Warrant evidencing the right of the Holder
thereof to purchase the balance of the Warrant Shares purchasable hereunder.
Upon receipt by the Company during the Exercise Period of this Warrant, together
with (a) the Purchase Form in proper form for exercise, (b) the proper payment
of the Exercise Price and (c) a duly executed Shareholder's Agreement, at its
principal office or its agent's principal office, as the case may be, the Holder
shall be deemed to be the holder of record of the number of Warrant Shares
specified in such Purchase Form. If the date of such receipt by the Company or
its agent is a date on which the stock transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such Warrant
Shares on the next business day on which the stock transfer books of the Company
are open. The Company shall pay any and all documentary, stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of such Warrant
Shares. Any Warrant issued upon partial exercise of this Warrant pursuant to
this Section 2 shall be dated the date of this Warrant.
Section 3. Reservation of Shares. The Company shall at all times
keep reserved solely for issuance and delivery pursuant to the Warrants the
number of shares of its Common Stock that are or would be issuable from time to
time upon exercise of all Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free of all preemptive rights.
Before taking any action that would cause an adjustment pursuant to Section 9
hereof reducing the Exercise Price below the then par value (if any) of the
Warrant Shares issuable upon exercise of this Warrant, the Company will take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.
Section 4. Transfer in Compliance with Applicable Securities Laws;
Investment Intent and Suitability.
4.1 Neither this Warrant nor any of the Warrant Shares, nor
any interest in either, may be sold, assigned, pledged, hypothecated, encumbered
or in any other manner transferred or disposed of, in whole or in part, except
in accordance with Section 6
4
hereof and in compliance with applicable United States federal and state
securities laws and the terms and conditions hereof. Except as provided in
Subsection 4.2 or 4.3, each Warrant shall bear the following legend:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS.
NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
4.2 If (x) the Warrant Shares have been registered under the
Act and registered or qualified under applicable state securities or Blue Sky
laws or (y) the Holder has received an opinion of counsel reasonably
satisfactory to the Company that the Warrant Shares may be freely sold or
transferred without registration under the Act or registration or qualification
under applicable state securities or Blue Sky laws, the Holder can require the
Company to issue, in substitution for a Warrant with the foregoing legend, a
Warrant with the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY
LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS
THEREUNDER.
4.3 The Holder can require the Company to issue a Warrant
without either of the foregoing legends in substitution for a Warrant bearing
one of such legends if either (x) this Warrant and the Warrant Shares issuable
upon the exercise hereof have been registered under the Act and registered or
qualified under applicable state securities or Blue Sky laws or (y) the Holder
has received an opinion of counsel reasonably satisfactory to the Company that
this Warrant may be freely sold or transferred without registration under the
Act or registration or qualification under applicable state securities or Blue
Sky laws. The provisions of this Section 4 shall be binding on all subsequent
holders of this Warrant.
4.4 The Holder represents to the Company as follows:
(a) The Holder is purchasing this Warrant for its own
account for investment purposes only and not with a view to or for sale in
connection with any distribution of the Warrant or the Warrant Shares;
5
(b) The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the risks and the
merits of an investment in the Company;
(c) The Holder can bear the economic risk of its, his or
her investment in the Warrant and the Warrant Shares (i.e., at the time of the
investment the Holder can afford a complete loss of the investment and can
afford to hold the investment for an indefinite period of time); and
(d) The Holder is an "Accredited Investor" as that term
is defined in Regulation D under the Act or to the extent the Holder is not an
"Accredited Investor," such Holder is fully capable of making all of the
representations and warranties in this Section 4.4 and by its, his or her
execution hereof does so affirm.
Section 5. Warrant Shares Registration Rights. The Holder shall have
such registration rights with respect to the Warrant Shares as are set forth in
this Section 5.
5.1 Demand Registration. Upon the written request of one or
more holders of Warrant Shares, which request will state the intended method of
disposition by such holders and will request that the Company effect the
registration under the Act of all or part of the Warrant Shares of such holders,
the Company will, within 10 days after receipt of such request, give written
notice of such requested registration to all registered holders of Warrant
Shares, Series A Securities, Series B Securities and Series C Securities, and
thereupon (except as expressly provided herein) will use its best efforts to
effect the registration ("Demand Registration") under the Act of (x) the Warrant
Shares included in the initial request for registration (for disposition in
accordance with the intended method of disposition stated in such request) and
(y) all other shares of Series A Registerable Common Stock, shares of Series B
Registerable Common Stock and shares of Series C Registerable Common Stock, the
holders of which have made written request to the Company for registration
thereof within 30 days after the receipt of such written notice from the
Company, provided that:
(a) the Company shall be required to effect only two
Demand Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Warrant Shares outstanding at
the time of the request; provided that the Company shall not be required to
effect more than one registration during any one-year period pursuant to this
Section 5.1, Paragraph 7(a) of the Series A Agreement, Section 7.1 of the Series
B Agreement or Section 7.1 of the Series C Agreement;
(b) if the holders of Warrant Shares who initiated the
request for registration intend to sell their Warrant Shares by means of an
underwriting (whether on a "best efforts" or a "firm commitment" basis), they
shall so advise the Company as part of their request, and the Company shall
include such information in the notice to the holders of Series A Securities,
Series B Securities and Series C Securities. In that event, the other holders of
Warrant Shares, Series A Securities, Series B Securities and Series C Securities
shall have the right to include their Warrant Shares or shares of Series A
Registerable Common Stock, Series B Registerable Common Stock and Series C
Registerable Common Stock in the underwriting (unless otherwise mutually agreed
by a majority in interest of the holders of the Warrant Shares, Series A
Securities, Series B Securities and Series C Securities). The managing
underwriter for such offering shall be selected by the Board of
6
Directors of the Company. Each such holder of Warrant Shares agrees, with
respect to an underwritten public offering which occurs following the Closing
Date, by its acquisition of this Warrant, not to effect any public sale or
distribution of this Warrant or the Warrant Shares issuable upon the exercise
hereof (other than as part of such underwritten public offering) during such
period, if any, not to exceed 180 days, as shall reasonably be requested by any
underwriter;
(c) if a Demand Registration under this Section 5.1 is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
Warrant Shares, Series A Registerable Common Stock, Series B Registerable Common
Stock and Series C Registerable Common Stock requested to be included in such
registration exceeds the amount of such Warrant Shares, Series A Registerable
Common Stock, Series B Registerable Common Stock and Series C Registerable
Common Stock which can be successfully sold in such offering, the Company will
nevertheless include in such registration, prior to the inclusion of any
securities which are not Warrant Shares, Series A Registerable Common Stock,
Series B Registerable Common Stock or Series C Registerable Common Stock
(notwithstanding any consent obtained in accordance with Section 5.1(c) hereof),
the amount of Warrant Shares, Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the holders of Warrant Shares, Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock requesting
inclusion on the basis of the number of Warrant Shares and shares of Series A
Registerable Common Stock, Series B Registerable Common Stock and Series C
Registerable Common Stock then owned by such holders;
(d) if the Company shall furnish to the holders
requesting a registration pursuant to this Section 5 a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
for a registration statement to be filed as requested, the Company shall have
the right to defer such filing for a period of not more than 120 days after
receipt of the initial request for registration under this Section 5.1;
provided, however, that the Company may not utilize this right more than once in
any one-year period;
(e) registrations under this Section 5.1 will be on a
form permitted by the rules and regulations of the Commission selected by the
underwriters if the Demand Registration is in connection with an underwritten
public offering or otherwise by the Company; and
(f) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand Registration pursuant to this
Section 5.1 unless the aggregate number of shares of Common Stock to be
registered exceeds 20% of the Warrant Shares then held by the holders of the
Warrant Shares.
5.2 Incidental Registrations.
(a) If the Company at any time proposes to register any
of its securities under the Act (other than pursuant to Section 5.1 hereof),
whether of its own accord or at the demand of any holder of such securities
pursuant to an agreement with respect to the registration thereof (provided such
agreement does not prohibit third parties from including additional securities
in such registration), and if the form of registration
7
statement proposed to be used may be used for the registration of Warrant
Shares, the Company will give notice to all holders of record of Warrant Shares
not less than 5 days nor more than 30 days prior to the filing of such
registration statement of its intention to proceed with the proposed
registration (the "Incidental Registration"), and, upon the written request of
any such holder made within 5 days after the receipt of any such notice (which
request will specify the Warrant Shares intended to be disposed of by such
holder and state the intended method of disposition thereof), the Company will
use its best efforts to cause all Warrant Shares as to which registration has
been requested to be registered under the Act, provided that if such
registration is in connection with an underwritten public offering, such
holder's Warrant Shares to be included in such registration shall be offered
upon the same terms and conditions as apply to any other securities included in
such registration. Notwithstanding anything contained in this Section 5.2 to the
contrary, the Company shall have no obligation to cause Warrant Shares to be
registered with respect to any holder whose Warrant Shares shall be eligible for
resale under Rule 144(k) of the Act.
(b) If an Incidental Registration is a primary
registration on behalf of the Company and is in connection with an underwritten
public offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in such
registration (whether by the Company, the holders of registration rights
pursuant to Section 5.2(a) hereof or other holders of its securities pursuant to
any other rights granted by the Company to demand inclusion of any such
securities in such registration) exceeds the amount of such securities which can
be successfully sold in such offering, the Company will include in such
registration the amount of securities requested to be included which in the
opinion of such underwriters can be sold, in the following order (i) first, all
of the securities the Company proposes to sell, (ii) second, all of the Warrant
Shares, Series A Registerable Common Stock, Series B Registerable Common Stock
and Series C Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number of
Warrant Shares and shares of Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock then owned by
such holders, and (iii) third, any other securities requested to be included in
such registration, pro rata among the holders thereof on the basis of the amount
of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
securities requested to be included in such registration (whether by such
holders, by holders of registration rights pursuant to Section 5.2(a) hereof or
by holders of its securities pursuant to any other rights granted by the Company
to demand inclusion of securities in such registration) exceeds the amount of
such securities which can be sold in such offering, the Company will include in
such registration the amount of securities requested to be included which in the
opinion of such underwriters can be sold, in the following order (i) first, all
of the securities requested to be included by holders demanding or requesting
such registration, (ii) second, all of the Warrant Shares, Series A Registerable
Common Stock, Series B Registerable Common Stock and Series C Registerable
Common Stock requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of Warrant Shares and shares of
Series A Registerable Common Stock, Series B Registerable Common Stock and
Series C Registerable Common Stock then owned by such holders, and (iii) third,
any other securities requested to be included in such registration, pro rata
among the holders thereof on the basis of the amount of such securities then
owned by such holders.
8
5.3 Registration Procedures. If and whenever the Company has
been requested to, or is under an obligation to, use its best efforts to effect
or cause the registration of any Warrant Shares under the Act as provided in
this Section 5, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Warrant Shares and use its best efforts (which
shall not, in any case, require the Company to incur any unreasonable expense)
to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than six months or such shorter period in
which the disposition of all securities in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement shall be completed, and to comply with the provisions of the Act (to
the extent applicable to the Company) with respect to such dispositions;
(c) furnish to each seller of such Warrant Shares such
number of copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the Act, and
such other documents, as such seller may reasonably request, in order to
facilitate the disposition of the Warrant Shares owned by such seller;
(d) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or qualify
such Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as any seller reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Warrant Shares owned by such seller, except that the
Company will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not, but
for the requirements of this Section 5.3(d) be obligated to be qualified, to
subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for all such
Warrant Shares covered by such registration statement not later than the
effective date of such registration statement;
(f) notify each seller of such Warrant Shares at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Warrant Shares, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact required to be stated therein or
necessary to make the statements therein not misleading;
9
(g) use its best efforts to cause all such Warrant
Shares to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters in such
transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
reasonably required in order to expedite or facilitate the disposition of such
Warrant Shares; and
(j) make available for inspection by any seller of
Warrant Shares, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by any such seller and/or representative of such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
5.4 Registration and Selling Expenses.
(a) All expenses incurred by the Company in connection
with the Company's performance of or compliance with this Section 5, including,
without limitation (A) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
(B) Blue Sky fees and expenses, (C) all printing expenses and (D) all fees and
disbursements of counsel and accountants for the Company (including the expenses
of any audit of financial statements) retained by the Company (all such expenses
being herein called "Registration Expenses"), will be paid by the Company except
as otherwise expressly provided in this Section 5.4.
(b) The Company will, in any event, in connection with
any registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of audits
of year-end financial statements), and the expenses and fees for listing the
securities to be registered on one or more securities exchanges on which similar
securities issued by the Company are then listed.
(c) The Company shall bear the Registration Expenses of
each Demand Registration and each Incidental Registration hereunder.
(d) Notwithstanding any of the foregoing, all
underwriting discounts, selling commissions and stock transfer taxes applicable
to sales of Warrant Shares in connection with any Demand Registration or
Incidental Registration shall be borne by all persons who are selling Warrant
Shares pursuant to such Registration Statement in proportion to the dollar value
of the securities being sold by each such person.
(e) All fees and expenses required to be paid by the
holders of Warrant Shares pursuant to Section 5.4(d) hereof in connection with
any Incidental Registration hereunder shall be borne by said holders in
proportion to the dollar value of the securities of such holder covered by such
Incidental Registration.
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5.5 Other Conditions Relating to Registrations. The Company
shall not be required to furnish any audited financial statements at the request
of any holder of Warrant Shares other than those statements customarily prepared
at the end of its fiscal year, unless (a) the requesting holder of Warrant
Shares shall agree to reimburse the Company for the out-of-pocket costs incurred
by the Company in the preparation of such other audited financial statements or
(b) such other audited financial statements shall be required by the Commission
as a condition to declaring a Demand Registration effective under the Act.
5.6 Other Public Sales and Registrations. The Company agrees
(a) that if it has previously filed a registration statement with respect to
Warrant Shares in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the Act or otherwise effect a public
sale or distribution of its securities (except pursuant to registration on Form
S-8 or any successor form relating to a special offering to the employees or
security holders of the Company or any Subsidiary hereafter formed or acquired),
whether on its own behalf or at the request of any holder of such securities,
until at least 60 days have elapsed after the effective date of such previous
registration; and (ii) to cause each holder of securities purchased from the
Company any time after the date of this Agreement (other than in a registered
public offering) to agree not to effect any such public sale or distribution
during such 60-day period of any such securities or any securities issuable on
the conversion thereof or in redemption or exchange therefor. The foregoing
60-day limitation, however, shall not preclude the Company from proceeding with
a registration statement requested by a holder of securities with "demand"
registration rights who requests registration prior to the time a registered
holder of Warrant Shares requests a registration pursuant to Section 5.1 hereof.
5.7 Transferees of Warrant Shares. Notwithstanding anything
else set forth in this Section, no person or entity to whom this Warrant or
Warrant Shares are transferred shall have any rights under this Section 5 as a
holder of this Warrant or such Warrant Shares unless (a) such person or entity
(i) is a partnership whose partners are directors, officers or employees of GMGS
(provided that the partnership is either an Accredited Investor (as defined in
Regulation D of the Act), advised by a Purchased Representative (as defined in
Regulation D of the Act) or a sophisticated investor, or (ii) officers or
directors of GMGS who are either Accredited Investors, advised by a Purchaser
Representative or sophisticated investors; (b) such person agrees to be bound by
the terms and conditions of this Agreement; and (c) the Company is given prompt
written notice of such transfer.
5.8 Indemnification.
(a) The Company hereby agrees to indemnify, to the
extent permitted by law, each holder of Warrant Shares, its officers, attorneys,
accountants, agents and directors, if any, and each person, if any, who controls
such holder within the meaning of the Act, against all losses, claims, damages,
liabilities and expenses under the Act, applicable state securities laws, common
law or otherwise (including, as incurred, legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, except to the extent limited by Section 5.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if the
Company has furnished any amendments or supplements thereto) or any preliminary
prospectus, which registration
11
statement, prospectus or preliminary prospectus shall be prepared in connection
with a Demand Registration or Incidental Registration, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused by
any untrue statement or alleged untrue statement of a material fact contained in
or by any omission or alleged omission of a material fact from information
furnished in writing to the Company by such holder in connection with a Demand
Registration or Incidental Registration, provided the Company will not be liable
pursuant to this Section 5.8 if such losses, claims, damages, liabilities or
expenses have been caused by any selling security holder's failure to deliver a
copy of the registration statement or prospectus, or any amendments or
supplements thereto, after the Company has furnished such holder with a
sufficient amount of copies of the same.
(b) In connection with any registration statement in
which a holder of Warrant Shares is participating, each such holder shall
furnish to the Company in writing such information as is reasonably requested by
the Company for use in any such registration statement or prospectus and shall
indemnify, to the extent permitted by law, the Company, its officers, attorneys,
accountants, agents and directors and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages,
liabilities and expenses under the Act, applicable state securities laws, common
law or otherwise (including, as incurred, legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, except to the extent limited by Section 5.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
such losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or alleged
omission from information so furnished in writing by such holder in connection
with the Demand Registration or Incidental Registration. If the offering
pursuant to any such registration is made through underwriters, each such holder
agrees to enter into an underwriting agreement in customary form with such
underwriters and to indemnify such underwriters, their officers and directors,
if any, and each person who controls such underwriters within the meaning of the
Act to the same extent as hereinabove provided with respect to indemnification
by such holder of the Company. Notwithstanding the foregoing, no such holder of
Warrant Shares shall be liable under this Section 5.8(b) for any amounts
exceeding the product of (i) the offering price per share of Warrant Shares
pursuant to the registration statement in which such holder is participating
(less any underwriting discounts or commissions which reduce the amount such
holder receives), multiplied by (ii) the number of Warrant Shares being sold by
such holder pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party under
Section 5.8(a) or Section 5.8(b) hereof of notice of the commencement of any
action or proceeding, such indemnified party will, if a claim in respect thereof
is, or is to be, made against the indemnifying party under such Section, notify
the indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under such Section. In case
any such action or proceeding is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and, to the extent that it
wishes, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel
12
reasonably satisfactory to such indemnified party, and 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 under such Section for any legal or any other expenses subsequently
incurred by such indemnified party in connection with the defense thereof (other
than reasonable costs of investigation) unless incurred at the written request
of the indemnifying party. Notwithstanding the above, the indemnified party will
have the right to employ one counsel (exclusive of local counsel) of its own
choice in any such action or proceeding if the indemnified party has reasonably
concluded that there may be defenses available to it which are different from or
additional to those of the indemnifying party, or counsel to the indemnified
party is of the opinion that it would not be desirable for the same counsel to
represent both the indemnifying party and the indemnified party because such
representation might result in a conflict of interest (in either of which cases
the indemnifying party will not have the right to assume the defense of any such
action or proceeding on behalf of the indemnified party or parties and such
legal and other expenses will be borne by the indemnifying party). An
indemnifying party will not be liable to any indemnified party for any
settlement of any such action or proceeding effected without the consent of such
indemnifying party.
(d) If the indemnification provided for in Section
5.8(a) or Section 5.8(b) hereof is unavailable under applicable law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and of the holders of Warrant Shares on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holders of Warrant Shares on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company or by the holders of Warrant Shares and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth in Section 5.8(c), hereof any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by the Company or any holder
of Warrant Shares of notice of the commencement of any action or proceeding,
such party will, if a claim for contribution in respect thereof is to be made
against another party (the "contributing party"), notify the contributing party
of the commencement thereof; but the omission so to notify the contributing
party will not relieve it from any liability which it may have to any other
party other than for contribution hereunder. In case any such action, suit, or
proceeding is brought against any party, and such party notifies a contributing
party of the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. No party shall be liable for contribution with regard to the
settlement of any action or proceeding effected without its consent.
13
Section 6. Exchange, Transfer or Assignment of Warrant.
6.1 This Warrant may be, at the option of the Holder, and upon
presentation and surrender hereof to the Company at its principal office or to
the Company's agent at its office, (x) exchanged for other Warrants of different
denominations, entitling the Holder or Holders to purchase in the aggregate the
same number of Warrant Shares at the Exercise Price or, (y) if delivered
together with a written notice specifying the denominations in which new
Warrants are to be issued and signed by the Holder, divided or combined with
other Warrants that carry the same rights.
6.2 Subject to Section 4, this Warrant may be transferred and
assigned, at the option of the Holder, upon surrender of this Warrant to the
Company at its principal office or to the Company's agent at its office, with
the Warrant assignment form attached hereto ("Warrant Assignment Form") duly
executed and accompanied by funds sufficient to pay any transfer tax. The
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees named in such Warrant Assignment Form and, if the Holder's
entire interest is not being transferred or assigned, in the name of the Holder;
and this Warrant shall promptly be cancelled.
6.3 Any transfer or exchange of this Warrant shall be without
charge to the Holder and any Warrant or Warrants issued pursuant to this Section
6 shall be dated the date hereof.
Section 7. Lost, Mutilated or Missing Warrant. Upon receipt by the
Company or its agent of evidence satisfactory to it of the loss, theft or
destruction of this Warrant, and of satisfactory indemnification, and upon
surrender and cancellation of this Warrant if mutilated, the Company or its
agent shall execute and deliver a Warrant of like tenor and date in exchange for
this Warrant.
Section 8. Rights of the Holder. The Holder shall not, by virtue of
being a Holder, be entitled to any rights of a shareholder in the Company,
either at law or in equity, and the rights of the Holder are limited to those
expressed in this Warrant.
Section 9. Anti-dilution.
9.1 The Exercise Price shall be adjusted as described below in
the event the Company shall fix or have fixed a record date at any time after
the date hereof and before the expiration of the Exercise Period for a Stock
Distribution, a Below Market Issuance or a Distribution (all as defined below).
(a) Stock Dividends, Subdivisions, Combinations,
Reclassifications, etc.
(i) A "Stock Distribution" shall be deemed to have
occurred upon (A) the declaration of a dividend or distribution on the Common
Stock payable in shares of capital stock (whether shares of Common Stock or of
capital stock of any other class), (B) the subdivision of shares of the Common
Stock into a greater number of shares, (C) the combination of the Common Stock
into a smaller number of shares or (D) the issuance of any shares of its capital
stock by reclassification of the Common Stock in connection with a consolidation
or merger with a subsidiary of the Company in which the Company is the
continuing corporation and in which the Company issues securities
14
representing, immediately prior to such issuance, more than 30% of the combined
voting power of the Company's then outstanding voting securities having power to
vote in the election of directors.
(ii) Upon the occurrence of a Stock Distribution,
the Holder shall be entitled to receive the aggregate number and kind of shares
which, if the Warrant had been exercised immediately prior to such record date,
it would have been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification, and the Exercise Price shall be
appropriately adjusted. Such adjustment shall be made successively whenever any
event listed in subparagraph (i) shall occur.
(b) Issuance at Less Than Fair Market Value.
(i) A "Below Market Issuance" shall be deemed to
have occurred upon the Company's issuance of rights, options, warrants or shares
of stock, other than Permitted Shares (as hereinafter defined), to any person or
entity at a price per share or having a conversion or exercise price per share
(including the amount paid, if any, for such rights, options or warrants) less
than the Exercise Price, as adjusted, on such record date (excluding rights or
warrants that are not immediately exercisable and for which provision is made
for the Holder to receive comparable rights or warrants). As used in this
paragraph, "Permitted Shares" shall mean (x) any shares of Common Stock or
securities convertible into Common Stock ("Convertible Securities") issued or
issuable, after the date hereof, to officers, directors or employees of, or
consultants to, or to persons who were to become officers, directors or
employees of, or consultants to, the Company pursuant to awards or grants made
prior to the date hereof, (y) 500,000 shares of Common Stock issued after the
date hereof, including but not limited to any shares of Common Stock or
Convertible Securities issued or issuable to officers, directors or employees
of, or consultants to, or to persons who were to become officers, directors or
employees of, or consultants to, the Company pursuant to awards or grants made
after the date hereof under stock option, stock incentive, stock appreciation,
stock bonus, stock award or compensation plans or arrangements or employment
letters or any other employee benefit plans presently in effect or which may
hereafter be adopted or entered into by the Company, and (z) any shares of
Common Stock or Convertible Securities issued or issuable upon conversion of any
Convertible Securities.
(ii) Upon the occurrence of a Below Market
Issuance, the Exercise Price shall be adjusted to a price determined by dividing
(y) an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such Below Market Issuance multiplied by the
Exercise Price then in effect, plus (B) the consideration, if any, received by
the Company upon such Below Market Issuance, by (z) the total number of shares
of Common Stock outstanding immediately after such Below Market Issuance. For
purposes of this paragraph, "Common Stock outstanding" shall mean all issued and
outstanding shares of Common Stock and all issued and outstanding shares of
Convertible Securites.
(iii) Shares of Common Stock owned by or held for
the account of the Company or any subsidiary of the Company on such record date
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall become effective immediately after such record date. Such
adjustment shall be made successively whenever any such Below Market Issuance
shall occur. If such rights, options or warrants are not so issued, the number
of Warrant Shares receivable hereunder shall again
15
be adjusted to be the number that would have been in effect had such record date
not been fixed.
(iv) On the expiration of such rights, options or
warrants, the number of Warrant Shares receivable hereunder shall be readjusted
to be the number that would have obtained had the adjustment made upon the
issuance of such rights, options or warrants been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such rights, options or warrants, provided, however, that if the
Holder of this Warrant shall have exercised this Warrant prior to any such
readjustment, the number of Warrant Shares that have been delivered or the
number of Warrant Shares to be delivered shall not be subject to any
readjustment.
(v) In any case in which this Subsection (b) shall
require that an adjustment in the number of shares receivable hereunder or the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event issuing to the
Holder of any Warrant exercised after such record date the number of Warrant
Shares, if any, issuable upon such exercise over and above the number of Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such Holder a due ▇▇▇▇ or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustments.
(c) Distribution of Subscription Rights, Warrants,
Evidences of Indebtedness or Assets.
(i) The Company shall be deemed to have made a
"Distribution" upon the making of a distribution to all holders of Common Stock
(or other securities deliverable hereunder) (including any such distribution to
be made in connection with a consolidation or merger in which the Company is to
be the continuing corporation) of (A) any shares of capital stock of the Company
(other than Common Stock), (B) subscription rights or warrants (excluding those
for which adjustment is provided in Subsection 9.1(b) above and excluding those
that are not immediately exercisable and for which provision is made for the
Holder to receive comparable subscription rights or warrants) or (C) evidences
of its indebtedness or assets (excluding (x) dividends paid in or distributions
of the Company's capital stock for which the number of Warrant Shares receivable
hereunder shall have been adjusted pursuant to Subsection 9.1(a) and (y) cash
dividends or distributions payable out of earnings or surplus not in excess of
10% of the Exercise Price before the date of declaration multiplied by the
number of outstanding shares of Common Stock) (any of the foregoing being
hereinafter in this paragraph (iii) called the "Securities").
(ii) Upon the making of any such Distribution
(unless the Company elects to reserve shares or other units of such securities
for distribution to each Holder upon exercise of the Warrant so that, in
addition to the shares of the Common Stock to which each Holder is entitled,
each Holder will receive upon such exercise the amount and kind of such
securities which such Holder would have received if the Holder had, immediately
prior to the record date for the distribution of the securities, exercised the
Warrant), the number of Warrant Shares receivable hereunder after such record
date shall be determined by multiplying the number of Warrant Shares receivable
hereunder immediately prior to such record date by a fraction, the denominator
of which shall be the Exercise Price on the day immediately prior to the date on
which the right to receive such securities
16
accrues, less the fair market value (as determined in the reasonable judgment of
the Board of Directors of the Company and described in a statement mailed by
certified mail to the Holder) of the portion of the assets or evidences of
Indebtedness so to be distributed to a holder of one share of the Common Stock
or of such subscription rights or warrants applicable to one share of the Common
Stock, and the numerator of which shall be the Exercise Price on such date; and
the Exercise Price shall be appropriately adjusted.
(iii) Such adjustment shall become effective
immediately after such record date and shall be made successively whenever such
a record date is fixed. If such distribution is not so made, the number of
Warrant Shares receivable hereunder shall be readjusted to be the number that
was in effect immediately prior to such record date.
(iv) In the event that the Holder of this Warrant
exercises this Warrant after an adjustment is made under this Subsection (c) and
prior to a readjustment under this Subsection (c), the number of Warrant Shares
that have been delivered or the number of Warrant Shares to be delivered shall
not be subject to any readjustment. In any case in which this Subsection (c)
shall require that an adjustment in the number of Warrant Shares receivable
hereunder or the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Holder of any Warrant exercised after such record date the
number of Warrant Shares, if any, issuable upon such exercise over and above the
number of Warrant Shares, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such Holder a due ▇▇▇▇ or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares upon the occurrence of the event requiring such adjustments.
9.2 Reorganization Event. In case of any Reorganization Event
the Company shall, as a condition precedent to the consummation of the
transaction constituting, or announced as, such Reorganization Event, cause
effective provisions to be made so that the Holder shall have the right
immediately thereafter, by exercising this Warrant, to receive the aggregate
amount and kind of shares of stock and other securities and property that were
receivable upon such Reorganization Event by a holder of the number of shares of
Common Stock that would have been received immediately prior to such
Reorganization Event upon exercise of this Warrant. Any such provision shall
include provision for adjustments in respect of such shares of stock and other
securities and property that shall be as nearly equivalent as may be practicable
to the adjustments provided for in Subsection 9.1. The foregoing provisions of
this Subsection 9.2 shall similarly apply to successive Reorganization Events.
9.3 Fractional Shares. No fractional shares of Common Stock
(or other securities deliverable hereunder) or scrip shall be issued to any
Holder in connection with the exercise of this Warrant. Instead of any
fractional share of Common Stock (or other securities deliverable hereunder)
that would otherwise be issuable to such Holder, the Company shall pay to such
Holder a cash adjustment in respect of such fractional interest in an amount
equal to such fractional interest multiplied by the Exercise Price per share of
Common Stock (or other securities deliverable hereunder) on the date of such
exercise.
9.4 Carryover. Notwithstanding any other provision of this
Section 9, no adjustment shall be made to the number of shares of Common Stock
(or other securities deliverable hereunder) to be delivered to each Holder (or
to the Exercise Price) if
17
such adjustment would represent less than one percent of the number of shares to
be so delivered, but any such adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to one percent or
more of the number of shares to be so delivered.
9.5 Notices of Certain Events. If at any time after the date
hereof and before the expiration of the Exercise Period:
(a) the Company authorizes the issuance to all holders
of its Common Stock of (i) rights or warrants to subscribe for or purchase
shares of its Common Stock or (ii) any other subscription rights or warrants; or
(b) the Company authorizes the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than cash dividends or distributions excluded from the operation of Subsection
9.1(c)); or
(c) there shall be any capital reorganization of the
Company or reclassification of the Common Stock (other than a change in par
value of the Common Stock or an increase in the authorized capital stock of the
Company not involving the issuance of any shares thereof) or any consolidation
or merger to which the Company is a party (other than a consolidation or merger
with a subsidiary in which the Company is the continuing corporation and that
does not result in any reclassification or change in the Common Stock
outstanding) or a conveyance or transfer of all or substantially all of the
properties and assets of the Company;
(d) there shall be any voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(e) there shall be any other event that would result in
an adjustment pursuant to this Section 9 in the Exercise Price or the number of
Warrant Shares that may be purchased upon the exercise hereof;
the Company will cause to be mailed to the Holder,
at least fifteen days (or ten days in any case specified in clauses (a) or (b)
above) before the applicable record or effective date hereinafter specified, a
notice stating (i) the date as of which the holders of Common Stock of record
entitled to receive any such rights, warrants or distributions is to be
determined, or (ii) the date on which any such reorganization, reclassification,
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 Common Stock of record will be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up.
9.6 Failure to Give Notice. The failure to give the notice
required by Subsection 9.5 or any defect therein shall not affect the legality
or validity of any distribution right, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up or the vote upon
any such action.
Section 10. Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this
18
Warrant or any portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto duly executed,
at the office of the Company; provided, that the Holder may not make such an
election unless (i) the Company has registered the Common Stock pursuant to the
Act or in connection with such registration or (ii) upon the expiration of this
Warrant. Thereupon, the Company shall issue to the Holder such number of fully
paid and nonassessable shares of Common Stock as is computed using the following
formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 10.
Y = the number of shares covered by this Warrant in respect of which
the net issue election is made pursuant to this Section 10.
A = the fair market value of one share of Common Stock. If the Common
Stock is registered pursuant to the Act, the fair market value shall
mean the average high and low prices of the Common Stock on the day
prior to the exercise of this Warrant, if the Common Stock is being
traded on a national exchange; or the last reported sale price on
the day prior to exercise of this Warrant, if the Common Stock is
traded on the Nasdaq National Market, and the Common Stock is not
traded on a national exchange; or the closing bid price (or average
of bid prices) last quoted on the day prior to the exercise of this
Warrant by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq
National Market or a national exchange. If the election occurs in
connection with the registration of Common Stock under the Act, then
the fair market value shall be the price offered to the public.
Otherwise, the fair market value shall be as determined in good
faith by the Board of Directors of the Company, at the time the net
issue election is made pursuant to this Section 10.
B = the Exercise Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 10. The Board of
Directors shall promptly respond in writing to an inquiry by the
Holder as to the fair market value of one share of Common Stock.
Section 11. Officers' Certificate. Whenever the number of Warrant
Shares that may be purchased on exercise of this Warrant or the Exercise Price
is adjusted as required by the provisions of Section 9, the Company will
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and at the office of its agent an officers' certificate showing
the adjusted number of Warrant Shares that may be purchased at the Exercise
Price on exercise of this Warrant and the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the President, Chief Financial Officer or
Treasurer of the Company and by the Secretary or an Assistant Secretary of the
Company. Each such officers' certificate shall be made available at all
reasonable times for inspection by the Holder. The Company shall, forthwith
after each such adjustment, cause a copy of such certificate to be mailed to the
Holder.
19
Section 12. Warrant Register. The Company will register this Warrant
in the Warrant Register in the name of the record holder to whom it has been
distributed or assigned in accordance with the terms hereof. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof (notwithstanding any notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof or any distribution to the
Holder and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 13. Successors. All of the provisions of this Warrant by or
for the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective successors and assigns.
Section 14. Headings. The headings of sections of this Warrant have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15. Amendments. This Warrant may be amended by the
affirmative vote of Holders holding Warrants to purchase not less than
two-thirds of the Warrant Shares purchasable pursuant to all of the then
outstanding Warrants; provided, that, except as expressly provided herein, this
Warrant may not be amended, without the consent of the Holder, to change (a) any
price at which this Warrant may be exercised, (b) the period during which this
Warrant may be exercised, (c) the number or type of securities to be issued upon
the exercise hereof or (d) the provisions of this Section 15.
Section 16. Notices. Unless otherwise provided in this Warrant, any
notice or other communication required or permitted to be made or given to any
party hereto pursuant to this Warrant shall be in writing and shall be deemed
made or given if delivered by hand, on the date of such delivery to such party
or, if mailed, on the fifth day after the date of mailing, if sent to such party
by certified or registered mail, postage prepaid, addressed to it (in the case
of a Holder) at its address in the Warrant Register or (in the case of the
Company) at its address set forth below, or to such other address as is
designated by written notice, similarly given to each other party hereto.
Section 17. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be construed in accordance with the laws of said Commonwealth as
applied to contracts made and to be performed in Pennsylvania between
Pennsylvania residents.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed and attested by its duly authorized officer and to be dated as of the
date first above written.
APOLLON, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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21
PURCHASE FORM
The undersigned, ______________, hereby irrevocably elects to
exercise the within Warrant to purchase _____ shares of Common Stock and hereby
makes payment of $_________ in payment of the exercise price thereof.
Date:_____________, ____ __________________________________________
[Signature]
__________________________________________
[Street Address]
__________________________________________
[City and State]
NET ISSUE ELECTION NOTICE
The undersigned, _________________________, hereby irrevocably
elects under Section 10 of the within Warrant to surrender the right to purchase
________ shares of Common Stock pursuant to this Warrant. The certificate(s) for
the shares issuable upon such net issue election shall be issued in the name of
the undersigned or as otherwise indicated below.
Date:_____________, ____ __________________________________________
[Signature]
__________________________________________
[Name of Registration]
__________________________________________
[Street Address]
__________________________________________
[City and State]
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________
("Assignor"), hereby sells, assigns and transfers unto
Name: ________________________________________ ("Assignee")
(Please type or print in block letters.)
Address: _____________________________________
_____________________________________
Social Security or Taxpayer I.D. No.: __________________
Assignor's right to purchase up to ______ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint the Company and
any of its officers, secretary, or assistant secretaries, as attorneys-in-fact
to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date: ____________, ____ ________________________________________________
[Signed]