EXHIBIT 4.02
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ISONICS CORPORATION AND
XXXXXX XXXXXX SECURITIES, INC.
UNDERWRITER'S
WARRANT AGREEMENT
DATED AS OF_____________, 1997
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UNDERWRITER'S WARRANT AGREEMENT dated as of _____________, 1997, between
ISONICS CORPORATION, a California corporation (the "Company"), and XXXXXX XXXXXX
SECURITIES, INC. and its assignees or designees (each hereinafter collectively
referred to variously as "Holders" or the "Underwriter").
W I T N E S S E T H :
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WHEREAS, the Underwriter has agreed pursuant to the underwriting agreement
(the "Underwriting Agreement") dated as of the date hereof and entered into
between the Company and the Underwriter therein (the "Underwriter") in
connection with the Company's proposed public offering of 700,000 units
("Units") at a public offering price of $7.00 per Unit, consisting of 1,400,000
shares of Common Stock which have been given a value for purposes of this
agreement of $3.40 per share as (hereinafter defined) and 1,400,000 redeemable
warrants (the "Redeemable Warrants") which have been given a value for purposes
of this agreement of $.10 per warrant to purchase one (1) share of Common Stock
at an exercise price of $4.00 per share (the "Public Offering").
WHEREAS, pursuant to the Underwriting Agreement, the Company proposes to
issue warrants (the "Underwriter's Warrants") to the Underwriter to purchase up
to an aggregate of 140,000 shares of Common Stock of the Company and/or 140,000
Redeemable Warrants.
WHEREAS, the Underwriter's Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter in consideration for, and as part
of the Underwriters' compensation in connection with, the Underwriter acting as
the underwriter pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of _______ dollars ($140.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Underwriter is hereby granted the right to purchase, at
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any time one year after the Effective Date of the Registration Statement until
5:30 p.m., New York time, on September ___, 2002 (five years from the Effective
Date of the Registration Statement), at which time the Underwriter's Warrants
expire, up to an aggregate of 140,000 shares of Common Stock, no par value (the
"Common Stock"), and/or 140,000 Redeemable Warrants at an initial exercise price
(subject to adjustment as provided in Section 11 hereof) of $5.61 per share of
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Common Stock (165% of the initial public offering price per share and $.165 per
Redeemable Warrant (165% of the initial public offering price per Redeemable
Warrant, (collectively, the "Exercise Price"). The Redeemable Warrant is
exercisable to purchase one additional share of Common Stock at an initial
exercise of $4.00 (from one year after the Effective Date of the Registration
Statement until September __, 5:30 p.m. New York time, 2001 (four years from the
Effective Date of the Registration Statement), at which time the Redeemable
Warrants shall expire. The shares of Common Stock and the Redeemable Warrants
issuable upon exercise of the Underwriter's Warrants are in all respects
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identical to the shares of Common Stock and the Redeemable Warrants being
purchased by the Underwriters for resale to the public pursuant to the terms and
provisions of the Underwriting Agreement. The shares of Common Stock and the
Redeemable Warrants issuable upon exercise of the Underwriter's Warrants are
sometimes hereinafter referred to collectively as the "Securities."
2. Underwriter's Warrant Certificates. The Underwriter's Warrant
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Certificates (the "Warrant Certificates") delivered and to be delivered pursuant
to this Agreement shall be in the form set forth in Exhibit A, attached hereto
and made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this Agreement.
3. Registration of Warrant. The Underwriter's Warrants shall be numbered
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and shall be registered on the books of the Company when issued. The
Underwriter's Warrants and securities underlying such warrant shall be
registered on the Company's registration statement for the initial Public
Offering of its securities.
4. Exercise of Underwriter's Warrants.
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The Underwriter's Warrants initially are exercisable at an aggregate
Exercise Price (subject to adjustment as provided in Section 11 hereof) of $5.61
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per share of Common Stock and $.165 per Redeemable Warrant as set forth in
Section 8 hereof payable by certified or official bank check in New York
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Clearing House funds. Upon surrender of a Underwriter's Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price for the Securities purchased at the Company's principal
offices in California presently located at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxx, Xxxxxxxxxx 00000, the registered holder of an Underwriter's Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock and/or Redeemable Warrants so
purchased. The purchase rights represented by each Underwriter's Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of Common Stock and/or Redeemable Warrants
underlying the Underwriter's Warrants). Underwriter's Warrants may be exercised
to purchase all or part of the shares of Common Stock together with an equal or
unequal number of the Redeemable Warrants represented thereby. In the case of
the purchase of less than all of the shares of Common Stock and/or Redeemable
Warrants purchasable under any Underwriter's Warrant Certificate, the Company
shall cancel said Underwriter's Warrant Certificate upon the surrender thereof
and shall execute and deliver a new Underwriter's Warrant Certificate of like
tenor for the balance of the shares of Common Stock and/or Redeemable Warrants
purchasable thereunder.
5. Issuance of Certificates. Upon the exercise of the Underwriter's
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Warrant, the issuance of certificates for shares of Common Stock and/or
Redeemable Warrants or other securities, properties or rights underlying such
Underwriter's Warrant shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 7
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and 9 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; 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 and delivery
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of any such certificates in a name other than that of the Holder 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.
The Underwriter's Warrant Certificates and the certificates representing
the shares of Common Stock and/or Redeemable Warrants or other securities,
property or rights issued upon exercise of the Underwriter's Warrant shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present President or any Vice President of the Company under its corporate
seal reproduced thereon, attested to by the manual or facsimile signature of the
then present Secretary or any Assistant Secretary of the Company. Underwriter's
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
6. Transfer of Underwriter's Warrant. The Underwriter's Warrant shall be
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transferable in the first year only to officers, directors and principals of the
Underwriter, only on the books of the Company maintained at its principal
office, where its principal office may then be located, upon delivery thereof
duly endorsed by the Holder or by its duly authorized attorney or underwriter
accompanied by proper evidence of succession, assignment or authority to
transfer. Upon any registration transfer, the Company shall execute and deliver
the new Underwriter's Warrant to the person entitled thereto.
7. Restriction On Transfer of Underwriter's Warrant. The Holder of a
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Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Underwriter's Warrant is being acquired as an investment and not
with a view to the distribution thereof, and that the Underwriter's Warrant may
not be sold, transferred, assigned, hypothecated or otherwise disposed of, in
whole or in part, for the term of the Underwriter's Warrant, except to officers
or partners of the Underwriters, or by operation of law.
8. Exercise Price.
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8.1 Initial and Adjusted Exercise Price. Except as otherwise
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provided in Section 11 hereof, the initial exercise price of each Underwriter's
Warrant shall be $5.61 per share of Common Stock (165% of the initial public
offering price per share of Common Stock) and $.165 per Redeemable Warrant (165%
of the initial public offering price per Redeemable Warrant). The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 11 hereof. Any transfer of a Underwriter's Warrant shall
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constitute an automatic transfer and assignment of the registration rights set
forth in Section 9 hereof with respect to the Securities or other securities,
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properties or rights underlying the Underwriter's Warrants.
8.2 Exercise Price. The term "Exercise Price" herein shall mean the
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initial exercise price or the adjusted exercise price, depending upon the
context or unless otherwise specified.
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9. Registration Rights.
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9.1 Registration Under the Securities Act of 1933. Each
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Underwriter's Warrant Certificate and each certificate representing shares of
Common Stock and/or Redeemable Warrants and any of the other securities issuable
upon exercise of the Underwriter's Warrant (collectively, the "Warrant Shares")
shall bear the following legend unless (i) such Underwriter's Warrant or Warrant
Shares are distributed to the public or sold to the underwriters for
distribution to the public pursuant to Section 9 hereof or otherwise pursuant to
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a registration statement filed under the Securities Act of 1933, as amended (the
"Act"), or (ii) the Company has received an opinion of counsel, in form and
substance reasonably satisfactory to counsel for the Company, that such legend
is unnecessary for any such certificate:
THE UNDERWRITER'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE
OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE
TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANT REPRESENTED BY THE
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S WARRANT
AGREEMENT REFERRED TO HEREIN.
9.2 Automatic and Piggyback Registration. The Underwriter's Warrant
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and all securities underlying the Underwriter's Warrant shall be registered on
the registration statement for the Company's initial Public Offering of
securities. In the event a new registration statement is required to effect
valid registration of the Underwriter's Warrant and the securities thereunder,
then if, at any time commencing after the effective date of the Registration
Statement and expiring five (5) years thereafter, the Company proposes to
register any of its securities under the Act (other than in connection with a
merger or pursuant to Form S-4 or Form S-8) it will give written notice by
registered mail, at least twenty (20) days prior to the filing of each such
registration statement, to the Holders of the Underwriter's Warrants and/or the
Warrant Shares of its intention to do so. If any of the Holders of the
Underwriter's Warrants and/or Warrant Shares notify the Company within ten (10)
days after mailing of any such notice of its or their desire to include any such
securities in such proposed registration statement, the Company shall afford
such Holders of the Underwriter's Warrants and/or Warrant Shares the opportunity
to have any such Underwriter's Warrants and/or Warrant Shares registered under
such registration statement. In the event that the managing underwriter for said
offering advises the Company in writing that in its opinion the number of
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securities requested to be included in such registration exceeds the number
which can be sold in such offering without causing a diminution in the offering
price or otherwise adversely affecting the offering, the Company will include in
such registration (a) first, the securities the Company proposes to sell, (b)
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second, the securities held by the entities, if any, that made the demand for
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registration, (c) third, the Underwriter's Warrants and/or Warrant Shares
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requested to be included in such registration which in the opinion of such
underwriter can be sold, pro rata, among all proposed selling shareholders.
Notwithstanding the provisions of this Section 9.2, the Company shall have
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the right at any time after it shall have given written notice pursuant to this
Section 9.2 (irrespective of whether a written request for inclusion of any such
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securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 Demand Registration.
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(a) At any time commencing one (1) year after the effective
date of the Registration Statement and expiring five (5) years from the
effective date of the Registration Statement, the Holders of the Underwriter's
Warrants and/or Warrant Shares representing a "Majority" (as hereinafter
defined) of the Underwriter's Warrants and/or Warrant Shares shall have the
right (which right is in addition to the registration rights under Section 9.2
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hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale by such Holders and any other Holders
of the Underwriter's Warrant and/or Warrant Shares who notify the Company within
fifteen (15) days after the Company mails notice of such request pursuant to
Section 9.3(b) hereof (collectively, the "Requesting Holders") of their
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respective Warrant Shares for the earlier of (i) nine (9) consecutive months or
(ii) until the sale of all of the Warrant Shares requested to be registered by
the Requesting Holders.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 9.3 by any Holder or Holders
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representing a Majority of the Underwriter's Warrants and/or Warrant Shares to
all other registered Holders of the Underwriter's Warrants and the Warrant
Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) Intentionally omitted.
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Shares within the time period specified in Section 9.4(a) hereof pursuant to the
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written notice specified in Section 9.3(a) of the Holders of a Majority of the
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Underwriter's Warrants and/or Warrant Shares, the Company, at its option, may
repurchase (i) any and all Warrant Shares at the higher of the Market Price (as
defined
in Section 9.3(e)) per share of Common Stock on (e) the date of the notice sent
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pursuant to Section 9.3(a) or (y) the expiration of the period specified in
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Section 9.4(a) and (ii) any and all Underwriter's Warrants at such Market Price
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less the exercise price of such Underwriter's Warrant. Such repurchase shall be
in immediately available funds and shall close within two (2) days after the
later of (i) the expiration of the period specified in Section 9.4(a) or (ii)
the delivery of the written notice of election specified in this Section 9.3(d).
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(e) Definition of Market Price. As used herein, the phrase
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"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the shares of
Common Stock and/or Redeemable Warrants or Common Stock is listed or admitted to
trading, or, if the shares of Common Stock and/or Redeemable Warrants or Common
Stock is not listed or admitted to trading on any national securities exchange,
the average closing sale price as furnished by the NASD through The Nasdaq Stock
Market, Inc. ("Nasdaq") or similar organization if Nasdaq is no longer reporting
such information, or if the shares of Common Stock and/or Redeemable Warrants or
Common Stock is not quoted on Nasdaq as determined in good faith by resolution
of the Board of Directors of the Company, based on the best information
available to it.
9.4 Covenants of the Company With Respect to Registration. In
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connection with any registration under Sections 9.2 or 9.3 hereof, the Company
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covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested. The Company
shall keep its registration statement for its initial Public Offering effective
for so long as the Underwriter may reasonably request; provided however, this
obligation of the Company shall terminate upon the earlier of the expiration of
the Warrants or until such Warrants are fully exercised.
(b) The Company shall pay all costs, fees and expenses in
connection with all registration statements filed pursuant to Sections 9.2 and
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9.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay all
costs, fees and expenses (including those of the Company) in connection with the
registration statement filed pursuant to Section 9.3(c).
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(c) The Company will use its commercially reasonable efforts to
take all necessary action which may be required in qualifying or registering the
Warrant Shares included in a registration statement for offering and sale under
the securities or blue sky laws of such states as reasonably are requested by
the Holder(s), provided that the Company shall not be obligated to execute or
file any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
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(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
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Agreement pursuant to which the Underwriters have agreed to indemnify the
Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Underwriter's Warrant prior to the
initial filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Shares to be included in any registration statement filed
pursuant to Section 9.3 hereof, or permit any other registration statement
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(other than a registration statement on Form S-4 or S-8) to be or remain
effective during a ninety (90) day period following the effectiveness of a
registration statement filed pursuant to Section 9.3 hereof, without the prior
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written consent of National or as otherwise required by the terms of any
existing registration rights granted prior to the date of this Agreement by the
Company to the holders of any of the Company's securities.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily
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covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within fifteen (15) months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
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least twelve (12) consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting,
which may be the Underwriter. Such agreement shall be satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Shares and may, at their
option, require that any or all the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in
reference to the Underwriter's Warrants or Warrant Shares, shall mean in excess
of fifty percent (50%) of the then outstanding Underwriter's Warrants or Warrant
Shares that (i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates, members of
their family, persons acting as nominees or in conjunction therewith or (ii)
have not been resold to the public pursuant to a registration statement filed
with the Commission under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
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obligations of the Company to take any action pursuant to Section 9 hereof that
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each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating to
the Warrant Shares covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
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fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
11. Adjustments to Exercise Price and Number of Securities. The Exercise
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Price in effect at any time and the number and kind of securities purchased upon
the exercise of the Underwriter's Warrant shall be subject to adjustment from
time to time only upon the happening of the following events:
11.1 Stock Dividend. Subdivision and Combination. In case the Company
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shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
11.2 Adjustment in Number of Securities. Upon each adjustment of the
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Exercise Price pursuant to the provisions of this Section 11, the number of
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Warrant Shares issuable upon the exercise at the adjusted Exercise Price of each
Underwriter's Warrant shall be adjusted to the nearest number of whole shares of
Common Stock by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of the Underwriter's Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
11.3 Definition of Common Stock. For the purpose of this Agreement,
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the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 Merger or Consolidation. In case of any consolidation of the
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Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to the Holder a supplemental warrant
agreement providing that the Holder of each Underwriter's Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Underwriter's Warrant) to receive, upon exercise of such
Underwriter's Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock for which such Underwriter's Warrant
might have been exercised immediately prior to such consolidation, merger, sale
or transfer. Such supplemental warrant
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agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 11. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
11.5 No Adjustment of Exercise Price in Certain Cases. No adjustment
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of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrant or the
Warrant Shares:
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof; or
(c) If the amount of said adjustment shall be less than two cents
($.02) per share, provided, however, that in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to at least two cents
($.02) per Underwriter's Warrant.
12. Exchange and Replacement of Underwriter's Warrant Certificates. Each
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Underwriter's Warrant Certificate is exchangeable, without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company for a new Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Warrant
Shares in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Underwriter's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Underwriter's Warrant, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall not be
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required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Underwriter's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company shall at all times
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reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon
11
the exercise of the Underwriter's Warrant and the Redeemable Warrant, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. Every transfer agent ("Transfer
Agent") for the Common Stock and other securities of the Company issuable upon
the exercise of the Underwriter's Warrant will be irrevocably authorized and
directed at all times to reserve such number of authorized shares of Common
Stock and other securities as shall be requisite for such purpose. The Company
will keep a cow of this Agreement on file with every Transfer Agent for the
Common Stock and other securities of the Company issuable upon the exercise of
the Underwriter's Warrant. The Company will supply every such Transfer Agent
with duly executed stock and other certificates, as appropriate, for such
purpose. The Company covenants and agrees that, upon exercise of the
Underwriter's Warrant and payment of the Exercise Price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Underwriter's Warrant shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Underwriter's Warrant to be
listed (subject to official notice of issuance) on all securities exchanges on
which the Common Stock issued to the public in connection herewith may then be
listed and/or quoted on Nasdaq SmallCap Market.
15. Notices to Underwriter's Warrant Holders. Nothing contained in this
-----------------------------------------
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Underwriter's Warrants and their exercise, any of
the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then in any one or more of said events, the Company shall give written
notice of such event at least fifteen (15) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any convertible
or exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
16. Redeemable Warrants.
--------------------
The form of the certificate representing the Redeemable Warrants (and the
form of election to purchase shares of Common Stock upon the exercise of the
Redeemable Warrants and the form of assignment printed on the reverse thereof)
shall be substantially as set forth in Exhibit "A" to the Warrant Agreement
dated as of the date hereof by and among the Company, the Underwriter and
Continental Stock Transfer & Trust Company, as warrant agent (the "Redeemable
Warrant Agreement"). Each Redeemable Warrant issuable upon exercise of the
Underwriter's Warrants shall evidence the right to initially purchase a fully
paid and non-assessable share of Common Stock at an initial purchase price of
$5.61 from one year after the Effective Date of the Registration Statement until
5:30 p.m. New York time on __________, 2001 (four (4) years from the Effective
Date of the Registration Statement) at which time the Redeemable Warrants,
unless the exercise period has been extended, shall expire. The exercise price
of the Redeemable Warrants and the number of shares of Common Stock issuable
upon the exercise of the Redeemable Warrants are subject to adjustment, whether
or not the Underwriter's Warrants have been exercised and the Redeemable
Warrants have been issued, in the manner and upon the occurrence of the events
set forth in Section 8 of the Redeemable Warrant Agreement, which is hereby
incorporated by reference and made a part hereof as if set forth in its entirety
herein. Subject to the provisions of this Agreement and upon issuance of the
Redeemable Warrants underlying the Underwriter's Warrants, each registered
holder of such Redeemable Warrant shall have the right to purchase from the
Company (and the Company shall issue to such registered holders) up to the
number of fully paid and non-assessable shares of Common Stock (subject to
adjustment as provided herein and in the Redeemable Warrant Agreement), free and
clear of all preemptive rights of stockholders, provided that such registered
holder complies with the terms governing exercise of the Redeemable Warrant set
forth in the Redeemable Warrant Agreement, and pays the applicable exercise
price, determined in accordance with the terms of the Redeemable Warrant
Agreement. Upon exercise of the Redeemable Warrants, the Company shall forthwith
issue to the registered holder of any such Redeemable Warrant in his name or in
such name as may be directed by him, certificates for the number of shares of
Common Stock so purchased. Except as otherwise provided in this Agreement, the
Redeemable Warrants underlying the Underwriter's Warrants shall be governed in
all respects by the terms of the Redeemable Warrant Agreement. The Redeemable
Warrants shall be transferable in the manner provided in the Redeemable Warrant
Agreement, and upon any such transfer, a new Redeemable Warrant Certificate
shall be issued promptly to the transferee. The Company covenants to, and agrees
with, the Holder(s) that without the prior written consent of the Holder(s),
which will not be unreasonably withheld, the Redeemable Warrant Agreement will
not be modified, amended, canceled, altered or superseded, and that the Company
will send to each Holder, irrespective of whether or not the Underwriter's
Warrants have been exercised, any and all notices required by the Redeemable
Warrant Agreement to be sent to holders of the Redeemable Warrants.
13
17. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder of the Underwriter's Warrant, to the
address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4 hereof or
to such other address as the Company may designate by notice to the Holders.
18. Supplements: Amendments: Entire Agreement. This Agreement (including
------------------------------------------
the Underwriting Agreement to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought. The Company and the Underwriter may from
time to time supplement or amend this Agreement without the approval of any
Holders of Underwriter's Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Underwriter's Warrant Certificates.
19. Successors. All of the covenants and provisions of this Agreement
-----------
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
20. Survival of Representations and Warranties. All statements in any
------------------------------------------
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
21. Governing Law. This Agreement and each Underwriter's Warrant
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
22. Severability. If any provision of this Agreement shall be held to be
------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
14
23. Captions. The caption headings of the Sections of this Agreement are
---------
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
24. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder(s) of the Underwriter's Warrant
Certificates or Warrant Shares any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and the Underwriters and any other Holder(s) of the
Underwriter's Warrant Certificates or Warrant Shares.
25. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ATTEST: ISONICS CORPORATION
_________________ Name: ________________________
Secretary Title: ________________________
XXXXXX XXXXXX SECURITIES, INC.
By: ________________________
Name: Xxxxxxx Xxxxxxxx
Title: Director of Corporate Finance
15
EXHIBIT A
[FORM OF UNDERWRITER'S WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, ___________, 2002
Underwriter's Warrant No.________
Shares of Common Stock and/or Redeemable Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ________, or registered assigns, is
the registered holder of Warrants to purchase initially, at any time commencing
one year after ____________, 1997 until 5:30 p.m., New York time on
_____________, 2002 ("Expiration Date"), up to _______ shares of Common Stock
and/or ___________ Redeemable Warrants (each to acquire one share of the
Company's Common Stock at the initial exercise price, subject to adjustment of
$4.00 per share) of Isonics Corporation, a California corporation (the
"Company") at the initial exercise price, subject to adjustment in certain
events, of $5.61 per share of Common Stock and $.165 per Redeemable Warrant
(165% of the initial public offering price per Warrant) (the "Exercise Price")
upon surrender of this Underwriter's Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriter's Warrant Agreement dated as
of __________, 1997 among the Company, and Xxxxxx Xxxxxx Securities, Inc. (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Underwriter's Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Underwriter's Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Underwriter's Warrants issued pursuant to the
Warrant Agreement, which Warrant Agreement is hereby incorporated by reference
in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Underwriter's Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Underwriter's
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Underwriter's Warrants shall be issued to the transferee(s) in exchange for
this Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Warrant evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such numbered unexercised Underwriter's
Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by-any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
EXH. A-2
This Warrant Certificate does not entitle any holder thereof to any of the
rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ________ __, 1997.
ATTEST: ISONICS CORPORATION
_________________ Name: ______________________
Secretary Title: ______________________
EXH. A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock and/or _____ Redeemable Warrants and herewith tenders in payment for such
securities a certified or official bank check payable in New York Clearing House
Funds to the order of Isonics Corporation (the "Company") in the amount of
$______, all in accordance with the terms of Section 4 of the Underwriter's
Warrant Agreement dated as of _________, 1997 among the Company and Xxxxxx
Xxxxxx Securities, Inc. The undersigned requests that a certificate for such
securities be registered in the name of ________________________, whose address
is ___________________________and that such certificate be delivered
to__________________________, whose address is __________________, and if said
number of shares shall not be all the shares purchasable hereunder, that a new
Warrant Certificate for the balance of the shares purchasable under the within
Warrant Certificate be registered in the name of the undersigned warrant holder
or his assignee as below indicated and delivered in the address stated below.
Dated: ______________________ ____________________________________________
(Signature must conform in all respects to
the name of the holder as specified on the
face of the Warrant Certificate.)
Address:____________________________________
____________________________________
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-4
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and transfers
unto [NAME OF TRANSFEREE] this Warrant Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
_____________________ Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, with full power of substitution.
Dated: ______________________ ____________________________________________
(Signature must conform in all respects to
the name of the holder as specified on the
face of the Warrant Certificate.)
Address:____________________________________
____________________________________
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
XXX. X-0
