EXHIBIT 4.2
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PACIFICHEALTH LABORATORIES, INC.
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UNDERWRITER'S WARRANT AGREEMENT FOR SHARES
Dated as of December __, 1997
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UNDERWRITER'S WARRANT AGREEMENT dated as of December __, 1997 between
PACIFICHEALTH LABORATORIES,INC., a Delaware corporation with its principal
address at 0000 Xxxxx 0, Xxxxx Xxxxxxxxxx, Xxx Xxxxxx 00000 (the "Company") and
FIRST MONTAUK SECURITIES CORP., as Underwriter, a (hereinafter referred to
variously as the "Holder" 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 between the
Underwriter and the Company, to underwrite the Company's proposed public
offering (the "Public Offering") of 1,200,000 shares of common stock $.0025 par
value (the "Common Stock") of the Company at a public offering price of $6.00
per share (the "Shares"); and
WHEREAS, the Company proposes to issue to the Underwriter warrants
("Underwriter's Warrants") to purchase up to an aggregate of 120,000 fully paid
non-assessable shares (the "Shares") of the Company's Common Stock, at an
exercise price of $8.70 per share (145% of the public offering price of the
Shares); and
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
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Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of the compensation in connection with the Public Offering;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of One Hundred and Twenty ($120.00),
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:
x. Xxxxx. The Holder is hereby granted the right to purchase, at any time
from ____, 1998 [one year after effective date] until 5:30 P.M., New York time,
on _____, 2002 [four years after effective date], up to an aggregate of 120,000
Shares at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) of $8.70 per Share (the "Exercise Price"), subject to the
terms and conditions of this Agreement. Except as set forth herein, the Shares
issuable upon exercise of the Underwriter's Warrants are in all respects
identical to the shares of Common Stock being purchased by the Underwriter for
resale to the public pursuant to the terms and provisions of the Underwriting
Agreement.
2. Underwriter's Warrant Certificates. The Underwriter's warrant
certificates (the "Underwriter's 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.
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3. Exercise of Underwriter's Warrants.
Section 3.1 Exercise. The Underwriter's Warrants initially are exercisable
at an aggregate initial exercise price (subject to adjustment as provided in
Section 8 hereof) per share, as set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender at the Company's
principal offices currently located at 0000 Xxxxx 0, Xxxxx Xxxxxxxxxx, Xxx
Xxxxxx 00000), of an Underwriter's Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase Price
(as hereinafter defined) for the Shares purchased, the registered holder of an
Underwriter's Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the Shares 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 underlying the Underwriter's Warrants). In the case of
the purchase of less than all the Shares purchasable under any Underwriter's
Warrant Certificate, the Company shall cancel the 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
purchasable thereunder.
Section 3.2 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
Holder's Warrant certificate, in whole or in part (a "Warrant Exchange), into
the
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number of fully paid and non-assessable Shares determined in accordance with
this Section 3.2, by surrendering such Warrant certificate at the principal
office of the Company or at the office of its transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange, or, if later, the
date the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant of like tenor evidencing the balance of the Shares
remaining subject to the Holder's Warrant certificate, shall be issued as of the
Exchange Date and delivered to the Holder within three (3) business days
following the Exchange Date. In connection with any Warrant Exchange, the
Holder's Warrant certificate shall represent the right to subscribe for and
acquire (i) the number of Shares (rounded to the next highest integer) equal to
(A) the number of Shares specified by the Holder in its Notice of Exchange (the
"Total Share Number") less (B) the number of Shares equal to the quotient
obtained by dividing (i) the product of the Total Share Number and the existing
Exercise Price (as hereinafter defined) per Share by (ii) the Market Price (as
defined in Section 3.3 hereof) of a share of Common Stock.
Section 3.3 Market Price. For the purpose of this Agreement, the phrase
"Market Price" at any date shall be deemed to be the (i) last reported sale
price on the last trading day or, in case no such reported sale takes place on
such day, the
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average last reported sale price for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, (ii) if the Common Stock is
not listed or admitted to trading on any national securities exchange but is
listed or quoted upon the Nasdaq National Market or SmallCap Market (together
referred to hereinafter as "NASDAQ"), the closing bid price on the last trading
day, or, in case no such reported bid takes place on such day, the average
closing bid price for the last three (3) trading days, as furnished by NASDAQ or
similar organization if NASDAQ is no longer reporting such information, or (iii)
if the Common Stock is not listed upon a principal exchange or quoted on NASDAQ,
but quotes for the Common Stock are available in the OTC Bulletin Board the
closing bid price on the last trading day, or, in case no such bid takes place
on such day, the average closing bid price for the last three (3) trading days
as furnished on the OTC Bulletin Board or (iv) in the event the Common Stock is
not traded upon a principal exchange and not listed on NASDAQ and quotes are not
available on the OTC Bulletin Board, as determined in good faith by resolution
of the Board of Directors of the Company, based on the best information
available to it.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrants, the issuance of certificates for the Shares or other securities,
properties or rights underlying such Underwriter's Warrants, 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
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issuance thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 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 of any such certificates in a name other
than that of the Underwriter 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 issuable upon exercise of the Underwriter's Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
then Chairman or Vice Chairman of the Board of Directors or President or 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
Assistant Secretary of the Company. The Underwriter's Warrant Certificates shall
be dated the date of the execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The certificates representing the
Shares issuable upon exercise of the Underwriter's Warrant shall be identical in
form to those issued in connection with the Public Offering.
5. Restriction On Transfer of Underwriter's Warrants. The Holder of an
Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees
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that the Underwriter's Warrants are not being acquired with a view to the
distribution thereof; and that the Underwriter's Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date hereof, except to officers of
the Underwriter or members of the Selling Group (as defined in the Underwriting
Agreement) and thereafter only to officers, directors, employees of and one
consultant to the Company.
6. Exercise Price.
Section 6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Underwriter's
Warrant shall be $7.20 per Share. The exercise price shall be adjusted from time
to time in accordance with the provisions of Section 8 hereof.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise prices or the adjusted exercise price, depending upon the
context of the Underwriter's Warrants.
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The
Underwriter's Warrants and the Shares issuable upon exercise of the
Underwriter's Warrants, have been registered (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act").
Section 7.2 Piggyback Registration. If, at any time commencing after
__________, 1998 (one (1) year from the Effective Date), through and including
________, 2002 (five (5) years from the Effective Date), the Company proposes to
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register any of its securities under the Act (other than on Form S-8 or any
successor form for use in connection with the issuer employee benefit plans in
connection with a merger or acquisition) it will give written notice by
registered or certified mail, at least thirty (30) days prior to the filing of
each such registration statement, to the Underwriter and to all other Holders of
the Underwriter's Warrants and Shares underlying the Underwriter's Warrants, of
its intention to do so. If any of the Underwriter or other Holders of the
Underwriter's Warrants and/or the Shares underlying the Underwriter's Warrants,
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Underwriter's Warrants and/or Shares underlying the Underwriter's Warrants,
the opportunity to have any of such securities registered under such
registration statement; provided, however, that in the event the underwriters of
any securities proposed to be sold by the Company advise the Company that in
their opinion the number of securities requested to be included in such
registration pursuant to this Agreement and pursuant to any other rights granted
by the Company to holders of its securities exceeds the number of securities
that can be sold in the offering without adversely affecting the offering price
of the Company's securities, the Company may first include in such registration
all securities the Company proposes to sell (without including the holders of
other rights granted by the Company), and each Holder shall accept a pro rata
reduction in the number of shares to be included in such registration statement.
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Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
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.
Section 7.3 Demand Registration.
(a) At any time commencing after , 1998 (one (1) year from the Effective
Date) through and including , 2002 (five (5) years from the Effective Date), the
Holders of the Underwriter's Warrants and Shares underlying the Underwriter's
Warrants, representing a "Majority" of the shares of Common Stock issued or
issuable upon the exercise of the Underwriter's Warrants (assuming the exercise
of all of the Underwriter's Warrants) shall have the right (which right is in
addition to the registration rights under Section 7.2 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Commission, on one occasion only, 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 Underwriter and Holders, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Underwriter's Warrants and Shares for at least nine (9)
consecutive months by such Holders and any other Holders of the Underwriter's
Warrants and the Shares who shall notify the Company within ten (10) days after
receiving notice from the
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Company of such request. Such registration and all costs incident thereof shall
be at the expense of the Company, as provided in Section 7.4(b).
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Underwriter's Warrants and Shares within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and subsection
(a) of this Section 7.3, at any time within the time period specified in Section
7.4(a) hereof, through and including ___________, 2002 (five (5) years from the
Effective Date), any Holder of the Underwriter's Warrants and/or Shares,
representing a "Majority" (as hereinafter defined) of the shares of Common Stock
issued or issuable upon the exercise of the Underwriter's Warrants (assuming the
exercise of all of the Underwriter's Warrants) shall have the right, exercisable
by written request to the Company, to have the Company prepare and file, on one
occasion, with the Commission a registration statement so as to permit a public
offering and sale for nine (9) consecutive months by any such Holder of its
shares, provided, however, that the provisions of Section 7.4(b) hereof shall
not apply to any such registration request and registration and all costs
incident thereto shall be at the expense of the Holder or Holders making such
request.
(d) The Company and the Holders agree that the Holders of Underwriters
Warrants and Shares (the "Securities") will suffer damages if the Company fails
to fulfill its obligations under this Section 7.3. In the event that the holders
of the Securities are required to initiate suit or arbitration to enforce their
rights under this Section 7, then the Company shall pay all reasonable costs and
expenses, including attorney's fees incurred by the Holders in connection
therewith.
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Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration statement
within sixty (60) days of receipt of any demand therefor in accordance with
Section 7.3(a), shall use its best efforts to have any registration statement
declared effective by within 90 days after filing, and shall furnish each Holder
desiring to sell the Shares underlying the Underwriter's Warrants such number of
prospectuses as shall reasonably be requested. Notwithstanding the foregoing
sentence, the Company shall be entitled to postpone the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 7.4(a) if the Company (i) is publicly committed to a
self-tender or exchange offer and the filing of a registration statement would
cause a violation of Regulation M under the Securities Exchange Act of 1934 as
amended (the "Exchange Act") or (ii) or if the Company is involved in
negotiating or consummating an acquisition or merger which would make such
registration impracticable in which case the filing of the registration
statement may be delayed for a reasonable period not to exceed 150 days. In the
event of such postponement, the Company shall be required to file the
registration statement pursuant to this Section 7.4(a) upon the earlier of (i)
the consummation or termination, as applicable, of the event requiring such
postponement or (ii) 150 days after the receipt of the initial demand for such
registration. Additionally, notwithstanding anything to the contrary contained
herein, during any period that a registration statement filed pursuant to
Section 7.3 hereof is effective, the Company shall have the right to prohibit
the sale of any Warrants or Warrant Shares thereunder upon notice to the
Holder(s) (A) if in the opinion of counsel for the Company, the Company would
thereby be required to disclose information not otherwise then required by law
to be publicly disclosed where it is significant to the operations or well being
of the Company that such information remain undisclosed, provided that the
Company shall use its best efforts to minimize the period of time in which it
shall prohibit the sale of any of such shares pursuant to this clause (A), (B)
for periods of up to 30 days if the Company reasonably believes that such sale
might reasonably be expected to have an adverse effect on any significant
proposal or plan of the Company to engage in an acquisition of assets or any
merger, consolidation, tender offer, financing, corporate reorganization or
similar transaction; (C) during the period starting with the date 10 days prior
to the
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Company's estimate of the date of filing of, and ending on a date 120 days after
the effective date of, a Company initiated registration in which the Holders are
entitled to and may in fact participate in accordance with Section 7.2 hereof,
but in no event longer than 180 days; or (D) upon the happening of any event, as
a result of which the prospectus under the registration statement includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing (in which case, the Company shall
within a reasonable period provide the Holder with revised or supplemental
prospectuses and the Holders shall promptly take action to cease making any
offers of such shares until receipt and distribution of such revised or
supplemental prospectuses.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c).
(c) The Company will take all necessary action which may be required in
qualifying or registering the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by
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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.
(d) The Company shall indemnify the Holder(s) of the Underwriter's Warrants
and 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 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 the
Underwriter contained in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants 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
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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 Agreement pursuant to which the
Underwriter has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring the
Holder(s) to exercise their Underwriter's Warrants 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 Shares underlying the Underwriter's Warrants to be included in any
registration statement filed pursuant to Section 7.3 hereof, or permit any other
registration statement (other than in connection with a merger or acquisition)
to become effective within 120 days of a registration statement filed pursuant
to Section 7.3 hereof, without the prior written consent of the Holders of the
Underwriter's Warrants or Shares underlying the Underwriter's Warrants
representing a majority of the shares of Common Stock issuable upon the exercise
of such Underwriter's Warrants.
(h) If the Shares underlying the Underwriter's Warrants are to be sold in
an underwritten public offering, the Company shall use its best efforts to
furnish to each Holder participating in the offering and to each such
underwriter, a signed counterpart, addressed to such underwriter, of (i) an
opinion of counsel to the Company dated the date of the closing under the
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underwriting agreement, and (ii) a "cold comfort" 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
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 15 months thereafter, have
made "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 least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below, and the
managing underwriters, copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable
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securities laws or rules of the National Association of Securities Dealers, Inc.
("NASD"). Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriter(s) selected for such underwriting, if any, by Holders
holding a Majority of the Underwriter's Warrants and Shares underlying the
Underwriter's Warrants requested to be included in such underwriting. Such
underwriting 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(s).
The Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Underwriter's Warrants and the Shares underlying the
Underwriter's Warrants 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 underwriter(s) 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 underwriter(s) except as
they may relate to such Holders, their intended methods of distribution, and
except for matters related to disclosures with respect to such Holders,
contained or required to be contained,
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in such registration statement under the Act and the rules and regulations
thereunder.
(l) For purposes of this Agreement, the term "Majority" in reference to the
Holders of Underwriter's Warrants and Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Shares, assuming the full exercise of all
Underwriter's Warrants 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 families, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public pursuant to
Rule 144 under the Act or a registration statement filed with the Commission
under the Act.
(m) Notwithstanding anything to the contrary herein, the Company shall have
no obligation (i) to register any Shares which previously were sold by a Holder
pursuant to an effective registration statement under the Act or which are then
saleable, without registration and without restriction, pursuant to Section 4(i)
of the Act, or (ii) to register any Shares or Warrants under Section 7.3 if, at
the time it receives Holders' notice of exercise of the rights set forth in
Section 7.3, the Company is in the process of preparing a registration for a
public offering of securities by the Company in which Holders are entitled to
participate under Section 7.2, such registration is filed within forty-five days
following receipt of such notice from Holders, and such registration statement
becomes effective within 120 days thereafter, or (iii) during the period of time
that any registration statement to which Section 7.2 or subsection (ii) above is
effective, but no longer than 120 days after its effective date.
8. Adjustments to Exercise Price and Number of Securities.
Section 8.1 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price of the Underwriter's Warrants shall forthwith be proportionately decreased
in the case of subdivision or increased in the case of combination.
Section 8.2 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price of the Underwriter's Warrants, pursuant to the provisions of this
Section 8, the number of shares issuable upon the exercise of the Underwriter's
Warrants, shall be adjusted to the nearest full amount by multiplying a number
equal to the exercise price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable upon exercise of the Underwriter's
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Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Prices.
Section 8.3 Definition of Common Stock. For the purpose of this Agreement,
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. In
the event that the Company shall after the date hereof issue common securities
with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Underwriter's Warrant, either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
Section 8.4 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the 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 shall have
the right thereafter (until the expiration of such warrant) to receive, upon
exercise of such 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
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of Common Stock of the Company for which such warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
Section 8.5 No Adjustment of Exercises Price in Certain Cases. No
adjustment of the Exercise Price of the Underwriter's Warrants shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants or Shares
issuable upon the exercise of the Underwriter's Warrants or the exercise of
options and warrants outstanding on the date hereof and described in the
prospectus relating to the Public Offering; or
(b) If the amount of such adjustment shall be less than two cents
($.02) per share of Common Stock, 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 share of Common
Stock.
9. Exchange and Replacement of Underwriter's Warrant Certificates. Each
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
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representing in the aggregate the right to purchase the same number of Shares as
provided in the original Underwriter's Warrants 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 Warrants, if mutilated, the Company will make and deliver a
new Underwriter's Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Underwriter's Warrants, 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.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Underwriter's Warrants,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Underwriter's Warrants and payment of the Exercise
Price
21
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 Warrants 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 Warrants 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.
12. 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
22
(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 such events the Company shall give
written notice to the Holders 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.
13. Notices.
All notices requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
23
(a) If to the registered Holder of the Underwriter's Warrants, 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 3 hereof or
to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. 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.
15. Successors. All 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.
16. Termination. This Agreement shall terminate at the close of business on
______ , 2002. Notwithstanding the foregoing, the indemnification provisions of
Section 7 shall survive such termination until the close of business on
_____________ 16, 2004.
24
17. Governing Law: Submission to Jurisdiction. 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 Jersey and for all purposes
shall be construed in accordance with the laws of such State without giving
effect to the rules of said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any action,
proceeding or claim against it arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New Jersey
or of the United States of America for the District of New Jersey, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Underwriter and the Holders hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the Company, the Underwriter and the Holders
(at the option of the party bringing such action, proceeding or claim) may be
served by transmitting a copy thereof, by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
25
18. Entire Agreement: Modification. 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, except as provided in Section 14 hereof, 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.
19. 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.
20. 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.
21. Benefits or 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 Shares underlying the Underwriter's Warrants 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 Underwriter and any
other Holder(s) of the Underwriter's Warrant Certificates or Shares.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be
26
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.
[SEAL] PACIFICHEALTH LABORATORIES, INC.
By _________________________________________
Name:
Title:
Attest:
_______________________
Secretary
FIRST MONTAUK SECURITIES CORP.
By ______________________________
Name:
Title:
27
EXHIBIT A
[FORM OF UNDERWRITER'S WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANTS 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 WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, _____________, 2002
No. UW-1 120,000 Underwriter's Warrants
Underwriter's Warrant Certificate
This Underwriter's Warrant Certificate certifies that ____________________,
or registered assigns, is the registered holder of 120,000 Underwriter's
Warrants to purchase initially, at any time from ________________, 1998 [one
year from the effective date of the offering] until 5:30 p.m. New York time on
_____________, 2002 [five years from the effective date of the offering]
("Expiration Date"), up to 120,000 fully-paid and non-assessable shares of
Common Stock, par value $.0025 per share (the "Warrants") of PACIFICHEALTH
LABORATORIES, INC., a Delaware corporation (the "Company"), at an initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $8.70 per Share 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 warrant agreement dated as of
_____________-, 1997 between the Company and FIRST MONTAUK SECURITIES CORP. (the
"Underwriter's 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 or otherwise
in accordance with the terms of the Underwriter's Warrant Agreement. In
accordance with Section 3.2 of the Underwriter's Warrant Agreement, payment of
the exercise price may also be made by the delivery of Shares of Common Stock of
the Company.
No Underwriter's 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 Underwriter's Warrant
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriter's Warrant Agreement, which Underwriter's 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 Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the exercise price 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 Underwriter's
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
Underwriter's Warrant Certificates shall not in any way change, alter or
otherwise impair, the rights of the holder as set forth in the Underwriter's
Warrant Agreement.
Upon due presentment for registration of transfer of this Underwriter's
Warrant Certificate at an office or agency of the Company, a new Underwriter's
Warrant Certificate or Underwriter's 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 Underwriter's Warrant
Certificate, subject to the limitations provided herein and in the Underwriter's
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 Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Underwriter's Warrant Certificate representing such number of unexercised
Underwriter's Warrants.
2
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriter's 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 Underwriter's Warrant Certificate which are defined
in the Underwriter's Warrant Agreement shall have the meanings assigned to them
in the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Underwriter's Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ______________-, 1997
PACIFICHEALTH LABORATORIES, INC.
[SEAL] By _________________________________
Name:
Title:
Attest:
_________________________________
Secretary
3
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriter's Warrant Certificate, to purchase ________
shares of Common Stock 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 _______________________________ in the amount of $_______________, all
in accordance with the terms hereof. 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 _______________.
Dated:
Signature __________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Underwriter's
Warrant Certificate.)
________________________________
Insert Social Security or Other
Identifying Number of Holder)
