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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. ACCORDINGLY, THIS WARRANT
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT (i) AN OPINION OF
COUNSEL SATISFACTORY TO ISSUER THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION MAY
LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
ORPHAN MEDICAL, INC.
WARRANT
TO PURCHASE
SHARES OF
SERIES C CONVERTIBLE PREFERRED STOCK
OR
SERIES D NON-VOTING PREFERRED STOCK
For value received, UBS Capital II LLC, its successors or assigns
("Holder"), is entitled to purchase from Orphan Medical, Inc., a Minnesota
corporation (the "Company"), up to (i) 2,050 fully paid and nonassessable shares
of the Company's Series C Convertible Preferred Stock, par value $0.01 per share
(the "Series C Preferred Stock"), or such greater or lesser number of shares of
Series C Preferred Stock as may be determined by application of the
anti-dilution provisions of this warrant (the "Warrant"); (ii) up to 315,385
fully paid and nonassessable shares of the Company's Series D Non-Voting
Preferred Stock, $0.01 par value per share (the "Series D Preferred Stock"), or
such greater or lesser number of Series D Preferred Stock as may be determined
by application of the anti-dilution provisions of this Warrant, at the warrant
exercise price set forth in Section 2 hereof; or (iii) any combination of Series
C Preferred Stock and Series D Preferred Stock, provided that the combined
purchase price for the shares does not exceed $2,050,000.
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This Warrant is subject to the following terms and conditions:
1. Exercise. The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, by written election, in the form set forth
below, by the surrender of this Warrant (properly endorsed if required) at the
principal office of the Company, by payment to it by cash, certified check or
bank draft of the applicable warrant exercise price for the shares of Series C
Preferred Stock or Series D Preferred Stock to be purchased and by delivery of
the applicable Warrant Exercise form attached hereto or similar documents
acceptable to the Company demonstrating that the sale of the shares to be
purchased is exempt from registration under the Securities Act of 1933, as
amended, and any state securities law.
The Series C Preferred Stock or Series D Preferred Stock purchased
hereunder shall be deemed to be issued as of the close of business on the date
on which this Warrant has been exercised by payment to the Company of the
applicable warrant exercise price. Certificates for the shares of stock so
purchased, bearing an appropriate restrictive legend, shall be delivered to the
Holder within 15 days after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new warrant
representing the number of shares, if any, with respect to which this Warrant
has not been exercised shall also be delivered to the Holder hereof within such
time. No fractional shares shall be issued upon the exercise of this Warrant.
This Warrant shall be exercised in accordance with the provisions of Sections
9(b) and 9(c) hereof.
2. Warrant Exercise Price. The per share exercise price for the shares
represented by this Warrant shall be $1,000 for the Series C Preferred Stock
(the "Series C Warrant Exercise Price") and $6.50 for the Series D Preferred
Stock, as adjusted pursuant to Section 5 hereof (the "Series D Warrant Exercise
Price").
3. Expiration Date. The rights represented by this Warrant may be
exercised by holder at any time or from time to time after July 23, 2002 or upon
the liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, whichever is earlier, and prior to August 2, 2006. The Company has
the right to require the Holder to exercise this Warrant, in whole or in part,
any time after July 23, 2002 in the event the last sale price of Company's
common stock is equal to or greater than $13 per share for the ten (10)
consecutive trading days immediately preceding the date the Company gives the
Holder notice of the Company's election to require the exercise of all or a part
of this Warrant (the "Notice Date"). The portion of this Warrant required by the
Company to be exercised will expire on the 30th day following the Notice Date
unless exercised by the Holder on or before such 30th day.
4. Shares. All shares that may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be duly authorized and issued,
fully paid and nonassessable shares. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times
have authorized and reserved for the purpose of issue or transfer upon exercise
of the subscription rights evidenced by this Warrant a sufficient number of
shares of its
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Series C Preferred Stock, Series D Preferred Stock, shares of common stock in
the case of a Transfer Conversion (as that term is defined in Section 7(b)
hereof), to provide for the exercise of the rights represented by this Warrant.
5. Adjustment. The Series D Warrant Exercise Price for the Series D
Preferred Stock issuable upon exercise of this Warrant or issuable upon a
Transfer Conversion, shall be subject to adjustment from time to time as
hereinafter provided in this Section 5:
(a) If the Company at any time divides the outstanding shares of its
common stock into a greater number of shares (whether pursuant to a stock
split, stock dividend or otherwise), and conversely, if the outstanding
shares of its common stock are combined into a smaller number of shares,
the Series D Warrant Exercise Price in effect immediately prior to such
division or combination of the Company's common stock shall be
proportionately adjusted to reflect the reduction or increase in the value
of each such common share.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, the sale of all or substantially all of its assets to
another corporation or a Change of Control shall be effected in such a way
that holders of the Company's common stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for such common
stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Holder shall have the right, at its
option, to (i) purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the shares of the
Series D Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby, such shares of Series D Preferred Stock or other securities as
would have been issued or delivered to the Holder if Holder had exercised
this Warrant and had received such shares of Series D Preferred Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or sale; or (ii) purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant and in lieu of the shares
of the Series D Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby, such assets as would have been issued or delivered to the Holder
if Holder had exercised this Warrant and had received such shares of
Series D Preferred Stock immediately prior to such reorganization,
reclassification, consolidation, merger or sale; or (iii) purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant, a warrant to purchase shares of stock or other securities as
would have been issued or delivered to the Holder if Holder had exercised
this Warrant and had received shares of Series D Preferred Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or sale. With respect to (i), (ii) and (iii) above, in the case of
a Change of Control (as defined herein), the Holder shall receive, at its
option, the securities, assets or warrants described above as if it had
not only exercised this Warrant, but had also participated in the
transaction that resulted in the Change
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of Control. In the event such a Change of Control resulted from a tender
offer or the issuance of additional securities by the Company, the Holder
shall receive from the Company, at its option, an amount equal to the
excess of the aggregate offer price over the aggregate Series D Warrant
Exercise Price, as the case may be. For purposes of the preceding
sentence, the term "aggregate offer price" means the amount that would be
paid to the Holder in connection with the Change of Control if the Holder
had exercised this Warrant for shares of Series D Preferred Stock. For
purposes of this Warrant, the term "Change of Control" means any sale or
issuance or series of related sales or issuances of the Company's voting
securities (or securities convertible into or exchangeable for voting
securities) which results in any person or group of affiliated persons (i)
owning more than 50% of the Company's voting securities outstanding at the
time of such sale or issuances, or (ii) having the ability to elect a
majority of the Company's Board of Directors.
The Company shall not effect any such consolidation, merger or
sale unless prior to the consummation thereof the successor corporation
(if other than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written instrument
executed and mailed to the Holder at the last address of the Holder
appearing on the books of the Company the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder may be entitled to purchase. Further
adjustment to the Series D Warrant Exercise Price shall be made for
successive recapitalizations, reclassifications, consolidations, mergers,
sale of assets or Changes of Control as shall be appropriate under the
circumstances.
(c) If and whenever the Company shall (1) issue or sell any shares
of its common stock for a consideration per share less than the Series D
Warrant Exercise Price in effect immediately prior to the time of such
issuance or sale, (2) issue or sell any warrants, options or other rights
to acquire shares of its common stock at a purchase price less than the
Series D Warrant Purchase Price in effect immediately prior to the time of
such issuance or sale, (3) amend the terms of any existing warrants,
options or other rights to acquire shares of common stock, or otherwise
adjust the purchase price for shares of common stock issuable upon the
exercise of such warrants, options or other rights to acquire shares of
common stock, such that the purchase price for such shares of common stock
is less than the Series D Warrant Exercise Price in effect immediately
prior to the time of such amendment or adjustment, or (4) issue or sell
any other securities that are convertible into shares of its common stock
for a purchase or exchange price less than the Series D Warrant Exercise
Price in effect immediately prior to the time of such issuance or sale
(except for Permitted Issuances (as that term is defined in Article I
Section 8 of the Company's Certificate of Designation for Series B
Convertible Preferred Stock)), then, upon such issuance or sale, the
Series D Warrant Exercise Price shall be reduced to the price at which
such shares of common stock are being issued or sold by the Company or the
price at which such other securities are exercisable or convertible into
shares of the Company's common stock. For
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purposes of this Warrant, the term "consideration per share" for which
common stock is issued or issuable shall mean (1) with respect to the
issuance, grant or sale of options or warrants to purchase shares of
common stock, an amount determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the
granting or sale of such options or warrants, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon
exercise of all such options and warrants, plus in the case of such
options which relate to convertible securities, the minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such convertible securities and the
conversion or exchange thereof, by (ii) the total maximum number of shares
of common stock issuable upon the exercise of such options and warrants or
upon the conversion or exchange of all such convertible securities
issuable upon the exercise of such options, and (2) with respect to the
issuance, grant or sale of common stock of the Company or securities
directly or indirectly exercisable or convertible into shares of common
stock, an amount determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such convertible securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of common stock issuable upon the conversion or exchange of all such
convertible securities.
(d) If the Company takes any other action, or if any other event
occurs, which does not come within the scope of the provisions of Section
5(a), 5(b) or 5(c), but which should result in an adjustment in the Series
D Warrant Exercise Price and/or the number of shares subject to this
Warrant in order to fairly protect the purchase rights of the Holder, an
appropriate adjustment in such purchase rights shall be made by the
Company.
(e) Upon each adjustment of the Series D Warrant Exercise Price, the
Holder shall thereafter be entitled to purchase, at the Series D Warrant
Exercise Price resulting from such adjustment, the number of shares of
Series D Preferred Stock obtained by multiplying the Series D Warrant
Exercise Price in effect immediately prior to such adjustment by the
number of shares of Series D Preferred Stock purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by
the Series D Warrant Exercise Price resulting from such adjustment.
(f) Upon any adjustment of the Series D Warrant Exercise Price, the
Company shall give written notice thereof to the Holder stating the Series
D Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares of Series D Preferred Stock
purchasable at such price upon the exercise of this Warrant, setting forth
in reasonable detail the method of calculation and the facts upon which
such calculation is based.
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6. Rights as Shareholder. This Warrant shall not entitle the Holder to any
voting rights or other rights except as provided in the Stock Purchase Agreement
dated as of August 2, 1999, by and between the Company and UBS Capital II LLC
(the "Stock Purchase Agreement").
7. Transfer.
(a) This Warrant and all rights hereunder are transferable, in whole
or in part, at the principal office of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. The bearer of this Warrant, when endorsed, may be
treated by the Company and all other persons dealing with this Warrant as
the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof
on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the
registered owner hereof as the owner for all purposes.
(b) In the event this Warrant and all rights hereunder are
transferred, in whole or in part, to a Permitted Investor, any rights to
purchase shares of Series D Preferred Stock pursuant to the exercise of
this Warrant, or any transferred portion thereof will automatically be
converted into a right to purchase shares of the Company's common stock (a
"Transfer Conversion"). The conversion rate applicable to a Transfer
Conversion shall be one share of common stock for each share of Series D
Preferred Stock.
(c) For purposes of Section 7(b), the following definitions apply:
(i) "Permitted Investor" means a Person that is not (a) the
Beneficial Owner, directly or indirectly, of ten percent (10%) or
more of the Company's outstanding stock or other securities entitled
to vote, or has or shares the power to dispose of, or direct the
disposition of, such stock or securities, (b) a Person that directly
or indirectly controls, is controlled by, or is under common control
with, the Company (an "Affiliate"), or (c) any corporation or
organization of which the Company is an officer or partner, is the
Beneficial Owner, directly or indirectly, of ten percent (10%) or
more of the Company's outstanding stock or other securities entitled
to vote (an "Associate").
(A) A Person shall not be considered a Beneficial Owner
for purposes of Section 7(c)(i) if such Person was not a
Beneficial Owner of ten percent (10%) or more of the Company's
outstanding stock or other securities entitled to vote, or has
or shares the power to dispose of, or direct the disposition
of, such stock or securities immediately prior to a repurchase
of shares, recapitalization of the Company or similar action
and became a Beneficial Owner as defined in Section 7(c)(ii)
solely as a result of such share repurchase, recapitalization
or similar action unless, (i) the repurchase,
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recapitalization, conversion, or similar action was proposed
by or on behalf of, or pursuant to, any agreement,
arrangement, relationship, understanding, or otherwise
(whether or not in writing) with, the Person or is an
Affiliate or Associate of the Person, or (ii) the Person
thereafter acquires a beneficial ownership, directly or
indirectly, of the Company's outstanding shares entitled to
vote and, immediately after such acquisition, is the
Beneficial Owner, directly or indirectly, of ten percent (10%)
or more of the Company's outstanding stock or other shares
entitled to vote.
(ii) "Beneficial Owner" means a Person who, directly or
indirectly through any written or oral agreement, arrangement,
relationship, understanding, or otherwise, has or shares the power
to vote, or direct the voting of, shares or securities of the
Company entitled to vote, or has or shares the power to dispose of,
or direct the disposition of, such shares of securities; provided,
that a Person shall not be deemed the beneficial owner of shares or
securities of the Company (a) tendered pursuant to a tender offer or
exchange offer made by the Person or any of such Person's Affiliates
or Associates until the tendered shares or securities are accepted
for purchase or exchange, (b) if such beneficial ownership arises
solely from a revocable proxy given in response to a proxy
solicitation required to be made and made in accordance with the
applicable rules and regulations under the Securities Exchange Act
of 1934, as amended (the "Securities Exchange Act"), and is not then
reportable under the Securities Exchange Act, or, if the Company is
not subject to the Securities Exchange Act, would have been required
to be made and would not have been reportable even if the Company
had been subject to the Securities and Exchange Act.
(iii) "Affiliate" shall have the meaning assigned to that term
in Section 7(c)(i) hereof.
(iv) "Associate" shall have the meaning assigned to that term
in Section 7(c)(i) hereof.
(v) "Person" means any individual, partnership, limited
liability company, association, corporation, estate, trust or other
entity.
(d) In the event this Warrant and all rights hereunder, are
re-acquired, in whole or in part, by Investor (as defined in the Stock
Purchase Agreement") prior to July 23, 2002, the shares of common stock
into which the shares of Series D Preferred Stock were converted upon a
Transfer Conversion shall automatically be converted into shares of Series
D Preferred Stock at a conversion rate of one share of Series D Preferred
Stock for each share of common stock.
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8. Notices. All demands and notices to be given hereunder shall be
delivered or sent by first class mail, postage prepaid; in the case of the
Company, addressed to its corporate headquarters, 00000 Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxxx, 00000, until a new address shall have been substituted by
like notice; and in the case of Holder, addressed to Holder at the address
written below, until a new address shall have been substituted by like notice,
with a copy to:
Xxxxx Xxxxx, Esq.
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
9. Additional Right to Convert Warrant.
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time after
it is exercisable, but prior to its expiration, into shares of Series D
Preferred Stock as provided for in this Section 9. Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of any Series D Warrant Exercise Price) that number of
shares of Company's Series D Preferred Stock, as the case may be, equal to
the result obtained by multiplying (i) the number of shares with respect
to which the Warrant is being exercised by (ii) the quotient obtained by
dividing (x) the value of the Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Series D Warrant
Exercise Price for the warrant shares in effect immediately prior to the
exercise of the Conversion Right from the aggregate fair market value for
the warrant shares immediately prior to the exercise of the Conversion
Right) by (y) the aggregate fair market value for the warrant shares
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time
or from time to time, prior to its expiration, on any business day by
delivering written notice to the Company (the "Conversion Notice") at the
offices of the Company exercising the Conversion Right and specifying (i)
the total number of shares with respect to which the Warrant is being
exercised and (ii) a place and date not less than one or more than 20
business days from the date of the Conversion Notice for the closing of
such purchase.
(c) At any closing under Section 9(b) hereof, (i) Holder will
surrender the Warrant and (ii) the Company will deliver to Holder a
certificate or certificates for the number of shares of the Company's
Series D Preferred Stock (or common stock, as the case may be under
Section 7(b) hereof) issuable upon such conversion, together with cash, in
lieu of any fraction of a share, and (iii) the Company will deliver to
Holder a new warrant
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representing the number of shares, if any, with respect to which the
Warrant shall not have been exercised.
(d) Fair market value for a warrant share as of a particular date
(the "Determination Date") shall mean:
(i) The average of the closing bid or last sale prices of the
Company's common stock, respectively, reported for the ten (10)
business days immediately preceding the Determination Date if the
Company's common stock is reported on the New York Stock Exchange
Composite Tape, or, if the Company's common stock is not listed or
admitted to trading on such exchange, on the principal national
securities exchange on which the Company's common stock is listed or
admitted to trading, or if the common stock is not listed or
admitted to trading on any national securities exchange, on the
NASDAQ National Market System.
(ii) If the Company's common stock is not admitted for
quotation on the NASDAQ National Market System, then the average of
the high bid and low asked prices reported for the ten (10) business
days immediately preceding the Determination Date as recorded by the
National Association of Securities Dealers, Inc. through NASDAQ, or
if the National Association of Securities Dealers, Inc. through
NASDAQ shall not have reported any bid and asked prices for the
Company's common stock for the ten (10) day period immediately
preceding the Determination Date, the average of the bid and asked
prices for such ten (10) day period as furnished by any New York
Stock Exchange member firm selected from time to time by the Company
for such purpose.
(iii) If no bid and asked prices can be obtained from any firm
identified in Section 9(d)(ii), then the value of one share of the
Company's common stock on such date as determined by the mutual
agreement of the Company and the holders of the right to purchase a
majority of the shares issuable under this Warrant, or, if no such
agreement can be reached within 30 days from such date, then as
determined by an independent appraiser mutually acceptable to the
parties.
(e) Holder of this Warrant shall have the right to pay for all or
any portion of the Series C Warrant Exercise Price or Series D Warrant
Exercise Price for shares of Series C Preferred Stock or Series D
Preferred Stock purchased hereunder by cancellation of all or any part of
the Company's obligation to Holder under the terms of that certain
Promissory Note dated as of August 2, 1999, in the face amount of
$2,050,000.
(f) Holder of this Warrant shall have the right, at any time on or
after the date of this Warrant, to receive securities, assets or cash in
the event of a liquidation, dissolution or winding up of the Company (each
such event a "Liquidity Event"). The amount of such
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securities, assets or cash Holder shall be entitled to receive under this
Section 9(f) shall be an amount equal to the difference between the Series
D Warrant Exercise Price and the amount of consideration Holder would have
received if Holder had exercised this Warrant for shares of Series D
Preferred Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
delivered by a duly authorized officer.
Dated: August 2, 1999
ORPHAN MEDICAL, INC.
By: /s/ Xxxx Xxxxxx Bullion
-----------------------
Xxxx Xxxxxx Bullion
Chief Executive Officer
[Name and Address of Holder]
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WARRANT EXERCISE
(To be signed only upon exercise of this warrant)
The undersigned, the Holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder, __________ shares of Series C Preferred Stock, or
__________ shares of Series D Preferred Stock of Orphan Medical, Inc., to which
such warrant relates and herewith makes payment of $__________ therefor in cash,
certified check or bank draft and requests that the certificates for such shares
be issued in the name of, and be delivered to ____________________, whose
address is set forth below the signature of the undersigned.
Dated:_____________________
Signature
If shares are to be issued other than to Holder:
Social Security or other Tax Identification No.
Please print present name and address
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WARRANT ASSIGNMENT
(To be signed only upon transfer of this warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________ the right represented by the foregoing Warrant to purchase
the shares of Series C Preferred Stock or Series D Preferred Stock of Orphan
Medical, Inc. and appoints ____________________ attorney to transfer such right
on the books of Orphan Medical, Inc. with full power of substitution in the
premises.
Dated:______________________
Signature
Social Security or other Tax Identification No.
_______________________________________________
Please print present name and complete address
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