NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
ELITE PHARMACEUTICALS, INC.
THIS COMMON STOCK PURCHASE WARRANT (the "WARRANT") certifies that, for
value received, _____________ (the "HOLDER"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the Initial Exercise Date (as defined in Section 2) and
on or prior to the close of business on the five year anniversary of the Initial
Exercise Date (the "TERMINATION DATE") but not thereafter, to subscribe for and
purchase from Elite Pharmaceuticals, Inc., a Delaware corporation (the
"COMPANY"), up to ______ shares (the "WARRANT SHARES") of Common Stock, par
value $.01 per share, of the Company (the "COMMON STOCK"). The purchase price of
one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "PURCHASE AGREEMENT"), dated April 24, 2007, among the Company
and the purchasers signatory thereto.
SECTION 2. EXERCISE.
(a) EXERCISE OF WARRANT. Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on or
after the date of issue of this Warrant (the "INITIAL EXERCISE DATE") and on or
before the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of the
Company); and,
within three (3) Trading Days of the date said Notice of Exercise is delivered
to the Company, the Holder shall have surrendered this Warrant to the Company
and the Company shall have received payment of the aggregate Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn on a
United States bank. Partial exercises of this Warrant resulting in purchases of
a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain records showing the number
of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within one (1) Business Day
of receipt of such notice. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error.
(b) EXERCISE PRICE. The exercise price per share of the Common Stock
under this Warrant shall be US$3.00, subject to adjustment hereunder (the
"EXERCISE PRICE").
(c) CASHLESS EXERCISE. If at any time after one year from the date
of issuance of this Warrant there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the Warrant
Shares by the Holder, then this Warrant may also be exercised at such time by
means of a "cashless exercise" in which the Holder shall be entitled to receive
a certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
A = the VWAP on the Trading Day immediately preceding the date
of such election;
B = the Exercise Price of this Warrant, as adjusted; and
X = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant
by means of a cash exercise rather than a cashless
exercise.
(d) EXERCISE LIMITATIONS.
(i) HOLDER'S RESTRICTIONS. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the
applicable Notice of Exercise, such Holder (together with such Holder's
Affiliates, and any other person or entity acting as a group together with such
Holder or any of such Holder's Affiliates), as set forth on the applicable
Notice of Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by such Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by such Holder or any of
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its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Preferred Stock or Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by such
Holder or any of its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(d)(i), beneficial ownership shall be calculated
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by a Holder that the
Company is not representing to such Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and such Holder is solely
responsible for any schedules required to be filed in accordance therewith. To
the extent that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and of which a
portion of this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of a Notice of Exercise shall be deemed to be each
Holder's determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company shall
within two Trading Days confirm orally and in writing to such Holder the number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by such Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The "BENEFICIAL OWNERSHIP
LIMITATION" shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Beneficial Ownership
Limitation provisions of this Section 2(d)(i) may be waived by such Xxxxxx, at
the election of such Holder, upon not less than 61 days' prior notice to the
Company to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d) shall continue to apply. Upon such a change by a
Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such
9.99% limitation, the Beneficial Ownership Limitation may not be further waived
by such Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.
3
(ii) TRADING MARKET RESTRICTIONS. If the Company has not
obtained Shareholder Approval (as defined below), then the Company may not issue
upon exercise of this Warrant a number of shares of Common Stock, which, when
aggregated with any shares of Common Stock issued (A) upon conversion of or as
payment of dividends on the Preferred Stock issued pursuant to the Purchase
Agreement, (B) upon prior exercise of this or any other Warrant issued pursuant
to the Purchase Agreement and (C) pursuant to any warrants issued to any
registered broker-dealer as a fee in connection with the Securities pursuant to
the Purchase Agreement, would exceed 19.999% of the number of shares of Common
Stock outstanding on the Trading Day immediately preceding the Closing Date
(such number of shares, the "ISSUABLE MAXIMUM"). If on any attempted exercise of
this Warrant, the issuance of Warrant Shares would exceed the Issuable Maximum
and the Company shall not have previously obtained the vote of shareholders to
approve the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "SHAREHOLDER APPROVAL"), then the Company
shall issue to the Holder requesting a Warrant exercise such number of Warrant
Shares as may be issued below the Issuable Maximum and, with respect to the
remainder of the aggregate number of Warrant Shares, this Warrant shall not be
exercisable until and unless Shareholder Approval has been obtained.
(e) MECHANICS OF EXERCISE.
(i) AUTHORIZATION OF WARRANT SHARES. The Company covenants
that all Warrant Shares which may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by the Company
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
(ii) DELIVERY OF CERTIFICATES UPON EXERCISE. Certificates for
shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder's prime broker with
the Depository Trust Company through its Deposit Withdrawal Agent Commission
("DWAC") system if the Company is a participant in such system, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise within three (3) Trading Days from the delivery to the Company of the
Notice of Exercise Form, surrender of this Warrant and payment of the aggregate
Exercise Price as set forth above ("WARRANT SHARE DELIVERY DATE"). This Warrant
shall be deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of
such shares, have been paid.
(iii) DELIVERY OF NEW WARRANTS UPON EXERCISE. If this Warrant
shall have been exercised in part, the Company shall, upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.
4
(iv) RESCISSION RIGHTS. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant
Share Delivery Date, then the Holder will have the right to rescind such
exercise.
(v) COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES UPON EXERCISE. In addition to any other rights available to the
Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant to
an exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "BUY-IN"), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
(vi) NO FRACTIONAL SHARES OR SCRIP. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price or round up to the next whole share.
(vii) CHARGES, TAXES AND EXPENSES. Issuance of certificates
for Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; PROVIDED, HOWEVER, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached
5
hereto duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
(viii) CLOSING OF BOOKS. The Company will not close its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.
SECTION 3. CERTAIN ADJUSTMENTS.
(a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is outstanding, shall
sell or grant any option to purchase or sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then applicable Conversion Price (as
such term is defined in the Certificate of Designations) of the Preferred Stock
(such issuances collectively, a "DILUTIVE ISSUANCE") (if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share which is less
than the then applicable Conversion Price, such issuance shall be deemed to have
occurred for less than the then applicable Conversion Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced by
multiplying the Exercise Price by a fraction, the numerator of which is the
number of shares of Common Stock issued and outstanding immediately prior to the
Dilutive Issuance plus the number of shares of Common Stock which the offering
price for such Dilutive Issuance would purchase at the then applicable
Conversion Price, and the denominator of which shall be the sum of the number of
shares of Common Stock issued and outstanding immediately prior to the Dilutive
Issuance plus the number of shares of Common Stock so issued
6
or issuable in connection with the Dilutive Issuance and the number of Warrant
Shares issuable hereunder shall be increased such that the aggregate Exercise
Price payable hereunder, after taking into account the decrease in the Exercise
Price, shall be equal to the aggregate Exercise Price prior to such adjustment.
Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be
made, paid or issued under this Section 3(b) in respect of an Exempt Issuance.
The Company shall notify the Holder in writing, no later than the Trading Day
following the issuance of any Common Stock or Common Stock Equivalents subject
to this section, indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing terms (such
notice the "DILUTIVE ISSUANCE NOTICE"). For purposes of clarification, whether
or not the Company provides a Dilutive Issuance Notice pursuant to this Section
3(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares
based upon the adjusted Exercise Price regardless of whether the Holder
accurately refers to the adjusted Exercise Price in the Notice of Exercise.
(c) SUBSEQUENT RIGHTS OFFERINGS. If the Company, at any time while
the Warrant is outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the VWAP at the
record date mentioned below, then the Exercise Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered (assuming receipt by the Company in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at
such VWAP. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants. If any such rights, options or warrants expire without having been
exercised, the Exercise Price as adjusted upon the issuance of such rights,
options or warrants shall be readjusted to the Exercise Price which would have
been in effect had an adjustment been made on the basis that only additional
shares of Common Stock so issued were the additional shares of Common Stock, if
any, actually issued or sold on the exercise of such rights, options or warrants
and such additional shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights, options or warrants, whether or not exercised, provided that
such readjustment shall not apply to prior exercises of the Warrant.
(d) PRO RATA DISTRIBUTIONS. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the
7
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of
the Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(e) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"FUNDAMENTAL TRANSACTION"), then,
(i) subject to clause (ii) below, upon any subsequent exercise
of this Warrant, the Holder shall have the right to receive, for each Warrant
Share that would have been issuable upon such exercise immediately prior to the
occurrence of such Fundamental Transaction, at the option of the Holder, (a)
upon exercise of this Warrant and payment of the Exercise Price, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the "ALTERNATE CONSIDERATION") receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) if the Company is acquired in
an all cash transaction, cash equal to the value of this Warrant as determined
in accordance with the Black-Scholes option pricing formula; or
(ii) if the Company is acquired in an all cash transaction, in
the option of the Company or its acquiror, the Holder may be paid cash equal to
the value of this Warrant as determined in accordance with the Black-Scholes
option pricing formula and upon payment of such cash, the Warrant shall
terminate.
For purposes of any such exercise by the Holder, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
8
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(d)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
(f) CALCULATIONS. All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
(g) VOLUNTARY ADJUSTMENT BY COMPANY. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
(h) NOTICE TO HOLDERS.
(i) ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is adjusted pursuant to any provision of this Section 3, the Company shall
promptly mail to each Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as defined in the Purchase
Agreement).
(ii) NOTICE TO ALLOW EXERCISE BY HOLDER. If (A) the Company
shall declare a dividend (or any other distribution in whatever form) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
9
record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
20-day period commencing on the date of such notice to the effective date of the
event triggering such notice.
SECTION 4. TRANSFER OF WARRANT.
(a) TRANSFERABILITY. The Warrant and the other rights of the Holder
pursuant to this Warrant certificate are not severable from this Warrant
certificate, and shall not be assignable or transferable except in connection
with a transfer or assignment of this Warrant certificate in accordance with the
terms hereof. Any instrument purporting to make a transfer or assignment in
violation of this Section 4(a) shall be void and of no effect. Subject to
compliance with any applicable securities laws and the conditions set forth in
Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant certificate at the principal office of the Company or its
designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon compliance with the foregoing and such
surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.
(b) NEW WARRANTS. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) WARRANT REGISTER. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "WARRANT
REGISTER"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
(d) TRANSFER RESTRICTIONS. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a
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written opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
such transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a "qualified institutional buyer"
as defined in Rule 144A(a) under the Securities Act.
SECTION 5. MISCELLANEOUS.
(a) NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof as set forth in Section 2(e)(ii).
(b) LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
(c) SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
(d) AUTHORIZED SHARES.
(i) The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.
(ii) Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith
11
assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder as
set forth in this Warrant against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
(iii) Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this Warrant is exercisable
or in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
(e) JURISDICTION. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.
(f) RESTRICTIONS. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(g) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Xxxxxx's rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
(h) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.
(i) LIMITATION OF LIABILITY. No provision hereof, in the absence of
any affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(j) REMEDIES. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate
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compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
(k) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(l) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(m) SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(n) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
********************
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: April 24, 2007
ELITE PHARMACEUTICALS, INC.
By:______________________________
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer
14
NOTICE OF EXERCISE
TO: ELITE PHARMACEUTICALS, INC.
(1) The undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
|_| in lawful money of the United States; or
|_| [if permitted] the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in
subsection 2(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
__________________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
__________________________________
__________________________________
__________________________________
(4) ACCREDITED INVESTOR. The undersigned is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: _________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the
foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________________________ whose address is
_______________________________________________________________________________.
________________________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: _________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
