Contract
THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXXXXX SCIENCE INC THAT SUCH REGISTRATION IS NOT
REQUIRED.
|
Right
to purchase ________ of shares of Common Stock of Xxxxxx Science,
Inc.
(subject to adjustment as provided
herein)
|
COMMON
STOCK PURCHASE WARRANT
|
No. 2007-__
|
Issue
Date: July 2, 2007
|
XXXXXX
SCIENCE, INC.,
a
corporation organized under the laws of the State of Delaware (the “Company”),
hereby certifies that, for value received, ____________ or its successors or
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company at any time after the Issue Date until 5:00 p.m.,
P.S.T. on the third anniversary of the Issue Date (the “Expiration Date”), up to
_______________ (______________) fully paid and nonassessable shares (“Warrant
Shares”) of the common stock of the Company (the “Common Stock”), at a per share
purchase price of $0.25. The aforedescribed purchase price per share, as
adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company
may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
not otherwise defined shall have the meaning set forth in the Note and Warrant
Purchase Agreement by and between the Holder and the Company on or about this
date.
As
used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term
“Company” shall include Xxxxxx Science, Inc. and any corporation which shall
succeed to or assume the obligations of Xxxxxx Science, Inc. hereunder.
(b) The
term
“Common Stock” includes (a) the Company's Common Stock and (b) any other
securities into which or for which any of the securities described in
(a) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The
term
“Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant
to
Section 4 or otherwise.
1. Exercise
of Warrant.
1.1. Number
of Shares Issuable upon Exercise.
From
and after the Issue Date through and including the Expiration Date the Holder
hereof shall be entitled to receive, upon exercise of this Warrant in whole
in
accordance with the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, _________ shares of
Common Stock of the Company, subject to adjustment pursuant to
Section 4.
1
1.2. Full
Exercise.
This
Warrant may be exercised in full by the Holder hereof by delivery of an original
or facsimile copy of the form of subscription attached as Exhibit A hereto
(the
“Subscription Form") duly executed by such Holder and surrender of the original
Warrant within seven (7) days of exercise, to the Company at its principal
office or at the office of its Warrant Agent (as provided hereinafter),
accompanied by payment, in cash, wire transfer or by certified or official
bank
check payable to the order of the Company, in the amount obtained by multiplying
the number of shares of Common Stock exercisable under this Warrant by the
Purchase Price then in effect or by cashless exercise in the manner set forth
in
Section 2. This Warrant may also be exercised in full on a "cashless exercise"
basis in accordance with the provisions of Section 2.
1.3. Partial
Exercise.
This
Warrant may be exercised in part (but not for a fractional share) by surrender
of this Warrant in the manner and at the place provided in subsection 1.2
except that the amount payable by the Holder on such partial exercise shall
be
the amount obtained by multiplying (a) the number of whole shares of Common
Stock designated by the Holder in the Subscription Form by (b) the Purchase
Price then in effect. On any such partial exercise, the Company, at its expense,
will forthwith issue and deliver to or upon the order of the Holder hereof
a new
Warrant of like tenor, in the name of the Holder hereof or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may request, the whole
number of shares of Common Stock for which such Warrant may still be exercised.
This Warrant may also be exercised in part on a "cashless exercise" basis in
accordance with the provisions of Section 2.
1.4. Fair
Market Value.
Fair
Market Value of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
(a) If
the
Company's Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the
American Stock Exchange, LLC (“AMEX”), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;
(b) If
the
Company's Common Stock is not traded on an exchange or on the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or AMEX,
but
is traded in the over-the-counter market, then the average of the closing bid
and ask prices reported for the last business day immediately preceding the
Determination Date;
(c) Except
as
provided in clause (d) below, if the Company's Common Stock is not publicly
traded, then as the Holder and the Company agree, or in the absence of such
an
agreement, by arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to be chosen from
a
panel of persons qualified by education and training to pass on the matter
to be
decided; or
(d) If
the
Determination Date is the date of a liquidation, dissolution or winding up,
or
any event deemed to be a liquidation, dissolution or winding up pursuant to
the
Company's charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for
the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.
1.5. Company
Acknowledgment.
The
Company will, at the time of the exercise of the Warrant, upon the request
of
the Holder hereof acknowledge in writing its continuing obligation to afford
to
such Holder any rights to which such Holder shall continue to be entitled after
such exercise in accordance with the provisions of this Warrant. If the Holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such rights.
2
1.6 Delivery
of Stock Certificates, etc. on Exercise.
The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner
of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon
as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares
of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock
or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2. Cashless
Exercise.
(a) If
(i)
the resale of the Warrant Shares has not been registered with the Securities
and
Exchange Commission within nine months of the Issue Date and (ii) the Fair
Market Value of one share of Common Stock is greater than the Purchase Price
(at
the date of calculation as set forth below), in lieu of exercising this Warrant
for cash, the holder may elect to receive Warrant Shares equal to the value
(as
determined below) of this Warrant (or the portion thereof being cancelled)
by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company shall issue
to the holder a number of shares of Common Stock computed using the following
formula:
|
X=
|
Y
(A-B)
|
|
A
|
| Where X = |
the
number of shares of Common Stock to be issued to the
holder
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|
Y
=
|
the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation)
|
|
A
=
|
the
Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
|
|
B
=
|
Purchase
Price (as adjusted to the date of such
calculation)
|
The
cashless exercise provisions set forth in this Section 2 shall expire
immediately upon the effectiveness of the Company’s registration of the Warrant
Shares.
3. Adjustment
for Reorganization, Consolidation, Merger, etc.; Adjustment for Issuance of
Additional Securities
3.1. Reorganization,
Consolidation, Merger, etc.
In case
at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or
(c) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of
the
Company, then, in each such case, as a condition to the consummation of such
a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in
Sections 1 or 2, at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date,
the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Section 4.
3
3.2. Dissolution.
In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock
and
other securities and property (including cash, where applicable) receivable
by
the Holder of the Warrants after the effective date of such dissolution pursuant
to this Section 3 to a bank or trust company (a "Trustee") having its
principal office in Orange County, California, as trustee for the Holder of
the
Warrants.
3.3. Continuation
of Terms.
Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable
to
the Other Securities and property receivable on the exercise of this Warrant
after the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may
be,
and shall be binding upon the issuer of any Other Securities, including, in
the
case of any such transfer, the person acquiring all or substantially all of
the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In
the event this Warrant does not continue in full force and effect after the
consummation of the transaction described in this Section 3, then only in
such event will the Company's securities and property (including cash, where
applicable) receivable by the Holder of the Warrants be delivered to the Trustee
as contemplated by Section 3.2.
3.4 Subsequent
Equity Sales.
Other
than Excluded Securities, if the Company or any Subsidiary thereof, as
applicable, at any time while Warrants are outstanding, shall offer, sell,
grant
any option to purchase or offer, 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 warrants,
options or convertible debt (“Common Stock Equivalents”) entitling any Person to
acquire shares of Common Stock, at an effective price per share less than the
then Purchase
Price
(“Dilutive Issuance”), the Purchase
Price
shall be adjusted downward, but never upward, by multiplying the Purchase
Price by
a fraction, the numerator of which is the number of shares of Common Stock
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
Purchase
Price,
and the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to the Dilutive Issuance plus the number
of
shares of Common Stock so issued or issuable in connection with the Dilutive
Issuance. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing,
no
later than the business day following the issuance of any Common Stock or Common
Stock Equivalents subject to this section, indicating therein the applicable
issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms. In the event the Purchase Price is decreased due to
a
Dilutive Issuance, the number of shares of Common Stock issuable on exercise
of
the Warrants will be determined by multiplying the number of shares of Common
Stock issuable on exercise of the Warrants immediately prior to the Dilutive
Issuance by a fraction the numerator of which will be the Purchase Price
immediately prior to the Dilutive Issuance and the denominator of which will
be
the Purchase Price adjusted by the Dilutive Issuance.
4
“Excluded
Securities” shall mean (i) securities issued in connection with the Note and the
Warrant; (ii) securities issued upon conversion of any securities outstanding
as
of the date of this Warrant; (iii) securities issued pursuant to the acquisition
of another business or business segment of any such entity by the Company by
merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (iv) securities issued
to employees, consultants, officers, directors or advisors of the Company
pursuant to any stock option, stock purchase or stock bonus plan, agreement
or
arrangement approved by the Board of Directors of the Company; (v) securities
issued in connection with obtaining lease financing, whether issued to a non
affiliated lender, lessor, guarantor or other person and approved by the Board
of Directors of the Company; (vi) securities issued to leasing companies,
landlords and other providers of goods and services to the Company and approved
by the Board of Directors; (vii) securities issued in connection with strategic
transactions involving the Company and other entities, including (A) joint
ventures, manufacturing, marketing or distribution arrangements or (B)
technology license, transfer or development arrangements; provided that such
strategic transactions and the issuance of shares therein, have been approved
by
the Board of Directors of the Company; and (viii) any right, option or warrant
to acquire any security convertible into the securities pursuant to subsections
(i) through (vii) above.
4. Extraordinary
Events Regarding Common Stock.
In the
event that the Company shall (a) issue additional shares of the Common Stock
as
a dividend or other distribution on outstanding Common Stock, (b) subdivide
its
outstanding shares of Common Stock, or (c) combine its outstanding shares of
the
Common Stock into a smaller number of shares of the Common Stock, then, in
each
such event, the Purchase Price shall, simultaneously with the happening of
such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect.
The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the
happening of any successive event or events described herein in this Section
4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1 or 2, be entitled
to
receive shall be adjusted to a number determined by multiplying the number
of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price in effect immediately prior to such event (but for the
provisions of this Section 4), and (b) the denominator is the Purchase Price
in
effect on the date of such event.
5. Certificate
as to Adjustments.
In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrants, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee
to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or Other
Securities) issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock (or Other Securities) outstanding or deemed
to
be outstanding, and (c) the Purchase Price and the number of shares of
Common Stock to be received upon exercise of this Warrant, in effect immediately
prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to the Holder of the Warrant and any Warrant Agent of the Company
(appointed pursuant to Section 11 hereof).
6. Reservation
of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements.
The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant. This
Warrant entitles the Holder hereof to receive copies of all financial and other
information distributed or required to be distributed to the holders of the
Company's Common Stock.
5
7. Assignment;
Exchange of Warrant.
Subject
to compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
"Transferor"). On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
“Transferor Endorsement Form") and together with an opinion of counsel
reasonably satisfactory to the Company that the transfer of this Warrant will
be
in compliance with applicable securities laws, the Company at its expense,
but
with payment by the Transferor of any applicable transfer taxes, will issue
and
deliver to or on the order of the Transferor thereof a new Warrant or Warrants
of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the Transferor.
No such transfers shall result in a public distribution of the
Warrant.
8. Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant,
the
Company at its expense, twice only, will execute and deliver, in lieu thereof,
a
new Warrant of like tenor.
9. Warrant
Agent.
The
Company may, by written notice to the Holder of the Warrant, appoint an agent
(a
“Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities)
on the exercise of this Warrant pursuant to Section 1, exchanging this
Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such Warrant Agent.
10. Transfer
on the Company's Books.
Until
this Warrant is transferred on the books of the Company, the Company may treat
the registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
11. Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be the addresses set forth in the Purchase
Agreement.
12. Miscellaneous.
This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be construed and enforced in accordance with and governed by the laws of
California. Any dispute relating to this Warrant shall be adjudicated only
in
County of Orange in the State of California. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any
of
the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
6
IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
| XXXXXX SCIENCE, INC. | |||
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By:
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Witness:
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1
Exhibit A
FORM
OF
SUBSCRIPTION
(to
be
signed only on exercise of Warrant)
TO:
XXXXXX SCIENCE INC
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.2007-__), hereby irrevocably elects to purchase (check applicable
box):
___ ________
shares of the Common Stock covered by such Warrant; or
___ the
maximum number of shares of Common Stock covered by such Warrant pursuant to
the
cashless exercise procedure set forth in Section 2.
The
undersigned herewith makes payment of the full purchase price for such shares
at
the price per share provided for in such Warrant, which is $___________. Such
payment takes the form of (check applicable box or boxes):
___ $__________
in lawful money of the United States; and/or
___ the
cancellation of such portion of the attached Warrant as is exercisable for
a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or
___ the
cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2, to exercise this
Warrant with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in
Section 2.
The
undersigned requests that the certificates for such shares be issued in the
name
of, and delivered to _____________________________________________________
whose
address is ______________________________________________________________________________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), or pursuant to an exemption from registration
under the Securities Act.
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Dated:
___________________
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(Signature
must conform to name of holder as
specified
on the face of the Warrant)
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(Address)
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2
Exhibit B
FORM
OF
TRANSFEROR ENDORSEMENT
(To
be
signed only on transfer of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading "Transferees" the right represented
by
the within Warrant to purchase the percentage and number of shares of Common
Stock of XXXXXX SCIENCE, INC. to which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of XXXXXX SCIENCE,
INC. with full power of substitution in the premises.
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Transferees
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Percentage
Transferred
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Number
Transferred
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Dated:
______________, ___________
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(Signature
must conform to name of holder as
specified
on the face of the warrant)
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Signed
in the presence of:
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(Name)
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(address)
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ACCEPTED
AND AGREED:
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[TRANSFEREE]
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(address)
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(Name)
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