Exhibit 4.2
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 later of the five (5) year
anniversary of (a) the Initial Exercise Date and (b) the date that both
Shareholder Approval and Authorized Share Approval (both as defined in the
Purchase Agreement) have been obtained and deemed effective if such date occurs
after January 31, 2009 (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 September 15, 2008, 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 Xxxxxx 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. Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within 3
Trading Days of the date the final Notice of Exercise is delivered to the
Company. 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.
THE HOLDER AND ANY ASSIGNEE, BY ACCEPTANCE OF THIS WARRANT, ACKNOWLEDGE AND
AGREE THAT, BY REASON OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING THE
PURCHASE OF A PORTION OF THE WARRANT SHARES HEREUNDER, THE NUMBER OF WARRANT
SHARES AVAILABLE FOR PURCHASE HEREUNDER AT ANY GIVEN TIME MAY BE LESS THAN THE
AMOUNT STATED ON THE FACE HEREOF.
(b) EXERCISE PRICE. The exercise price per share of the
Common Stock under this Warrant shall be US$0.25, subject to adjustment
hereunder (the "EXERCISE PRICE").
(c) CASHLESS EXERCISE. If at any time after the earlier of
(i) the one year anniversary of the date of the Purchase Agreement and (ii) the
completion of the then-applicable holding period required by Rule 144, or any
successor provision then in effect, there is no effective Registration Statement
registering, or no current prospectus available for, the resale of all 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.
Notwithstanding this anything to the contrary contained in this Section 2(c), to
the extent that there is an effective Registration Statement registering, or
current prospectus available for, the resale of any portion of the Warrant
Shares by the Holder, then this Warrant must be exercised as to the Warrant
Shares issuable upon exercise of this Warrant that are registered pursuant to an
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effective Registration Statement or eligible for resale pursuant to a current
prospectus, if any, by the Holder for cash pursuant to Section 2(a) hereof prior
to any exercise of this Warrant by means of "cashless exercise" as described in
this Section 2(c).
(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, the Holder (together with the Holder's
Affiliates, and any other person or entity acting as a group together with the
Holder or any of the 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 the 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, non-exercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (B) exercise or
conversion of the unexercised or non-converted 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 the 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 the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the 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 the 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 the 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 (2) Trading Days confirm orally and in
writing to the 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 the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.
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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 the
Holder, at the election of the Holder, upon not less than sixty-one (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 the 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.
(ii) TRADING MARKET RESTRICTIONS. If the Company has not
obtained Shareholder Approval, 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 Series D 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 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. Each
Holder shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing (x) such the number of shares of Series D
Preferred Stock initially purchased by the Holder by (y) the aggregate number of
shares purchased by all Holders. Such portion shall be adjusted upward ratably
in the event all of the shares of Series D Preferred Stock and Warrants
initially purchased by any Holder are no longer outstanding. If at any time (i)
the number of shares of Common Stock which could, notwithstanding the limitation
set forth herein, be issued to all Holders during the following 12 months
(assuming all dividends are paid in shares of Common Stock during such period of
determination based upon the VWAP at the time of any such determination) equals
or exceeds the Issuable Maximum and (ii) Shareholder Approval shall not have
been obtained, then the Company shall issue to the Holder requesting exercise a
number of Warrant Shares equal to the Holder's pro-rata portion (which shall be
calculated pursuant to the terms hereof) of the Issuable Maximum, and with
respect to the remainder of this Warrant then held by the Holder for which an
exercise in accordance with the applicable Exercise Price would result in an
issuance of shares of Warrant Shares in excess of the Holder's pro-rata portion
(which shall be calculated pursuant to the terms hereof) of the Issuable Maximum
(the "EXCESS WARRANTS"), the Corporation
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shall be prohibited from converting such Excess Warrants, and shall promptly
notify the Holder of the reason therefore. The Excess Warrants shall thereafter
be unexercisable to such extent until and unless Shareholder Approval is
subsequently obtained.
(iii) AUTHORIZED SHARE RESTRICTIONS. If the Company has
not obtained Authorized Share Approval, 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 Series D Preferred Stock issued pursuant to the
Purchase Agreement and (B) upon prior exercise of this or any other Warrant
issued pursuant to the Purchase Agreement, would exceed 87,059,562 (such number
of shares, the "SHARE APPROVAL MAXIMUM"), subject to adjustment for reverse and
forward stock splits and the like (such number of shares, the "AUTHORIZED SHARE
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 Authorized Share Approval, then the Company shall issue
to the Holder requesting the exercise of the Warrant such number of Warrant
Shares as may be issued below the Authorized Share Maximum and, with respect to
the remainder of the aggregate number of Warrant Shares, this Warrant shall not
be exercisable until and unless Authorized Share Approval has been obtained. The
Holder shall be entitled to a portion of the Authorized Share Maximum equal to
the quotient obtained by dividing (x) such the number of shares of Series D
Preferred Stock initially purchased by the Holder by (y) the aggregate number of
shares purchased by all Holders. Such portion shall be adjusted upward ratably
in the event all of the shares of Series D Preferred Stock and Warrants
initially purchased by any Holder are no longer outstanding. If at any time (i)
the number of shares of Common Stock which could, notwithstanding the limitation
set forth herein, be issued to all Holders during the following 12 months
(assuming all dividends are paid in shares of Common Stock during such period of
determination based upon the VWAP at the time of any such determination) equals
or exceeds the Authorized Share Maximum and (ii) the Authorized Share Approval
shall not have been obtained and deemed effective, then the Corporation shall
issue to the Holder a number of shares of Common Stock equal to the Holder's
pro-rata portion (which shall be calculated pursuant to the terms hereof) of the
Authorized Share Maximum, and with respect to the remainder of the Series D
Preferred Stock (including any accrued dividends) then held by the Holder for
which an exercise in accordance with the applicable Exercise Price would result
in an issuance of Warrant Shares in excess of the Holder's pro-rata portion
(which shall be calculated pursuant to the terms hereof) of the Authorized Share
Maximum (the "SHARE APPROVAL EXCESS WARRANT"), the Corporation shall be
prohibited from converting such Share Approval Excess Warrant, and shall
promptly notify the Holder of the reason therefore. The Share Approval Excess
Warrant shall thereafter be unconvertible to such extent until and unless
Authorized Share Approval is subsequently 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).
5
(ii) DELIVERY OF CERTIFICATES UPON EXERCISE.
Certificates for shares purchased hereunder shall be transmitted by the Transfer
Agent 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 then a participant in such system and either
(A) there is an effective Registration Statement permitting the resale of the
Warrant Shares by the Holder or (B) the shares are eligible for resale without
volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise within 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 (the "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)(vi) 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.
(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 Section 2(e)(ii) 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
6
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 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 such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
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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, 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 Designation of the Series D Preferred
Stock) of the Series D Preferred Stock (such lower price, the "BASE SHARE PRICE"
and 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 Exercise Price, such issuance shall be deemed to have occurred for less
than the Exercise Price on such date of the Dilutive Issuance), then, the
Exercise Price shall be reduced and only reduced to equal the Base Share Price.
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
3(b), 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 Base Share Price regardless of whether the Holder accurately refers to the
Base Share 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 sum of the (i) number of shares
of Common Stock issued and outstanding on the date of issuance of such rights,
options or warrants plus (ii) number of shares of Common Stock issuable upon
conversion or exercise of Common Stock Equivalents issued and outstanding on the
date of issuance of such rights, options or warrants plus (iii) number of
additional shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the sum of the (x) number of shares of the Common
Stock issued and outstanding on the date of issuance of such rights, options or
warrants plus (y) number of shares of Common Stock issuable upon conversion or
exercise of Common Stock Equivalents issued and outstanding on the date of
issuance of such rights, options or warrants plus (z) 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
8
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 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, (i) the Company effects any merger or consolidation of
the Company with or into another Person, (ii) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (iii) 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 (iv) 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 (each
"FUNDAMENTAL Transaction"), then, 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, 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 as a result of such 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. For purposes of any such exercise,
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
9
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 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(e) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market,
or the Nasdaq Capital Market, the Company or any successor entity shall pay, at
the Holder's option, exercisable at any time concurrently with or within 30 days
after the consummation of the Fundamental Transaction, an amount of cash equal
to the value of this Warrant as determined in accordance with the Black Scholes
Option Pricing Model obtained from the "OV" function on Bloomberg L.P. using (A)
a price per share of Common Stock equal to the VWAP of the Common Stock for the
Trading Day immediately preceding the date of consummation of the applicable
Fundamental Transaction, (B) the risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant as
of the date of consummation of the applicable Fundamental Transaction, (C) an
expected volatility equal to the 100 day volatility obtained from the "HVT"
function on Bloomberg L.P. determined as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction and
(D) a remaining option time equal to the time between the date of the public
announcement of such transaction and the Termination Date.
(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) 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).
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(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 twenty (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 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.
11
(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 either (i) registered pursuant to an effective
registration statement under the Securities Act and under applicable state
securities or blue sky laws or (ii) eligible for resale without volume or
manner-of-sale restrictions pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, 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 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
12
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.
(d) AUTHORIZED SHARES.
(i) Subject to receiving Authorized Share Approval, 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 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.
13
(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 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.
[SIGNATURE PAGE FOLLOWS]
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: September 15, 2008
ELITE PHARMACEUTICALS, INC.
By:_____________________________________
Name:
Title:
15
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.
