THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT
REQUIRED.
Warrant No. W-__
COMMON STOCK PURCHASE WARRANT
To Purchase [100% COVERAGE] Shares of Common Stock of
MACROCHEM CORPORATION
THIS IS TO CERTIFY THAT _______________, or registered assigns (the
"HOLDER"), is entitled, during the Exercise Period (as hereinafter defined), to
purchase from MacroChem Corporation, a Delaware corporation (the "COMPANY"), the
Warrant Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, at a purchase price of $0.03 per share, all on and
subject to the terms and conditions hereinafter set forth.
FOR AVOIDANCE OF DOUBT, THE NUMBER OF SHARES OF WARRANT STOCK AND THE
EXERCISE PRICE PER SHARE OF WARRANT STOCK DO NOT REFLECT THE 1 FOR 7 SPLIT OR
THE 1 FOR 6 SPLIT AS SUCH TERMS ARE DEFINED IN THE PURCHASE AGREEMENT.
1. DEFINITIONS. As used in this Warrant, the following terms have the
respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" means any shares of Common Stock issued
by the Company after the Closing Date other than: (i) Warrant Stock; (ii) shares
issued or issuable pursuant to anti-dilution provisions of the Preferred Stock;
(iii) shares issued or issuable upon the conversion of the Preferred Stock; (iv)
shares issued or issuable as payment of dividends to holders of Preferred Stock;
(v) shares issued or issuable upon the exercise of any warrants or options
outstanding as of the Closing Date; (vi) shares of Common Stock or Common Stock
Equivalents issued in connection with a bona-fide strategic transaction approved
by the Board of Directors of the Company, the primary purpose of which is not to
provide financing to the Company; (vii) shares of Common Stock or Common Stock
Equivalents issued in connection with any stock-based compensation plans of the
Company approved by the stockholders of the Company; (viii) shares issuable upon
the exercise of any warrants that are issuable pursuant to the terms of the
Purchase Agreement; or (ix) shares of Preferred Stock and warrants to purchase
Common Stock issued pursuant to the Purchase Agreement (whether at the Initial
Closing or any Additional Closing).
"AFFILIATE" means any person or entity that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a person or entity, as such terms are used in and construed under
Rule 144 under the Securities Act. With respect to a Holder of Warrants, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Xxxxxx will be deemed to be an Affiliate of
such Holder.
"APPRAISED VALUE" means, in respect of any share of Common Stock on any
date herein specified, the fair saleable value of such share of Common Stock
(determined without giving effect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Stock or to the fact that the Company
may have no class of equity registered under the Exchange Act) as of the last
day of the most recent fiscal month ending prior to such date specified, based
on the value of the Company on a fully-diluted basis, as determined by a
nationally recognized investment banking firm selected by the Company's Board of
Directors and having no prior relationship with the Company.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
Commonwealth of Massachusetts generally are authorized or required by law or
other government actions to close.
"CHANGE OF CONTROL" means, following the Closing Date, the (i) acquisition
by an individual or legal entity or group (as set forth in Section 13(d) of the
Exchange Act) of more than one-half of the voting rights or equity interests in
the Company; or (ii) sale, conveyance, or other disposition of all or
substantially all of the assets, property or business of the Company or the
merger into or consolidation with any other corporation (other than a wholly
owned subsidiary corporation) or effectuation of any transaction or series of
related transactions where holders of the Company's voting securities prior to
such transaction or series of transactions fail to continue to hold at least 50%
of the voting power of the Company (or, if other than the Company, the successor
or acquiring entity) immediately following such transaction. Notwithstanding the
forgoing, the sale of securities pursuant to the Purchase Agreement shall not
constitute a Change of Control.
"CLOSING DATE" means December 23, 2005.
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"COMMON STOCK" means (except where the context otherwise indicates) the
Common Stock, $0.01 par value per share, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed or converted, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets on liquidation over any other class of stock
of the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"COMMON STOCK EQUIVALENTS" has the meaning set forth in Section 4.4.
"CURRENT MARKET PRICE" means, in respect of any share of Common Stock on
any date herein specified,
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(1) if there shall not then be a public market for the Common Stock, the
higher of
(a) the book value per share of Common Stock at such date, and
(b) the Appraised Value per share of Common Stock at such date,
or
(2) if there shall then be a public market for the Common Stock, the higher
of (x) the book value per share of Common Stock at such date, and (y) the
average of the daily market prices for the five (5) consecutive Trading Days
immediately before such date. The daily market price for each such Trading Day
shall be (i) the closing bid price on such day on the principal stock exchange
(including Nasdaq) on which such Common Stock is then listed or admitted to
trading, or quoted, as applicable, (ii) if no sale takes place on such day on
any such exchange, the last reported closing bid price on such day as officially
quoted on any such exchange (including Nasdaq), (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the last reported
closing bid price on such day in the over-the-counter market, as furnished by
the National Association of Securities Dealers Automatic Quotation System or the
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.), (iv) if neither
such corporation at the time is engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business, or (v)
if there is no such firm, as furnished by any member of the NASD selected
mutually by the holder of this Warrant and the Company or, if they cannot agree
upon such selection, as selected by two such members of the NASD, one of which
shall be selected by holder of this Warrant and one of which shall be selected
by the Company (as applicable, the "DAILY MARKET Price").
"CURRENT WARRANT PRICE" means, in respect of a share of Common Stock at any
date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date. Until the Current Warrant Price
is adjusted pursuant to the terms herein, the initial Current Warrant Price
shall be $0.03 per share of Common Stock.
"DAILY MARKET PRICE" shall have the meaning assigned to such term in the
definition of "Current Market Price".
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" means the period during which this Warrant is exercisable
pursuant to Section 2.1.
"EXPIRATION DATE" means December 23, 2011.
"GAAP" means generally accepted accounting principles in the United States
of America as from time to time in effect.
"NASD" means the National Association of Securities Dealers, Inc., or any
successor corporation thereto.
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"OTHER PROPERTY" has the meaning set forth in Section 4.8.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"PREFERRED STOCK" shall mean the Company's Series C Cumulative Convertible
Preferred Stock, par value $0.01 per share issued pursuant to the Purchase
Agreement.
"PURCHASE AGREEMENT" means that certain Preferred Stock and Warrant
Purchase Agreement dated as of December 23, 2005 among the Company and the other
parties named therein, pursuant to which this Warrant was originally issued.
"RESTRICTED COMMON STOCK" means shares of Common Stock which are, or which
upon their issuance upon the exercise of any Warrant would be required to be,
evidenced by a certificate bearing the restrictive legend set forth in Section
3.2.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"TRADING DAY" means any day on which the primary market on which shares of
Common Stock are listed is open for trading, and if there is no such market,
"Trading Day" shall have the same meaning as Business Day.
"TRANSFER" means any disposition of any Warrant or Warrant Stock or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"WARRANTS" means (i) this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof or (ii), as
context indicates, the warrants issued pursuant to the Purchase Agreement. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"WARRANT PRICE" means an amount equal to (i) the number of shares of Common
Stock being purchased upon exercise of this Warrant pursuant to Section 2.1,
multiplied by (ii) the Current Warrant Price.
"WARRANT STOCK" means the ____________ shares of Common Stock to be
purchased upon the exercise hereof, subject to adjustment as provided herein.
2. EXERCISE OF WARRANT.
2.1. MANNER OF EXERCISE. Subject to the limitations provided in Section 7,
from and after the Closing Date, and until 5:00 P.M., New York time, on the
Expiration Date (the "EXERCISE PERIOD"), the Holder may exercise this Warrant,
on any Business Day, for all or any part of the number of shares of Warrant
Stock purchasable hereunder.
4
In order to exercise this Warrant, in whole or in part, the Holder shall
deliver to the Company at its principal office or at the office or agency
designated by the Company pursuant to Section 12, (i) a written notice of
Xxxxxx's election to exercise this Warrant, which notice shall specify the
number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant
Price as provided herein, and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as EXHIBIT A, duly executed by the Holder or its agent or attorney. Upon
receipt of such notice, payment of the Warrant Price and this Warrant, the
Company shall, as promptly as practicable, and in any event within three
Business Days thereafter, execute or cause to be executed and deliver or cause
to be delivered to the Holder a certificate or certificates representing the
aggregate number of full shares of Warrant Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as the Holder shall request in
the notice and shall be registered in the name of the Holder or such other name
as shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and the 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 when the notice, together with the payment of the
Warrant Price and this Warrant, is received by the Company as described above.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Stock,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant, or
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
Payment of the Warrant Price may be made at the option of the Holder by:
(i) certified or official bank check payable to the order of the Company, (ii)
wire transfer of immediately available funds to the account of the Company or
(iii) the surrender and cancellation of a portion of shares of Common Stock then
held by the Holder or issuable upon such exercise of this Warrant, which shall
be valued and credited toward the total Warrant Price due the Company for the
exercise of the Warrant based upon the Current Market Price of the Common Stock.
All shares of Common Stock issuable upon the exercise of this Warrant pursuant
to the terms hereof shall be validly issued and, upon payment of the Warrant
Price, shall be fully paid and nonassessable and not subject to any preemptive
rights.
2.2. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay an amount in cash equal to
the Current Market Price per share of Common Stock on the date of exercise
multiplied by such fraction.
2.3. CONTINUED VALIDITY. A Holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part (other than a Holder who acquires
such shares after the same have been publicly sold pursuant to a Registration
5
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as the Holder under Sections 10 and 13 of this
Warrant.
2.4. RESTRICTIONS ON EXERCISE AMOUNT.
(i) Unless a Holder delivers to the Company irrevocable written notice (x)
prior to the date of issuance hereof or sixty-one days prior to the effective
date of such notice that this Section 2.4(i) shall not apply to such Holder or
(y) prior to a Change of Control the terms of which require the conversion of
the Preferred Stock into Common Stock, the Holder may not acquire a number of
shares of Warrant Stock to the extent that, upon such exercise, the number of
shares of Common Stock then beneficially owned by such holder and its Affiliates
and any other persons or entities whose beneficial ownership of Common Stock
would be aggregated with the Holder's for purposes of Section 13(d) of the
Exchange Act (including shares held by any "group" of which the holder is a
member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein)
exceeds 4.95% of the total number of shares of Common Stock of the Company then
issued and outstanding. For purposes hereof, "group" has the meaning set forth
in Section 13(d) of the Exchange Act and applicable regulations of the
Securities and Exchange Commission, and the percentage held by the holder shall
be determined in a manner consistent with the provisions of Section 13(d) of the
Exchange Act. Each delivery of a notice of exercise by a Holder will constitute
a representation by such Holder that it has evaluated the limitation set forth
in this paragraph and determined, based on the most recent public filings by the
Company with the Commission, that the issuance of the full number of shares of
Warrant Stock requested in such notice of exercise is permitted under this
paragraph.
(ii) In the event the Company is prohibited from issuing shares of Warrant
Stock as a result of any restrictions or prohibitions under applicable law or
the rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization, the Company shall as soon as possible seek
the approval of its stockholders and take such other action to authorize the
issuance of the full number of shares of Common Stock issuable upon exercise of
this Warrant.
3. TRANSFER, DIVISION AND COMBINATION.
3.1. TRANSFER. The Warrants and the Warrant Stock shall be freely
transferable, subject to compliance with this Section 3.1 and all applicable
laws, including, but not limited to the Securities Act. If, at the time of the
surrender of this Warrant in connection with any transfer of this Warrant or the
resale of the Warrant Stock, this Warrant or the Warrant Stock, as applicable,
shall not be registered under the Securities Act, the Company may require, as a
condition of allowing such transfer (i) that the Holder or transferee of this
Warrant or the Warrant Stock as the case may be, furnish to the Company a
written opinion of counsel that is reasonably acceptable to the Company to the
effect that such transfer may be made without registration under the Securities
Act, (ii) that the Holder or transferee execute and deliver to the Company an
investment representation letter in form and substance acceptable to the Company
and substantially in the form attached as EXHIBIT C hereto and (iii) that the
6
transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act. Transfer of this Warrant and all rights hereunder, in
whole or in part, in accordance with the foregoing provisions, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of EXHIBIT B 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 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 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.
Following a transfer that complies with the requirements of this Section 3.1,
the Warrant may be exercised by a new Holder for the purchase of shares of
Common Stock regardless of whether the Company issued or registered a new
Warrant on the books of the Company.
3.2. RESTRICTIVE LEGENDS. Each certificate for Warrant Stock initially
issued upon the exercise of this Warrant, and each certificate for Warrant Stock
issued to any subsequent transferee of any such certificate, unless, in each
case, such Warrant Stock is eligible for resale without registration pursuant to
Rule 144(k) under the Exchange Act, shall bear the following legend:
"THESE SECURITIES HAVE NOT 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. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT."
In addition, the legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the transferee of any Warrant
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, such Warrant Stock is registered for resale under an
effective registration statement filed under the Securities Act and such Warrant
Stock is sold pursuant to the prospectus included in such registration statement
and the transferor of such Warrant Stock complies with the prospectus delivery
requirements of the Securities Act.
3.3. DIVISION AND COMBINATION; EXPENSES; BOOKS. This Warrant may be divided
7
or combined with other Warrants upon presentation hereof at the aforesaid office
or agency 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 3.1 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. The
Company shall prepare, issue and deliver at its own expense the new Warrant or
Warrants under this Section 3. The Company agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS. The number of shares of Common Stock for which this Warrant
is exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to time as
set forth in this Section 4. The Company shall give the Holder notice of any
event described below which requires an adjustment pursuant to this Section 4 in
accordance with Sections 5.1 and 5.2.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time while
this Warrant is outstanding the Company shall:
(i) declare a dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then:
(1) the number of shares of Common Stock acquirable upon exercise of this
Warrant immediately after the occurrence of any such event shall be adjusted to
equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock that would have been acquirable under this
Warrant immediately prior to the record date for such dividend or distribution
or the effective date of such subdivision or combination would own or be
entitled to receive after such record date or the effective date of such
subdivision or combination, as applicable, and
(2) the Current Warrant Price shall be adjusted to equal:
(A) the Current Warrant Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision or combination, multiplied by the number of shares of Common
Stock into which this Warrant is exercisable immediately prior to the
adjustment, divided by
(B) the number of shares of Common Stock into which this Warrant is
exercisable immediately after such adjustment.
Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
8
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clauses (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time while this Warrant is
outstanding the Company shall cause the holders of its Common Stock to be
entitled to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of stock of any
class or any other securities or property or assets of any nature whatsoever
(other than cash or additional shares of Common Stock as provided in Section 4.1
hereof), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property or assets of any nature whatsoever, then:
(1) the number of shares of Common Stock acquirable upon exercise of
this Warrant shall be adjusted to equal the product of the number of shares
of Common Stock acquirable upon exercise of this Warrant immediately prior
to the record date for such dividend or distribution, multiplied by a
fraction (x) the numerator of which shall be the Current Warrant Price per
share of Common Stock at the date of taking such record and (y) the
denominator of which shall be such Current Warrant Price minus the amount
allocable to one share of Common Stock of any such cash so distributable
and of the fair value (as determined in good faith by the Board of
Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable; and
(2) the Current Warrant Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive
such distribution shall be adjusted to equal (x) the Current Warrant Price
multiplied by the number of shares of Common Stock acquirable upon exercise
of this Warrant immediately prior to the adjustment, divided by (y) the
number of shares of Common Stock acquirable upon exercise of this Warrant
immediately after such adjustment. A reclassification of the Common Stock
(other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of
any other class of stock shall be deemed a distribution by the Company to
the holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
shares of Common Stock within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(i) If, at any time while this Warrant is outstanding, the Company
shall issue or sell any Additional Shares of Common Stock in exchange for
consideration in an amount per Additional Share of Common Stock less than the
9
Current Warrant Price at the time the Additional Shares of Common Stock are
issued or sold, then:
(A) the Current Warrant Price immediately prior to such issue or sale
shall be reduced to a price equal to the price for each of the Additional
Shares of Common Stock received by or to be received by the Company upon
such issue or sale of such Additional Shares of Common Stock; and
(B) the number of shares of Warrant Stock acquirable upon exercise of
this Warrant shall be adjusted to equal the amount obtained by
(1) multiplying the Current Warrant Price in effect immediately
prior to such issue or sale by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such
issue or sale and
(2) dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (A).
(ii) The provisions of paragraph 4.3(i) shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of shares of
Common Stock acquirable upon exercise of this Warrant shall be made under
paragraph 4.3(i) upon the issuance of any additional shares of Common Stock
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights or upon the
issuance of such convertible securities (or upon the issuance of any warrant or
other rights therefor) pursuant to Section 4.4.
4.4. ISSUANCE OF COMMON STOCK EQUIVALENTS. If, at any time while this
Warrant is outstanding, the Company shall issue or sell any warrants or rights
to subscribe for or purchase any Additional Shares of Common Stock or any
securities exchangeable or convertible into Additional Shares of Common Stock
(regardless of the number of shares of Common Stock that the Corporation is then
authorized to issue) (collectively, "COMMON STOCK EQUIVALENTS"), whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the effective price per share for which Common Stock is issuable upon the
exercise, exchange or conversion of such Common Stock Equivalents shall be less
than the Current Warrant Price in effect immediately prior to the time of such
issue or sale, then the Current Warrant Price and number of shares of Warrant
Stock shall be adjusted as provided in Section 4.3. No further adjustments to
the Current Warrant Price and number of shares of Warrant Stock shall be made
under this Section 4.4 upon the actual issue of such Common Stock upon the
exercise, conversion or exchange of such Common Stock Equivalents.
4.5. SUPERSEDING ADJUSTMENT.
(i) If, at any time after any adjustment of the Current Warrant Price
and number of shares of Warrant Stock shall have been made pursuant to Section
4.4 as the result of any issuance of Common Stock Equivalents, (x) the right to
exercise, convert or exchange all of such Common Stock Equivalents shall expire
unexercised, or (y) the conversion rate or consideration per share for which
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shares of Common Stock are issuable pursuant to such Common Stock Equivalents
shall be increased solely by virtue of provisions therein contained for an
automatic increase in such conversion rate or consideration per share upon the
occurrence of a specified date or event, then, unless any of such Common Stock
Equivalents have previously been converted or exercised at the original price,
any such previous adjustments to the Current Warrant Price and number of shares
of Warrant Stock shall be rescinded and annulled and the Additional Shares of
Common Stock which were deemed to have been issued by virtue of the computation
made in connection with the adjustment so rescinded and annulled shall no longer
be deemed to have been issued by virtue of such computation.
(ii) Upon the occurrence of an event set forth in Section 4.5(i) above
there shall be a recomputation made of the effect of such Common Stock
Equivalents on the basis of treating any such Common Stock Equivalents which
then remain outstanding as having been granted or issued immediately after the
time of such increase of the conversion rate or consideration per share for
which shares of Common Stock or other property are issuable under such Common
Stock Equivalents; whereupon a new adjustment to the Current Warrant Price and
number of shares of Warrant Stock shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
4.6. RESET ADJUSTMENT.
(i) On the sixtieth (60th) Trading Day following the effective date of
the 1 for 6 Split (as defined in the Purchase Agreement) (the "RESET DATE"), if
the product of (x) 1.20 MULTIPLIED BY (y) the average of the Daily Market Price
of the Common Stock over the immediately preceding twenty Trading Days (such
product, the "AVERAGE PRICE") is lower than the then-effective Current Warrant
Price (a "RESET EVENT"), then, immediately thereupon:
(A) the Current Warrant Price shall be adjusted to equal the
Average Price; and
(B) the number of shares of Warrant Stock acquirable upon exercise
of this Warrant shall be adjusted to equal the amount obtained by
(1) multiplying the Current Warrant Price in effect
immediately prior to the Reset Event by the number of shares of Common
Stock acquirable upon exercise of this Warrant immediately prior to
such Reset Event and
(2) dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (A).
(ii) If no adjustment is made pursuant to this Section 4.6 because the
Average Price is higher than the then-effective Current Warrant Price on the
Reset Date as a result of a prior adjustment pursuant to Section 4.4 (an
"ANTI-DILUTION ADJUSTMENT") and such Anti-Dilution Adjustment is followed by a
superseding adjustment pursuant to Section 4.5 (a "SUPERSEDING ADJUSTMENT")
that, if made prior to the Reset Date, would have resulted in the Average Price
on the Reset Date being lower than the then-effective Current Warrant Price,
then the Current Warrant Price following the Superseding Adjustment shall
11
immediately be reduced (but not increased) and the number of shares of Warrant
Stock acquirable upon exercise of this Warrant following such Superseding
Adjustment shall immediately be increased (but not reduced) pursuant to Section
4.6(i), as if such Superceding Adjustment had occurred immediately prior to the
Reset Date.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS. The following provisions
shall be applicable to the making of adjustments of the number of shares of
Common Stock into which this Warrant is exercisable and the Current Warrant
Price provided for in Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any that would otherwise be required may be
postponed (except in the case of a subdivision or combination of shares of the
Common Stock, as provided for in Section 4.1 and except in the case of an
adjustment pursuant to Section 4.6) up to, but not beyond the date of exercise
if such adjustment either by itself or with other adjustments not previously
made adds or subtracts less than 1% of the shares of Common Stock into which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company undertakes a
transaction contemplated under this Section 4 and as a result takes a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights or other benefits
contemplated under this Section 4 and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights or other benefits
contemplated under this Section 4, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) ESCROW OF STOCK. If after any property becomes distributable
pursuant to Section 4 by reason of the taking of any record of the holders of
Common Stock, but prior to the occurrence of the event for which such record is
taken, a holder of this Warrant exercises the Warrant during such time, then
such holder shall continue to be entitled to receive any shares of Common Stock
issuable upon exercise hereunder by reason of such adjustment and such shares or
other property shall be held in escrow for the holder of this Warrant by the
Company to be issued to holder of this Warrant upon and to the extent that the
event actually takes place. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned to the Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
12
OF ASSETS. If there shall occur a Change of Control, then the Holder of this
Warrant shall be entitled, at such Holder's option, either:
(a) upon request of Xxxxxx delivered to the Company within 10 days of
receipt of notice of such Change of Control pursuant to Section 5.2, to have the
Company (or any such successor or surviving entity) purchase this Warrant from
the Holder for an aggregate purchase price, payable in cash on the effective
date of consummation of such Change of Control, equal to the product of (i) the
difference between the Current Market Price and the Current Warrant Price,
multiplied by (ii) the number of shares of Common Stock issuable upon exercise
of this Warrant immediately prior to the consummation of such Change of Control;
or
(b) if pursuant to the terms of such Change of Control, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("OTHER PROPERTY"), are
to be received by or distributed to the holders of Common Stock of the Company,
and the Holder shall not have elected to have this Warrant purchased by the
Company pursuant to Section 4.8(a) above, then the Holder of this Warrant shall
have the right thereafter to receive, upon the exercise of the Warrant, the
number of shares of common stock of the successor or acquiring corporation or of
the Company, if it is the surviving corporation, and the Other Property
receivable upon or as a result of such Change of Control by a holder of the
number of shares of Common Stock into which this Warrant is exercisable
immediately prior to such event.
(c) In case of any such Change of Control described above, to the
extent this Warrant has not been fully purchased by the Company pursuant to
Section 4.8(a) above, the successor or acquiring corporation (if other than the
Company) and, if an entity different from the successor or surviving entity, the
entity whose capital stock or assets the holders of Common Stock are entitled to
receive as a result of such transaction, shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
contained in this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
into which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in Section 4. For purposes of
Section 4, common stock of the successor or acquiring corporation shall include
stock of such corporation of any class which is not preferred as to dividends or
assets on liquidation over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4 shall similarly apply to successive Change of Control
transactions.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than the payment of dividends permitted by Section 4 or any other action
described in Section 4, then, unless such action will not have a materially
adverse effect upon the rights of the holder of this Warrant, the number of
13
shares of Common Stock or other stock into which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
4.11. STOCK TRANSFER TAXES. The issue of stock certificates upon exercise
of this Warrant shall be made without charge to the Holder for any tax in
respect of such issue. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares in any name other than that of the Holder of this Warrant,
and the Company shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
5. NOTICES TO WARRANT HOLDERS.
5.1. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Current Warrant Price, the Company, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of the Holder of this Warrant, furnish or cause to
be furnished to such Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Current Warrant Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if any, or
other property which at the time would be received upon the exercise of Warrants
owned by such Holder.
5.2. NOTICE OF CORPORATE ACTION. If at any time:
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company) or other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder (i)
14
at least 20 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to the
Holder at the last address of the Holder appearing on the books of the Company
and delivered in accordance with Section 15.2.
5.3. NO RIGHTS AS STOCKHOLDER. This Warrant does not entitle the Holder to
any voting or other rights as a stockholder of the Company prior to exercise and
payment for the Warrant Price in accordance with the terms hereof.
6. NO IMPAIRMENT. 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 the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant 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 shares of
Common Stock upon the exercise of this Warrant including, without limitation,
effecting the 1 for 7 Split (as defined in the Purchase Agreement), provided
that the Holder acknowledges and agrees that the 1 for 7 Split will be effected
within ten days following the Initial Closing Date (as defined in the Purchase
Agreement), and (c) use its best 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. Upon the request of the Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
APPROVAL OF ANY GOVERNMENTAL AUTHORITY. Following the effectiveness of the 1 for
7 Split and the 1 for 6 Split (as such terms are defined in the Purchase
Agreement), the Company shall at all times reserve and keep available for issue
15
upon the exercise of Warrants such number of its authorized but unissued shares
of Common Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants (without regard to any ownership limitations provided in
Section 2.4(i)). Prior to the effectiveness of the 1 for 6 Split (as defined in
the Purchase Agreement), the Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely for issuance
upon the exercise of Warrants, the lesser of (i) all of its authorized but
unissued Common Stock not otherwise reserved as of the Closing Date or pursuant
to the Certificate of Designation (as defined in the Purchase Agreement) or (ii)
such number of shares of Common Stock as will be sufficient to permit the
exercise in full of all outstanding Warrants (without regard to any ownership
limitations provided in Section 2.4(i)). Unless a sufficient number of shares of
Common Stock are reserved for issuance pursuant hereto as will be sufficient to
permit the exercise in full of all outstanding Warrants (without regard to any
ownership limitations provided in Section 2.4(i)), then the right to exercise
pursuant to Section 2.1 shall be limited by the number of shares of Common Stock
reserved for issuance hereunder and shall be distributed pro-rata among the
holders of the Warrants in proportion to the number of shares into which such
holders' Warrants are exercisable (without regard to the ownership limitations
provided in Section 2.4(i) or the limitations on exercise contained in this
Section 7). All shares of Common Stock which shall be so issuable, when issued
upon exercise of any Warrant and payment therefor in accordance with the terms
of such Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights. Before taking any action
which would cause an adjustment reducing the Current Warrant Price below the
then par value, if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which may be necessary
in order that the Company may validly and legally issue fully paid and
non-assessable shares of such Common Stock at such adjusted Current Warrant
Price. Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant 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. If any shares of Common
Stock required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any federal
or state law before such shares may be so issued (other than as a result of a
prior or contemplated distribution by the Holder of this Warrant), the Company
will in good faith and as expeditiously as possible and at its expense endeavor
to cause such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the case of all
dividends or other distributions by the Company to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Company will in each such case take such a record
and will take such record as of the close of business on a Business Day. The
Company will not at any time, except upon dissolution, liquidation or winding up
of the Company, close its stock transfer books or Warrant transfer books so as
to result in preventing or delaying the exercise or transfer of any Warrant.
9. REGISTRATION RIGHTS. The resale of the Warrant Stock shall be registered
in accordance with the terms and conditions contained in that certain Investor
Rights Agreement dated as of the Initial Closing Date (as defined in the
Purchase Agreement), among the Holder, the Company and the other parties named
therein (the "INVESTOR RIGHTS AGREEMENT"). The Holder acknowledges that pursuant
16
to the Investor Rights Agreement, the Company has the right to request that the
Holder furnish information regarding such Holder and the distribution of the
Warrant Stock as is required by law or the Commission to be disclosed in the
Registration Statement (as such term is defined in the Investor Rights
Agreement), and the Company may exclude from such registration the shares of
Warrant Stock acquirable hereunder if Xxxxxx fails to furnish such information
within a reasonable time prior to the filing of each Registration Statement,
supplemented prospectus included therein and/or amended Registration Statement.
10. SUPPLYING INFORMATION. Upon any default by the Company of its
obligations hereunder or under the Investor Rights Agreement, the Company shall
cooperate with the Holder in supplying such information as may be reasonably
necessary for such Holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
11. LOSS OR MUTILATION. Upon receipt by the Company from the Holder of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to the Holder; provided, however, that in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form is surrendered
to the Company for cancellation.
12. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION.
13.1. QUARTERLY INFORMATION. The Company will deliver to the Holder, as
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, one copy of an
unaudited consolidated balance sheet of the Company and its subsidiaries as at
the end of such quarter, and the related unaudited consolidated statements of
income, retained earnings and cash flow of the Company and its subsidiaries for
such quarter and, in the case of the second and third quarters, for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year. Such financial statements shall be prepared by the Company in
accordance with GAAP and accompanied by the certification of the Company's chief
executive officer or chief financial officer that such financial statements
present fairly the consolidated financial position, results of operations and
cash flow of the Company and its subsidiaries as at the end of such quarter and
for such year-to-date period, as the case may be; provided, however, that the
Company shall have no obligation to deliver such quarterly information under
this Section 13.1 to the extent it is publicly available; and provided further,
that if such information contains material non-public information, the Company
shall so notify the Holder prior to delivery thereof and the Holder shall have
the right to refuse delivery of such information.
17
13.2. ANNUAL INFORMATION. The Company will deliver to the Holder as soon as
available and in any event within 90 days after the end of each fiscal year of
the Company, one copy of an audited consolidated balance sheet of the Company
and its subsidiaries as at the end of such year, and audited consolidated
statements of income, retained earnings and cash flow of the Company and its
subsidiaries for such year; setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year; all prepared
in accordance with GAAP, and which audited financial statements shall be
accompanied by an opinion thereon of the independent certified public
accountants regularly retained by the Company, or any other firm of independent
certified public accountants of recognized national standing selected by the
Company; provided, however, that the Company shall have no obligation to deliver
such annual information under this Section 13.2 to the extent it is publicly
available; and provided further, that if such information contains material
non-public information, the Company shall so notify the Holder prior to delivery
thereof and the Holder shall have the right to refuse delivery of such
information.
13.3. FILINGS. The Company will file on or before the required date all
regular or periodic reports (pursuant to the Exchange Act) with the Commission
and will deliver to Holder promptly upon their becoming available one copy of
each report, notice or proxy statement sent by the Company to its stockholders
generally.
14. LIMITATION OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the purchase price of any Common Stock,
whether such liability is asserted by the Company or by creditors of the
Company.
15. MISCELLANEOUS.
15.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of the Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to the Holder such amounts as shall be sufficient to cover any third party costs
and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
15.2. NOTICE GENERALLY. All notices, requests, demands or other
communications provided for herein shall be in writing and shall be given in the
manner and to the addresses set forth in the Purchase Agreement.
15.3. SUCCESSORS AND ASSIGNS. Subject to compliance with the provisions of
Section 3.1, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of the 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.
18
15.4. AMENDMENT. This Warrant may be modified or amended or the provisions
of this Warrant waived with the written consent of both the Company and the
Holder.
15.5. 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 modified to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
15.6. 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.
15.7. GOVERNING LAW. This Warrant and the transactions contemplated hereby
shall be deemed to be consummated in the State of New York and shall be governed
by and interpreted in accordance with the local laws of the State of New York
without regard to the provisions thereof relating to conflicts of laws. The
Company hereby irrevocably consents to the exclusive jurisdiction of the State
and Federal courts located in New York City, New York in connection with any
action or proceeding arising out of or relating to this Warrant. In any such
litigation the Company agrees that the service thereof may be made by certified
or registered mail directed to the Company pursuant to Section 15.2.
[Signature Page Follows]
19
IN WITNESS WHEREOF, MacroChem Corporation has caused this Warrant to be
executed by its duly authorized officer and attested by its Secretary.
Dated: December 23, 2005
MACROCHEM CORPORATION
By:
------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title: Secretary
20
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
1. The undersigned hereby elects to purchase shares of the Common Stock of
MacroChem Corporation pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Common Stock of MacroChem Corporation through "cashless exercise" in the manner
specified in the Warrant. This conversion is exercised with respect to
_____________________ of the Shares covered by the Warrant.
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
--------------------------------
(Name)
--------------------------------
--------------------------------
--------------------------------
(Address)
[and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.]
-------------------------------------
(Name of Registered Owner)
-------------------------------------
(Signature of Registered Owner)
-------------------------------------
(Street Address)
-------------------------------------
(State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
21
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant for the
purchase of shares of common stock of MacroChem Corporation hereby sells,
assigns and transfers unto the Assignee named below all of the rights of the
undersigned under this Warrant, with respect to the number of shares of common
stock set forth below:
---------------------------------------
---------------------------------------
---------------------------------------
(Name and Address of Assignee)
---------------------------------------
(Number of Shares of Common Stock)
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of the Company, maintained for the
purpose, with full power of substitution in the premises.
Dated:
--------------------------------
--------------------------------------
(Print Name and Title)
--------------------------------------
(Signature)
--------------------------------------
(Witness)
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
22
EXHIBIT C
FORM OF INVESTMENT REPRESENTATION LETTER
In connection with the acquisition of [warrants (the "WARRANTS") to purchase
____ shares of common stock of MacroChem Corporation (the "COMPANY"), par value
$0.01 per share (the "COMMON STOCK")][___shares of common stock of MacroChem
Corporation (the "COMPANY"), par value $0.01 per share (the "COMMON STOCK") upon
the exercise of warrants by ________], by _______________ (the "HOLDER") from
_____________, the Holder hereby represents and warrants to the Company as
follows:
The Holder (i) is an "Accredited Investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"ACT"); and (ii) has the ability to bear the economic risks of such Holder's
prospective investment, including a complete loss of Holder's investment in the
Warrants and the shares of Common Stock issuable upon the exercise thereof
(collectively, the "SECURITIES").
The Holder, by acceptance of the Warrants, represents and warrants to the
Company that the Warrants and all securities acquired upon any and all exercises
of the Warrants are purchased for the Holder's own account, and not with view to
distribution of either the Warrants or any securities purchasable upon exercise
thereof in violation of applicable securities laws.
The Holder acknowledges that (i) the Securities have not been registered under
the Act, (ii) the Securities are "restricted securities" and the certificate(s)
representing the Securities shall bear the following legend, or a similar legend
to the same effect, until (i) in the case of the shares of Common Stock
underlying the Warrants, such shares shall have been registered for resale by
the Holder under the Act and effectively been disposed of in accordance with a
registration statement that has been declared effective; or (ii) in the opinion
of counsel for the Company such Securities may be sold without registration
under the Act:
"[NEITHER] THE SECURITIES REPRESENTED BY THIS CERTIFICATE [NOR THE SECURITIES
INTO WHICH THEY ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND ALL SUCH SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. [NEITHER] THE
SECURITIES REPRESENTED HEREBY [NOR THE SECURITIES INTO WHICH THEY ARE
EXERCISABLE] MAY [NOT] BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT
THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT
REGISTRATION UNDER THE ACT."
23
IN WITNESS WHEREOF, the Holder has caused this Investment Representation Letter
to be executed this __ day of __________ 200_.
[Name]
By:
----------------------------
Name:
Title:
24
