Exhibit 10.9
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) REGISTRATION UNDER THE ACT, (ii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES STATING THAT REGISTRATION IS NOT REQUIRED, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT.
MITOKOR
WARRANT (WGT-___)
THIS CERTIFIES THAT, in exchange for certain warrants to purchase
shares of common stock of Apollo BioPharmaceutics, Inc., a Delaware corporation
("Apollo"), and pursuant to Section 1.6 of that certain Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") by and among MITOKOR, a
California corporation (the "Company"), Mito Acquisition Corp., a Delaware
corporation ("Merger Sub"), and Apollo BioPharmaceutics, Inc., a Delaware
corporation ("Apollo"), dated May 8, 2001 (the "Merger Agreement"), ((name))
(the "Holder") and his, her or its assignees are entitled to subscribe for and
purchase up to (i) ((shares_word)) (((shares_number))) shares of fully paid and
nonassessable Series G Preferred Stock, no par value (the "Series G Preferred
Stock") (as adjusted pursuant to Section 5 hereof, the "Warrant Shares") of the
Company, together with (ii) such portion of the Cash Consideration and
Contingent Consideration (as such terms are defined and provided for in the
Merger Agreement) as are associated with such Warrant Shares on Schedule 1.5 of
the Merger Agreement (the portion of the Cash Consideration and Contingent
Consideration associated with one Warrant Share together with one Warrant Share
itself being referred to hereinafter as a "Unit") at the price per Unit of
$((price)) (such price and such other price as shall result, from time to time,
from the adjustments specified in Section 5 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "Series G Preferred" shall
mean the Company's presently authorized Series G Preferred Stock, and any stock
into or for which such Series G Preferred Stock may hereafter be converted or
exchanged, and after the automatic conversion of the Series G Preferred Stock to
Common Stock shall mean the Company's Common Stock, (b) the term "Date of Grant"
shall mean ((date)), 2001, and (c) the term "Other Warrants" shall mean any
other warrants issued by the Company in connection with the merger with respect
to which this Warrant was issued, and any warrant issued upon transfer or
partial exercise of or in lieu of this Warrant. The term "Warrant" as used
herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise. Terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Merger Agreement.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through that date which is ten (10) years after the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in
1
whole or in part, at any time, and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as Exhibit A-l duly completed and
executed) at the principal office of the Company and by the payment to the
Company, by certified or bank check, or by wire transfer to an account
designated by the Company (a "Wire Transfer") of an amount equal to the then
applicable Warrant Price multiplied by the number of Units then being purchased;
(b) if in connection with a registered public offering of the Company's
securities, the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A-2 duly completed and executed) at the principal
office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Units then being
purchased; or (c) exercise of the "net issuance" right provided for in Section
12.2 hereof. The person or persons in whose name(s) any certificate(s)
representing shares of Series G Preferred shall be issuable upon exercise of
this Warrant shall be deemed to have become the holder(s) of record of, and
shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised in accordance with this Section 2. In the event of any
exercise of the rights represented by this Warrant, certificates for the shares
of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within ten (10) business days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Units, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such ten (10) business day
period; provided, however, at such time as the Company is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, if
requested by the holder of this Warrant, the Company shall cause its transfer
agent to deliver the certificate representing Warrant Shares and Contingent
Consideration, if any, issued upon exercise of this Warrant to a broker or other
person (as directed by the holder exercising this Warrant) within the time
period required to settle any trade made by the holder after exercise of this
Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Warrant Shares and
Contingent Shares, if any, that may be issued upon the exercise of the rights to
acquire Units represented by this Warrant (or in accordance with the terms of
the Merger Agreement in connection with the Contingent Shares associated with
such Units) will, upon issuance pursuant to the terms and conditions herein, be
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Series G Preferred (or other class of capital stock for which the Warrant is
exercisable or convertible) to provide for the exercise of the rights
represented by this Warrant and a sufficient number of shares of its Common
Stock to provide for the conversion of the Series G Preferred into Common Stock.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
2
(a) RECLASSIFICATION OR MERGER. In case of any reclassification or
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in case
of any merger or consolidation of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or
the Company shall make appropriate provision without the issuance of a new
Warrant, so that the holder of this Warrant shall have the right to receive, at
a total purchase price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Series G
Preferred (or shares or Common Stock if the Series G Preferred has converted, or
other shares of capital stock issuable upon exercise or conversion of this
Warrant) theretofore issuable upon exercise of this Warrant, the kind and amount
of shares of stock, other securities, money and property receivable upon such
reclassification, change, merger or sale by a holder of the number of shares of
Series G Preferred (or shares or Common Stock if the Series G Preferred has
converted or other shares of capital stock issuable upon exercise or conversion
of this Warrant) then purchasable under this Warrant. Any new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 5. The provisions of this
subparagraph (a) shall similarly apply to successive reclassifications, changes,
mergers, consolidations and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Series G Preferred (or shares of Common Stock
if the Series G Preferred has converted, or other shares of capital stock
issuable upon exercise or conversion of this Warrant), the Warrant Price shall
be proportionately decreased and the number of Warrant Shares issuable hereunder
shall be proportionately increased in the case of a subdivision and the Warrant
Price shall be proportionately increased and the number of Warrant Shares
issuable hereunder shall be proportionately decreased in the case of a
combination.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series G Preferred payable in Series G Preferred, then the
Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (A) the numerator of which shall be the
total number of shares of Series G Preferred outstanding immediately prior to
such dividend or distribution, and (B) the denominator of which shall be the
total number of shares of Series G Preferred outstanding immediately after such
dividend or distribution; or (ii) make any other distribution with respect to
Series G Preferred (except any distribution specifically provided for in
Sections 5(a) and 5(b)), then, in each such case, provision shall be made by the
Company such that the holder of this Warrant shall receive upon exercise of this
Warrant a proportionate share of any such dividend or distribution as though it
were the holder of the Series G Preferred (or Common Stock issuable
3
upon conversion thereof) as of the record date fixed for the determination of
the shareholders of the Company entitled to receive such dividend or
distribution.
(d) CONVERSION OF SERIES G PREFERRED. In the event that the Series
G Preferred has converted into Common Stock prior to the exercise of this
Warrant, the number of shares of Common Stock issuable pursuant to this Warrant
shall be subject to adjustment pursuant to this Section 5 from time to time in
the same manner that the Series G Preferred had been pursuant to this Section 5
prior to its conversion.
(e) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 5
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and the number of Warrant Shares purchasable
hereunder after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (by first class mail, postage prepaid) to the holder of
this Warrant within 10 days of such adjustment. In addition, whenever the
conversion price or conversion ratio of the Series G Preferred (or any other
class of convertible capital stock issuable upon exercise or conversion of the
Warrant) shall be adjusted, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series G
Preferred after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (by first class mail, postage prepaid) within 10 days
of such adjustment to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Series G Preferred will
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series G Preferred on the date of exercise as
reasonably determined in good faith by the Company's Board of Directors.
7. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant, and the shares of Series G Preferred (or any
other class of capital stock) to be issued upon exercise hereof and any Common
Stock issued upon conversion thereof are being acquired for investment and that
such holder will not offer, sell or otherwise dispose of this Warrant, or any
shares of Series G Preferred (or other class of capital stock) to be issued upon
exercise hereof or any Common Stock issued upon conversion thereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act") or any applicable state securities laws. Upon
exercise of this Warrant, unless the Warrant
4
Shares being acquired are registered under the Act and any applicable state
securities laws or an exemption from such registration is available, the holder
hereof shall confirm in writing that the shares of Series G Preferred so
purchased (and any shares of Common Stock issued upon conversion thereof) are
being acquired for investment and not with a view toward distribution or resale
in violation of the Act and shall confirm such other matters related thereto as
may be reasonably requested by the Company. This Warrant and all shares of
Series G Preferred issued upon exercise of this Warrant and all shares of Common
Stock issued upon conversion thereof (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) REGISTRATION UNDER THE ACT, (ii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES STATING THAT REGISTRATION IS NOT REQUIRED, OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT."
Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the initial Holder of this Warrant specifically represents to the
Company by acceptance of this Warrant as follows:
(1) The Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant. The
Holder is acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act.
(2) The Holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein.
(3) The Holder further understands that this Warrant must be
held indefinitely unless subsequently registered under the Act and qualified
under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available. The Holder is aware of
the provisions of Rule 144, promulgated under the Act.
(4) The Holder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Act. If the Holder is
not an "accredited investor," such holder has utilized a "purchaser
representative" (as defined in Rule 501(h)) to assist such holder in evaluating
the investment decision represented by this Warrant and the transactions
contemplated thereby.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any offer,
sale or other disposition of this Warrant or any shares of Series G Preferred
acquired pursuant to the exercise
5
of this Warrant prior to registration of such Warrant or shares, the holder
hereof agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such holder's
counsel, or other evidence, reasonably satisfactory to the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any applicable
federal or state securities law then in effect) of this Warrant or such shares
of Series G Preferred or Common Stock (or other class of capital stock) and
indicating whether or not under the Act certificates for this Warrant or such
shares of Series G Preferred (or other class of capital stock) to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law.
Upon receiving such written notice and reasonably satisfactory opinion or other
evidence, the Company, as promptly as practicable but no later than ten (10)
days after receipt of the written notice, shall notify such holder that such
holder may sell or otherwise dispose of this Warrant or such shares of Series G
Preferred or Common Stock (or other class of capital stock), all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 8(b) that the opinion of counsel for the
holder or other evidence is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly with details thereof after such
determination has been made. Notwithstanding the foregoing, this Warrant or such
shares of Series G Preferred or Common Stock (or other class of capital stock)
may, as to such federal laws, be offered, sold or otherwise disposed of in
accordance with Rule 144 or 144A under the Act, provided that the Company shall
have been furnished with such information as the Company may reasonably request
to provide a reasonable assurance that the provisions of Rule 144 or 144A have
been satisfied. Each certificate representing this Warrant or the shares of
Series G Preferred thus transferred (except a transfer pursuant to Rule 144 or
144A) shall bear a legend as to the applicable restrictions on transferability
in order to ensure compliance with such laws, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions. To the extent that (i)
registration rights are available under that certain Investors' Rights Agreement
described at Section 12.3 hereof, and (ii) the holder hereof has complied with
the transfer restrictions set forth in this Warrant and such Investors' Rights
Agreement, the transferee of this Warrant (or the shares of Series G Preferred
or Common Stock issued thereunder) thus transferred shall also enjoy the benefit
of such registration rights.
(c) APPLICABILITY OF RESTRICTIONS. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 8(b) shall
apply to any transfer of, or grant of a security interest in this Warrant (or
the Series G Preferred or Common Stock obtainable upon exercise of this Warrant)
or any part thereof (i) to a partner of the holder if the holder is a
partnership or to a member of the holder if the holder is a limited liability
company, (ii) to a partnership of which the holder is a partner or to a limited
liability company of which the holder is a member, (iii) to any affiliate of the
holder if the holder is a corporation; or (iv) to the ancestors, children
(including adopted children) or other descendants or spouse of an individual
holder or to trusts for the benefit of such person or persons.
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series G Preferred or any other securities of the Company which may at any time
be issuable on the exercise hereof for any
6
purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Warrant Shares and Contingent
Consideration, if any, issuable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. CASH CONSIDERATION AND CONTINGENT CONSIDERATION. Upon exercise of
this Warrant, in whole or in part from time to time, including a conversion of
this Warrant under Section 12.2 hereof, the holder of this Warrant shall be
entitled to receive, in addition to the applicable portion of the Warrant
Shares,
(a) a portion, based on the portion of the Warrant which is
exercised or converted, of the Cash Consideration set forth on Schedule 1.5 of
the Merger Agreement as attributable to the portion of such Warrant that was
exercised;
(b) to the extent that the applicable Contingent Consideration has
not been released in accordance with Section 1.5 of the Merger Agreement, a
right to the portion, based on the portion of the Warrant which is exercised or
converted, of the Contingent Consideration set forth on Schedule 1.5 of the
Merger Agreement as attributable to the Warrant (or portion thereof) that was
exercised. As a Warrant is exercised or converted prior to release of Contingent
Shares in accordance with the terms of the Merger Agreement, the portion of the
Contingent Shares attributable to the holder of such exercised or converted
Warrant (or portion thereof) (as set forth on Schedule 1.5 to the Merger
Agreement) will be issued in the name of the Escrow Agent to be held in the
Escrow Fund in accordance with the terms of the Merger Agreement, that certain
Escrow Agreement by and among the Company, U.S. Bank Trust National Association
(the "Escrow Agent") and Xxxxxxxxx Xxxxxx, Ph.D. (the "Stockholders' Agent")
(the "Escrow Agreement") and this Agreement. If and when such Contingent
Consideration is released it will be distributed in accordance with the Merger
Agreement and the Escrow Agreement to the person who exercised such Warrant (or
portion thereof); and
(c) to the extent that the applicable Contingent Consideration has
been released in accordance with Section 1.5 of the Merger Agreement prior to
such exercise or conversion, that portion of the Contingent Consideration
attributable to the portion of such Warrant that was exercised or converted.
10. INDEMNITY SHARES.
(a) Pursuant to the Merger Agreement and the Escrow Agreement, an
escrow fund ("Escrow Fund") has been established to provide in part a fund
against which the Company may seek indemnification under the Merger Agreement
and in part a mechanism through which the Company can release and distribute
Contingent Consideration.
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(b) In the event that this Warrant is exercised prior to the
Release Date (as such term is defined in Section 9.3(b) of the Merger
Agreement), ten percent (10%) of the Series G shares otherwise deliverable
hereunder by such exercise (including shares of Contingent Consideration, if
any) shall be issued in the name of the Escrow Agent and deposited into the
Indemnity Portion of the Escrow Fund (as such term is defined in Section 9.1(a)
of the Merger Agreement) to be available to compensate the Company pursuant to
the indemnification obligations of Holder and shall be deemed to have become
Indemnity Shares (as such term is defined in Section 9.1(b) of the Merger
Agreement).
(c) In the event that (i) this Warrant is exercised prior to the
Release Date, and (ii) a Conversion Right (as such term is defined at Section
12.2 hereof), is utilized to exercise all or a portion of the Warrant, that
number of Warrant Shares equal to ten percent (10%) of the Warrant Shares
underlying the Converted Units (as such term is defined at Section 12.2 hereof)
shall, in addition to (A) ten percent (10%) of any Contingent Consideration
deliverable thereby and (B) the shares identified in Section 11(b) hereof, be
deposited into the Indemnity Portion of the Escrow Fund to compensate the
Company pursuant to the indemnification obligations of Holder and shall be
deemed to have become Indemnity Shares.
11. ADDITIONAL RIGHTS.
11.1 ACQUISITION TRANSACTIONS. The Company shall provide the
holder of this Warrant with at least ten (10) days' written notice prior to
closing thereof of the terms and conditions of any of the following transactions
(to the extent the Company has notice thereof): (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, (ii) the Company's merger into or consolidation with any
other corporation (other than a wholly-owned subsidiary of the Company), (iii)
any transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of, (iv) the liquidation, dissolution or winding up of the Company,
(v) the issuance by the Company of dividends other than cash, (vi) the
redemption by the Company of over twenty percent (20%) of the Common Stock, or
(vii) the granting by the Company of rights to purchase its capital stock to all
holders of its then outstanding capital stock.
11.2 RIGHT TO CONVERT WARRANT INTO STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the
rights of the holder under the other terms of this Warrant (including the rights
to Cash Consideration and Contingent Consideration in accordance with the terms
of Section 10 upon an exercise or conversion of the Warrant) , the holder shall
have the right, in lieu of payment of the applicable exercise price, to convert
this Warrant or any portion thereof (the "Conversion Right") into Warrant Shares
and the applicable portion of the remaining rights in the Converted Units
(including rights to Cash Consideration and Contingent Consideration related to
the Converted Units), as provided in this Section 12.2 at any time or from time
to time during the term of this Warrant. Upon exercise of the Conversion Right
with respect to a particular number of Warrant Shares subject to this Warrant
(the "Converted Units"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
that
8
number of Warrant Shares as is determined according to the following formula (in
addition to the holder's rights under Section 10):
X = B - A
-----
Y
Where: X = the number of Warrant Shares that shall be
issued to holder
Y = the fair market value of one Warrant Share
A = the aggregate Warrant Price of the specified
number of Warrant Shares in the Converted Units
immediately prior to the exercise of the
Conversion Right (I. E., the number of Converted
Units MULTIPLIED BY the Warrant Price)
B = the aggregate fair market value of the specified
number of Warrant Shares underlying the
Converted Units (I. E., the number of Converted
Units MULTIPLIED BY the fair market value of one
Warrant Share)
No fractional Warrant Shares shall be issuable upon exercise of the
Conversion Right, and, if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number, the Company
shall pay to the holder an amount in cash equal to the fair market value of the
resulting fractional share on the Conversion Date (as hereinafter defined). For
purposes of Section 12 of this Warrant, shares issued pursuant to the Conversion
Right shall be treated as if they were issued upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of Exhibit
A-l or Exhibit A-2 hereto) specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of Units (corresponding
to the number of Warrant Shares) subject to this Warrant which are being
surrendered (referred to in Section 12.2(a) hereof as the Converted Units) in
exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"), and, at the election of the holder hereof, may be made contingent upon
the closing of the sale of the Company's Common Stock to the public in a public
offering pursuant to a Registration Statement under the Act (a "Public
Offering"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the Units
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within twenty (20) days following the
Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 11.2, "fair market value" of a Warrant Share (i.e. a share of Series G
Preferred or share of Common Stock if the Series G Preferred has been
automatically converted into Common Stock) as of a particular date (the
"Determination Date") shall mean:
9
(i) If the Conversion Right is exercised in connection
with and contingent upon a Public Offering, and if the Company's Registration
Statement relating to such Public Offering ("Registration Statement") has been
declared effective by the Securities and Exchange Commission, then the initial
"Price to Public" for a share of Common Stock specified in the final prospectus
with respect to such offering.
(ii) If the Conversion Right is not exercised in
connection with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair
market value of the Common Stock shall be deemed to be the average of the
closing prices of the Common Stock on such exchange over the 30-day period
ending five business days prior to the Determination Date, and the fair market
value of the Series G Preferred shall be deemed to be such fair market value of
the Common Stock multiplied by the number of shares of Common Stock into which
each share of Series G Preferred is then convertible;
(B) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall be
deemed to be the average of the closing bid prices of the Common Stock over the
30-day period ending five business days prior to the Determination Date, and the
fair market value of the Series G Preferred shall be deemed to be such fair
market value of the Common Stock multiplied by the number of shares of Common
Stock into which each share of Series G Preferred is then convertible; and
(C) If there is no public market for the Common
Stock, then the fair market value shall be determined by mutual agreement of the
holder of this Warrant and the Company. Provided, that in the event that the
Company and Holder, in good faith, cannot agree on such value within a period of
twenty (20) days following such Holder's conversion (the "Appointment Period"),
such fair market value shall be determined by an independent investment banking
firm that has been selected by two other independent investment banking firms
each of the Holder and the Company. In the event that both the Holder and the
Company must appoint an independent investment banking firm, such appointments
shall be made with twenty (20) days following the expiration of the Appointment
Period and the two firms so selected will select the third independent
investment banking firm within ten (10) days of the appointment of the second of
such firms. The fair market value of the Series G Preferred shall be deemed to
be such fair market value of the Common Stock multiplied by the number of shares
of Common Stock into which each share of Series G Preferred is then convertible.
If as a result of such valuation, the fair market value determined by the
independent investment banking firm is greater than one hundred ten percent
(110%) of the value determined by the Company, then the Company shall reimburse
Holder for such reasonable fees and expenses related to the independent
investment banking firms. If as a result of such valuation, the fair market
value determined by the independent investment banking firm is equal to or less
than one hundred ten percent (110%) of the value determined by the Company, then
the Holder shall reimburse the Company for such reasonable fees and expenses
related to the independent investment banking firms.
10
11.3 REGISTRATION RIGHTS. This Warrant is being issued in
connection with that certain investors' rights agreement, by and among the
Company and the individuals and entities listed on Exhibit A attached thereto,
dated as of the date hereof (the "Investors' Rights Agreement"), pursuant to
which certain registration rights have been granted in relation to the shares of
Series G Stock. and the shares of Common Stock issuable upon conversion thereof.
12. INCORPORATION OF MERGER AGREEMENT. The terms of the Merger
Agreement relating to the Series G Warrants and the Contingent Shares are
incorporated herein by reference as appropriate.
13. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized, executed and delivered
by the Company and is a valid and binding obligation of the Company enforceable
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Warrant Shares and Contingent Consideration, if any, have
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms hereof will be validly issued, fully paid and
nonassessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the Series G Preferred and the holders thereof are as set
forth in the Company's Amended and Restated Articles of Incorporation (the
"Charter") and the Investors' Rights Agreement, and on the Date of Grant, each
share of the Series G Preferred represented by this Warrant is convertible into
one share of Common Stock;
(d) The shares of Common Stock issuable upon conversion of the
Warrant Shares have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms of the Charter will be
validly issued, fully paid and nonassessable;
(e) The execution and delivery of this Warrant do not, and the
issuance of the Units upon exercise of this Warrant in accordance with the terms
hereof will not conflict with the Charter or by-laws, do not and will not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not conflict with or contravene
any provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the
registration or filing with or the taking of any action in respect of or by, any
federal, state or local government authority or agency or other person, except
for the filing of notices pursuant to federal and state securities laws, which
filings will be effected by the time required thereby; and
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a
11
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.
14. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
15. NOTICES. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered by hand, or shall be sent by certified, registered or
overnight mail, postage prepaid, to each such holder at its address as shown on
the books of the Company or to the Company at the address indicated therefor on
the signature page of this Warrant.
16. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Series G Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.
17. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
18. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
warrant.
19. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
internal laws of the State of California without regards to principles of choice
of law which would indicate otherwise.
20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
21. REMEDIES. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the
12
Company), or the Company (in the case of a breach by a holder), may proceed to
protect and enforce their or its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Warrant.
22. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Charter or through any other means, 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
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
23. SEVERABILITY. The invalidity or unenforceability of any provision
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
24. RECOVERY OF LITIGATION COSTS. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
25. ENTIRE AGREEMENT; MODIFICATION. This Warrant, together with the
Merger Agreement, the Escrow Agreement and that certain Investors' Rights
Agreement, by and among the Company and the individuals and entities listed on
Exhibit A attached thereto, dated as of the date hereof, constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.
MITOKOR
By:
----------------------------------
Title:
----------------------------------
Address: 00000 Xxxxxxxx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
13
EXHIBIT A-1
NOTICE OF EXERCISE
To: MITOKOR (the "Company")
1. The undersigned hereby:
(TM) elects to purchase _________ shares of [Series G
Preferred Stock][Common Stock] of the Company
pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of
such shares in full, or
(TM) elects to exercise its net issuance rights pursuant
to Section 12.2 of the attached Warrant with respect
to _______ shares of [Series G Preferred Stock]
[Common Stock].
2. Please issue a certificate or certificates representing Warrant
Shares and Contingent Consideration, if any, in the name of the undersigned or
in such other name or names as are specified below:
------------------------------------------
(Name)
------------------------------------------
------------------------------------------
(Address)
3. Please deliver to the undersigned a check drawn on the account of
the Company in an amount equal to the sum of (a) such Cash Consideration to
which the undersigned is entitled by the exercise of the Warrant hereby and (b)
any Cash being issued in lieu of any fractional interests.
4. Please issue a new warrant agreement for the balance of any Units
for which the Warrant is not exercised hereby in the name of the undersigned
holder of the Warrant.
5. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
------------------------------
(Date)
14
EXHIBIT A-2
NOTICE OF EXERCISE
To: MITOKOR (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S_, filed on ________, 20__, the undersigned hereby:
(TM) elects to purchase _________ shares of Common Stock
of the Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
(TM) elects to exercise its net issuance rights pursuant
to Section 12.2 of the attached Warrant with respect
to _______ shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such Warrant Shares and Contingent Consideration,
if any.
3. Please deliver to the undersigned a check drawn on the account of
the Company in an amount equal to the sum of (a) such Cash Consideration to
which the undersigned is entitled by the exercise of the Warrant hereby and (b)
any Cash being issued in lieu of any fractional interests.
4. Please issue a new warrant agreement for the balance of any Units
for which the Warrant is not exercised hereby in the name of the undersigned
holder of the Warrant.
5. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior
to the Closing.
---------------------------------------------
(Signature)
(Date)
