Exhibit 10.8
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 (WG- ___)
THIS CERTIFIES THAT, in exchange for certain options 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"),
________________ (the "Holder") is entitled to subscribe for and purchase up to
(i) ___________ (__________) 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 $______ (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 ________
___, 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. TRANSFERABILITY. Except as otherwise provided in this Section 2,
this Warrant shall not be transferable, and no interest herein may be sold,
transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. All of the Holder's rights in this Warrant may be
exercised during the life of the Holder only by the Holder or the Holder's legal
representative. Notwithstanding the foregoing, this Warrant may be transferred
by the Holder to an immediate family member; provided, however, that any such
transfer is without payment of any consideration whatsoever. For this purpose,
"immediate family member" means an individual's parents, siblings, spouse and
issue, spouses of such issue, or any trust for the benefit of, or the legal
representative of, the Holder or any of the preceding persons or any combination
thereof, or any partnership substantially all of the partners of which are one
or more of such persons or the Holder.
3. 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 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.
4. 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
2
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.
5. 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:
(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.
3
(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 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.
6. 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.
7. 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
4
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.
8. COMPLIANCE WITH ACT; DISPOSITION OF SHARES.
(a) COMPLIANCE WITH ACT. The holder of this Warrant, by acceptance
hereof, agrees that 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 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 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.
5
(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 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.
6
(c) APPLICABILITY OF RESTRICTIONS. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 8(b) or 2 above
shall apply to any transfer of, or grant of a security interest in 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.
9. 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 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.
10. 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 such 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
7
(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.
11. 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.
(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 ten percent (10%) of any Contingent Consideration
deliverable thereby, 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.
12. ADDITIONAL RIGHTS.
12.1 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.
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12.2 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 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
9
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:
(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 which has been selected by 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
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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.
12.3 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.
13. 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.
14. 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,
11
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 material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
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21. 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.
22. 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 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.
23. 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.
24. 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.
25. 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.
26. 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.
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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
14
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)
15
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)
