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EXHIBIT 4.5
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
NEOTHERAPEUTICS, INC.
ADJUSTABLE WARRANT
Warrant No.A-1 Dated: November 19, 1999
NeoTheraputics, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Montrose Investments Ltd., or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company the total number of shares of Common Stock, $.001 par
value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") calculated pursuant
to Section 3 of this Warrant (subject to adjustment for certain events as set
forth herein) at an exercise price equal to $.001 per share (as adjusted from
time to time as provided in Section 8, the "Exercise Price"), at the times set
forth herein through and including the 90th Business Day (as defined herein)
immediately following the Second Vesting Date (as defined in Section 3(a)) (the
"Expiration Date"), and subject to the following terms and conditions (certain
terms used herein are defined in Exhibit A attached hereto):
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
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2. Registration of Transfers and Exchanges.
(a) This Warrant may only be transferred pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from or in a transaction not subject to the registration
requirements of the Securities Act. In connection with any transfer of this
Warrant other than pursuant to an effective registration statement or to the
Company, the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such Warrant under the
Securities Act. Holder agrees to the imprinting, so long as is required by this
Section 2(a), of a legend substantially similar to that first above written on
any New Warrant (as defined below). Any such transferee shall agree in writing
to be bound by the terms of this Warrant and shall have the rights of Holder
under this Warrant.
(b) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly completed and signed, to the Transfer Agent
or to the Company at the address specified in Section 13. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(c) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in Section 13 for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) The vesting of the Warrant Shares which the Holder may acquire
pursuant to this Warrant shall occur on the dates set forth below. On each such
date, this Warrant shall vest on a cumulative basis with respect to a number of
Warrant Shares calculated pursuant to Section 3(b) below. Only the Warrant
Shares that have vested may be acquired upon exercise of this Warrant.
(i) The first vesting date (the "First Vesting Date") shall
be the 120th day following the Closing Date (as defined
herein);
(ii) The second vesting date (the "Second Vesting Date")
shall be the 180th day following the Closing Date;
Each of the First Vesting Date and the Second Vesting Date shall
be referred to herein as a "Vesting Date."
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(b) Except as otherwise set forth in this Warrant, this Warrant shall
vest and become exercisable on a Vesting Date with respect to the number of
Warrant Shares calculated in accordance with the following formula:
(Applicable Share Number) x (Purchase Price x 1.12 - Adjustment Price)
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Adjustment Price
If the number calculated in accordance with the foregoing formula is
zero or a negative number, no Warrant Shares shall vest hereunder for such
Vesting Date and the Holder shall not be obligated to transfer any shares of
Common Stock to the Company.
(c) Notwithstanding anything herein to the contrary, if, at any time
after the Effectiveness Date (as defined herein), (i) an Adjustment Price shall
exceed 112% of the Purchase Price, no Warrant Shares shall vest on the Vesting
Date relating to such Adjustment Price (however, if such threshold shall occur
on the First Vesting Date, the calculation relative to the Second Vesting Date
shall be unaffected) and (ii) each of (A) the average of the Per Share Market
Values for thirty (30) consecutive Trading Days (as defined herein) exceeds 150%
of the Purchase Price, and (B) no less than ten (10) Trading Days during such 30
Trading Day period used in (A), the Per Share Market Value exceeded 150% of the
Purchase Price, then no Warrant Shares shall vest with respect to any subsequent
Vesting Date (accordingly if such circumstances were met prior to the First
Vesting Date, then no Warrant Shares would ever vest under this Warrant).
(d) Notwithstanding anything herein to the contrary, if on any
Vesting Date the Adjustment Price shall be less than $5.00 (such an Adjustment
Price, the "Floor Price"), then on such Vesting Date: (i) this Warrant shall
vest with respect to the Warrant Shares pursuant to Section 3(a) and (b) hereof,
provided, that the Adjustment Price pursuant to the formula set forth in Section
3(b) shall, exclusively for purposes of this Section 3(d), equal the Floor Price
(such number of Warrant Shares, the "Initial Shares") and (ii) with respect to
the Warrant Shares whose vesting would, in the absence of the operation of
Section 3(d), result in a vesting of Warrant Shares in excess of the Initial
Shares, the Company will have the option to elect by written notice (the
"Notice") delivered to the Holder no later than thirty (30) Trading Days prior
to the applicable Vesting Date to either (x) pay to the Holder, in cash (the
"Cash Payment"), within three (3) Trading Days from the Vesting Date at issue,
an amount equal to the product obtained by multiplying (A) the applicable
Adjustment Price and (B) the difference between the number of Warrant Shares
which would have, notwithstanding the operation of Section 3(d), vested on such
Vesting Date pursuant to Section 3(a) and (b) hereof and the Initial Shares
(such number of Warrant Shares, the "Subsequent Shares") or (y) allow this
Warrant to vest with respect to the Subsequent Shares. A failure by the Company
to timely deliver the Notice to the Holder pursuant to the terms of this Section
shall constitute an election by the Company to allow this Warrant to vest as to
the Subsequent Shares pursuant to the terms hereof. If the Company shall fail to
pay the Cash Payment in full to the Holder by the third (3rd) Trading Day from
the Vesting Date at issue, then, at the election of the Holder, the Company
shall either (x) pay to the Holder $5,000 per day until the Cash Payment and all
additional payments due hereunder are paid in full, or (y) allow this Warrant to
vest with respect to the Subsequent Shares.
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(e) The vesting of the Warrant Shares in accordance with this Section
3 shall not be affected by any failure by the Company to maintain the
effectiveness of the Underlying Shares Registration Statement (as defined
herein) after the Effectiveness Date.
(f) Notwithstanding the foregoing provisions of this Section 3, at
any time within ten (10) Trading Days following the occurrence of any of the
following events (each, an "Event"), the Holder shall have the option to elect
by notice ("Vesting Notice") to the Company to have this Warrant vest with
respect to those Warrant Shares that have not yet already vested:
(i) upon the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of in excess of 1/3 of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's board of directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least 2/3 of the
securities of the surviving entity or acquirer of such assets or (iv) the
execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i), (ii)
or (iii);
(ii) immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under Title 11 of the
United States Code, or an entering into of an order for relief in an involuntary
case under Title 11 of the United States Code, or adoption by the Company of a
plan of liquidation or dissolution;
(iii) five (5) Business Days prior to the proposed consummation
with respect to the Company of a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Exchange Act (or, if necessary, such earlier date as the Company
shall determine in good faith to be required in order for the Holder to be able
to participate in such transaction), it being agreed that the Holder will
receive actual notice of the 13e-3 Statement filed with the Commission (as
defined herein) on the date filed and actual notice of the date of acceleration
hereunder no later than such date, and that if such transaction is not
consummated, and this Warrant has been exercised, then the Holder (and to the
extent that this Warrant would not but for this paragraph be exercisable, the
Company) shall be entitled to declare the exercise null and void and the Holder
shall, upon return of the Warrant Shares to the Company, be entitled to receive
a refund of the Exercise Price and warrants identical to this Warrant, and such
acceleration shall become void ab initio, and the Warrants shall (as to any
remaining unexercised portion thereof) remain in full force and effect in
accordance with the terms hereof;
(iv) The Common Stock fails to be listed or quoted for trading on
the NASDAQ (as defined herein) or a Subsequent Market (as defined herein) for a
period of three (3) Trading Days (which need not be consecutive Trading Days);
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(v) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted by action of the Company to sell
Registrable Securities under the Underlying Shares Registration Statement for
any reason for five (5) or more Trading Days (whether or not consecutive); or
(vi) The Company shall fail or default in the timely performance
of any material obligation under the Transaction Documents and such failure or
default shall continue uncured for a period of five (5) Business Days after the
date on which notice of such failure or default is first given to the Company
(it being understood that no prior notice need be provided in the case of
defaults which cannot reasonably be cured within a 5-day period).
In the event the Holder delivers a Vesting Notice, this Warrant shall
vest with respect to the number of Warrant Shares calculated in accordance with
the formula set forth on Section 3(b); provided, that for purposes of such
calculation, (i) the "Applicable Share Number" shall be deemed to mean 100% of
the number of shares of Common Stock purchased by the original Holder pursuant
to the Purchase Agreement and (ii) the "Adjustment Price" shall be deemed to
mean the average of the ten (10) lowest Per Share Market Values (which need not
occur on consecutive Trading Days) during the thirty (30) Trading Days
immediately preceding the date on which the Event occurred.
(h) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 8:00 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 8:00 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
(i) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 5 and 9, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than three (3) Trading Days after the Date
of Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends, except in the event that either an
Underlying Shares Registration Statement is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Any person so designated by the Holder to receive Warrant
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Shares shall be deemed to have become holder of record of such Warrant Shares as
of the Date of Exercise of this Warrant. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for
each day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the third (3rd) Trading Day after
the Date of Exercise, and if after such third (3rd) Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company
shall pay (1) in cash to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver pursuant to
Section 4(b) to deliver to the Holder in connection with the exercise at issue,
by (B) the Per Share Market Value at the time of the obligation giving rise to
such purchase obligation and (2) deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations under Section 4(b). For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted exercise of shares of Common Stock with a
market price on the date of exercise totaled $10,000, under clause (A) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice and documentation
indicating the amounts payable to the Holder in respect of the Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other
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Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares. If the Company
breaches its obligations under this Warrant, then, in addition to any other
liabilities the Company may have hereunder and under applicable law, the Company
shall pay or reimburse the Holder on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment. Notwithstanding anything to the contrary set forth herein, no
adjustment shall be made hereunder to the Exercise Price due to (i) the adoption
by the Company of a shareholders rights plan, (ii) the creation of "rights"
under such a plan that are evidenced by the shares of Common Stock to which they
are attached, but adjustments would be made if such rights are ever separated
from such shares of Common Stock or otherwise become evidenced by a separate
certificate or if, for any other reason, such rights would entitle the holders
thereof or of the
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Common Stock to which they attach to receive shares of Common Stock, (iii) the
granting of options or warrants to employees, officers, directors, consultants
and other service providers, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by
the Company, (iv) shares of Common Stock issuable upon exercise of currently
outstanding options and warrants and upon conversion of any currently
outstanding convertible securities of the Company, in each case to the extent
disclosed in Schedule 2.1(c) to the Securities Purchase Agreement but not with
respect to any amendment or modification thereof, (v) shares of Common Stock
issuable in connection with a Strategic Transaction (as defined in Section 3.9
of the Securities Purchase Agreement), (vi) an underwritten public offering of
Common Stock resulting in net proceeds to the Company in excess of $10,000,000,
(vii) warrants issuable to Brighton Capital, Ltd. in connection with the
Securities Purchase Agreement and the issuance of shares upon exercise thereof,
(viii) warrants to be issued by the Company to Kingsbridge Capital Limited to
purchase 25,000 shares of Common Stock and the issuance of shares upon exercise
thereof, (ix) the granting of warrants to purchase up to 10,000 shares of Common
Stock in connection with equipment leasing or other debt financing transactions,
and (x) the issuance of shares of Common Stock issuable pursuant to the Private
Equity Line of Credit Agreement dated March 27, 1998 between the Company and
Kingsbridge Capital Limited.
(i) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate) or
otherwise make a distribution or distributions on shares of its Common Stock or
on any other class of capital stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock into a larger number of shares, or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
(ii) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately prior
to such reclassification or share exchange. The terms of any such
reclassification or share exchange shall include such terms so as to continue to
give to the Holder the right to receive the securities or property set forth in
this Section 8(b) upon any exercise following any such reclassification or share
exchange.
(iii) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets
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or rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 8(a), (b) and (d)), then in each such case the Exercise
Price shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Exercise Price determined as of the record date mentioned above,
and of which the numerator shall be such Exercise Price on such record date less
the then fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Company's independent certified public
accountants that regularly examines the financial statements of the Company (an
"Appraiser").
(iv) If at any time the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), shall
issue shares of Common Stock or rights, warrants, options or other securities or
debt that is convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents"), entitling any person or entity to acquire shares
of Common Stock at a price per share less than both 15% of the Purchase Price
and the market price of the Common Stock at the time of issuance (if the holder
of the Common Stock or Common Stock Equivalent so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance at a price less than
both 15% of the Purchase Price and the market price, such issuance shall be
deemed to have occurred for less than both 15% of the Purchase Price and the
market price), then, forthwith upon such issue or sale, the Exercise Price shall
be reduced to the price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance, and (ii) the number
of shares of Common Stock which the aggregate consideration received (or to be
received, assuming exercise or conversion in full of such Common Stock
Equivalents) for the issuance of such additional shares of Common Stock would
purchase at the Exercise Price, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. For purposes hereof, all shares of Common Stock that
are issuable upon conversion, exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Exercise
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Exercise Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Exercise Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Exercise Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised.
(v) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a book value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are
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permitted to tender or exchange their shares for other securities, stock, cash
or property of the Company or another Person; then the Holder shall have the
right thereafter to (A) exercise this Warrant for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and the Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the Common Stock for which this Warrant
could have been exercised immediately prior to such merger, consolidation or
sales would have been entitled, (B) in the case of a merger or consolidation,
(x) require the surviving entity to issue to the Holder a warrant entitling the
Holder to acquire shares of such entity's common stock, which warrant shall have
terms identical (including with respect to exercise) to the terms of this
Warrant and shall be entitled to all of the rights and privileges set forth
herein and the agreements pursuant to which this Warrant was issued (including,
without limitation, as such rights relate to the acquisition, transferability,
registration and listing of such shares of stock other securities issuable upon
exercise thereof), or (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and the Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such tender or exchange
would have been entitled as would have been issued. In the case of clause (B),
the exercise price applicable for the newly issued warrant shall be based upon
the amount of securities, cash and property that each shares of Common Stock
would receive in such transaction and the Exercise Price immediately prior to
the effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
(vi) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(vii) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
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(viii) Whenever the Exercise Price is adjusted pursuant to Section
8(c) above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser and
such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(ix) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock;(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in
one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be
issued to the Holder.
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Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
A = the average of the closing sale prices
of the Common Stock on the NASDAQ for the
five (5) trading days immediately prior to
(but not including) the Date of Exercise as
reported by Bloomberg Information Systems,
Inc. (or any successor to its function of
reporting stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934, as amended (the "Exchange Act") and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares of Common Stock issuable upon such exercise and
held by such Holder after application of this Section. Since the Holder will not
be obligated to report to the Company the number of shares of Common Stock it
may hold at the time of an exercise hereunder, unless the exercise at issue
would result in the issuance of shares of Common Stock in excess of 9.999% of
the then outstanding shares of Common Stock without regard to any other shares
of Common Stock which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine whether
the restriction contained in this Section will limit any particular exercise
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Form of Election to Purchase for a number of
Warrant Shares that would result in the issuance in excess of the permitted
amount hereunder, the Company shall notify the Holder of this fact and shall
honor the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and disregard the balance of such Form of Election to Purchase, as if
never delivered The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than 61 days' prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
(b) If the Company Stock is then listed for trading on the NASDAQ or
Nasdaq SmallCap Market and the Company has not obtained the Shareholder Approval
(as defined below), then the Company may not issue in excess of [ ] Warrant
Shares upon exercise of this Warrant, which number of shares shall be subject to
adjustment pursuant to the anti-dilution provisions hereof (number of shares,
the "Issuable Maximum"). The Issuable Maximum equals 19.999% of the number of
shares of Common Stock outstanding multiplied by the quotient obtained by
dividing (x)
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the number of shares of Common Stock issued and sold by the Company on the date
hereof by (y) the number of shares of Common Stock issued and sold to the
original Holder on the date hereof. If on any Date of Exercise (A) the Company
Stock is listed for trading on the NASDAQ or Nasdaq SmallCap Market, (B) the
Exercise Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon exercise in full of this Warrant,
together with any shares of Common Stock previously issued upon exercise of this
Warrant, would equal or exceed the Issuable Maximum, and (C) the Company shall
not have previously obtained the vote of shareholders, if any, as may be
required by the applicable rules and regulations of the Nasdaq Stock Market to
approve the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "Shareholder Approval"), then the Company
shall issue to the Holder a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the shares whose issuance would result in
an issuance of shares of Common Stock in excess of the Issuable Maximum, (the
"Excess Warrant Shares"), the Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as possible, but in any event no later than
60 days after such request (such 60th day, the "Target Date") or (2) pay to the
Holder, within one (1) Trading Day from the request therefor, an amount in cash
equal to the product of (x) the Excess Warrant Shares multiplied by (y) the
closing sales price of the Common Stock on (a) the Target Date or (b) the Date
of Exercise giving rise to the obligation to seek Shareholder Approval,
whichever is greater (the "Cash Payment"). In the event the Holder has elected
to require the Company to seek the Shareholder Approval pursuant to clause (1)
of the immediately preceding sentence and the Company does not obtain the
Shareholder Approval on or prior to the Target Date, then, on the Target Date,
the Company shall pay the Cash Payment to the Holder. If the Company fails to
pay the Cash Payment in full pursuant to this Section within seven (7) days
after the date payable, the Company will pay interest on such amount at a rate
of 18% per annum, or such lesser maximum amount that is permitted to be paid by
applicable law, to the Holder, accruing daily from the date payable until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued upon exercise of
the Warrant and then held by the Holder or an Affiliate thereof may not cast
votes or be deemed outstanding for purposes of any vote to obtain the
Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 8:00PM. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 8:00 PM. (New York City time) on any date and earlier than
11:59 PM (New York City time) on such date, (iii) the Business Day
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following the date of mailing, if sent by nationally recognized overnight
courier service with next day delivery specified thereon, or (iv) if sent other
than by the methods set forth in (i)-(iii) of this section, upon actual receipt
by the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company: 000 Xxxxxxxxxx Xxxxx, Xxxxxx, XX
00000; facsimile number (000) 000-0000, attention Chief Financial Officer, or
(ii) if to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 13.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a new warrant
agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
NEOTHERAPEUTICS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-16-
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FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To NeoTherapeutics, Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.001 par value per share, of
NeoTherapeutics, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Dated: , Name of Holder:
---------------------- ---- (Print)
----------------------------------
(By:)
------------------------------------
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
18
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of NeoTherapeutics, Inc.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of NeoTherapeutics, Inc. with full power of
substitution in the premises.
Dated:
---------------, ----
---------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
--------------------------
19
Exhibit A
(i) "Adjustment Price" means for each Vesting Date, the average of
the ten (10) lowest Per Share Market Values (which need not occur on consecutive
Trading Days) during the thirty (30) consecutive Trading Days immediately prior
to a Vesting Date.
(ii) "Applicable Share Number" means (i) with respect to the First
Vesting Date, 50% of the number of shares of Common Stock purchased by the
Holder pursuant to the Purchase Agreement, and (ii) with respect to the Second
Vesting Date, 100% of the number of shares of Common Stock purchased by the
Holder pursuant to the Purchase Agreement. For example, as of the 180th day
following the Closing Date, a total of 100% of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement shall be
subject to vesting hereunder.
(iii) "Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York and the State of California generally are
authorized or required by law or other governmental action to close.
(iv) "Closing Date" means November 19, 1999.
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effectiveness Date" the date on which the initial Underlying
Shares Registration Statement is first declared effective by the Commission.
(vii) "NASDAQ" shall mean the Nasdaq National Market.
(viii) "Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the NASDAQ or on
any Subsequent Market, or if there is no such price on such date, then the
closing bid price on the NASDAQ or on such Subsequent Market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted on
the NASDAQ or a Subsequent Market, the closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the national Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Holders
of a majority of the applicable Warrant Shares.
(ix) "Purchase Agreement" means the Securities Purchase Agreement,
dated the date hereof to which the Company and the original Holder are parties
and pursuant to which this Warrant was issued.
(x) "Purchase Price" means $11.826.
(xi) "Subsequent Market" shall mean any of the New York Stock
Exchange, Inc., American Stock Exchange, Inc. or Nasdaq SmallCap Market.
(xii) "Trading Day" means a day on which the Common Stock is traded
on NASDAQ or any Subsequent Market, as the case may be, or (b) if the Common
Stock is not listed on the NASDAQ or on a Subsequent Market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (i) if the Common Stock is not quoted on the OTC Bulletin
Board a day on which the Common Stock is quoted in the over-the-counter
20
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting price); provided,
however, that in the event that the Common Stock is not listed or quoted, as set
forth in (a), (b) or (c) hereof, the Trading Day shall mean a Business Day.
(xiii) "Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
(xiv) "Underlying Shares Registration Statement" shall have the
meaning ascribed to it in the Purchase Agreement.
