Contract
Exhibit 10.5
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR ECHO THERAPEUTICS, INC. SHALL HAVE
RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
Expires February 12, 2013
| No.: W- | Number of Shares: | |
| Original Issuance Date: February 11, 2008 |
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the undersigned, Echo
Therapeutics, Inc., a Minnesota corporation (together with its successors and assigns, the
“Issuer”), hereby certifies that or its registered assigns is entitled
to subscribe for and purchase, during the period specified in this Warrant, up to
( ) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable common shares of the Issuer, at an exercise price per share
equal to the Warrant Price (subject to adjustment in accordance with the provisions and upon the
terms and conditions hereinafter set forth). Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in Section 9 hereof or in the
Purchase Agreement.
| 1. | Term. The right to subscribe for and purchase shares of Warrant Stock shall commence on February 11, 2008 and shall expire at 5:00 p.m., eastern time, on February 12, 2013 (such period being the “Term”). | ||
| 2. | Method of Exercise Payment; Issuance of New Warrant; Transfer and Exchange. | ||
| (a) | Time of Exercise. This Warrant may be exercised in whole or in part at any time and from time to time during the Term. |
| X | = | Y | - | (A)(Y) | ||||||||
| B |
Where
|
X = | the number of shares of Warrant Stock to be issued to the Holder. | ||
| Y = | the number of shares of Warrant Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. | |||
| A = | the Warrant Price. | |||
| B = | the Per Share Market Value of one share of Common Stock. |
(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely
for the Holder’s own account and not as a nominee for any other party, and for investment,
and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares
of Warrant Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities Act and any
applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF
(THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR ECHO THERAPEUTICS, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (g) upon the transfer of this Warrant
or the shares of Warrant Stock to be purchased upon exercise hereof shall terminate (A) when
such securities shall have been resold pursuant to an effective registration statement under
the Securities Act, (B) upon the Issuer’s receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the Issuer to the effect that
such restrictions are no longer required to ensure compliance with the Securities Act and
state securities laws or (C) upon the Issuer’s receipt of other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the Securities Act
and state securities laws are not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be entitled to receive from
the Issuer (or its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant Stock, new stock
certificates) of like tenor not bearing the applicable legend required by paragraph (ii)
above relating to the Securities Act and state securities laws.
In addition to any other rights available to the Holder, if the Issuer fails to cause its
transfer agent to transmit to the Holder a certificate or certificates representing the Warrant
Stock pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to
the Holder in connection with the exercise at issue times, (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either
reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which
such exercise was not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder
shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of
the Buy-In, together with applicable confirmations and other evidence reasonably requested by the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates
representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
(i) In case the Issuer after the Original Issuance Date shall do any of the following
(each, an “Adjustment Event”): (a) consolidate with or merge into any other Person
and the Issuer shall not be the continuing or surviving corporation of such consolidation or
merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with such
consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged
for Securities of any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect a capital
reorganization or reclassification of its Capital Stock, then, and in the case of each such
Adjustment Event, proper provision shall be made so that, upon the basis and the terms and
in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon
the exercise hereof at any time after the consummation of such Adjustment
Event, to the extent this Warrant is not exercised prior to such Adjustment Event, to
receive at the Warrant Price in effect at the time immediately prior to the consummation of
such Adjustment Event in lieu of the Common Stock issuable upon such exercise of this
Warrant prior to such Adjustment Event, the Securities, cash and property to which such
Holder would have been entitled upon the consummation of such Adjustment Event if such
Holder had exercised the rights represented by this Warrant immediately prior thereto
(including the right to elect the type of consideration, if applicable), subject to
adjustments (subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for elsewhere in this Section 4. Unless the surviving entity in any
such Adjustment Event is a public company under the Exchange Act, the common equity
securities of which are traded or quoted on a national securities exchange or the OTC
Bulletin Board (a “Qualifying Entity”), the Holder, at its option, shall be
permitted to require that the Issuer pay to the Holder an amount equal to the Black-Scholes
value of this Warrant. Notwithstanding anything to the contrary provided herein, a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Issuer shall not be an Adjustment Event, and provided further, neither
the Issuer nor the surviving entity shall deliver the instruments, opinions or other
documents in accordance with Section 4(a)(ii) upon such migratory merger.
(ii) Notwithstanding anything contained in this Warrant to the contrary and so long as
the surviving entity is a Qualifying Entity, the Issuer will not be deemed to have effected
any Adjustment Event if, prior to the consummation thereof, each Person (other than the
Issuer) which may be required to deliver any Securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument delivered to the
Holder of this Warrant and reasonably satisfactory to the Holder, (A) the obligations of the
Issuer under this Warrant (and if the Issuer shall survive the consummation of such
Adjustment Event, such assumption shall be in addition to, and shall not release the Issuer
from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to
deliver to such Holder such shares of Securities, cash or property as, in accordance with
the foregoing provisions of this subsection (a), such Holder shall be entitled to receive,
and such Person shall have similarly delivered to such Holder, an opinion of counsel for
such Person, which shall be reasonably satisfactory to the Holder, stating that this Warrant
shall thereafter continue in full force and effect and the terms hereof (including, without
limitation, all of the provisions of this subsection (a)) shall be applicable to the
Securities, cash or property which such Person may be required to deliver upon any exercise
of this Warrant or the exercise of any rights pursuant hereto.
(i) set a record date or take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other distribution of, shares
of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger number of shares of
Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,
then (1) the number of shares of Warrant Stock for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of shares of Warrant
Stock which a record holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be entitled to receive
after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to
equal (A) the Warrant Price then in effect multiplied by the number of shares of Warrant Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of
shares of Warrant Stock for which this Warrant is exercisable immediately after such adjustment.
(i) cash (other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of incorporation
of the Issuer),
(ii) any evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock Equivalents,
Additional Shares of Common Stock or Permitted Issuances), or
(iii) any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property of any
nature whatsoever (other than cash, Common Stock Equivalents, Additional Shares of Common
Stock or Permitted Issuances),
then (1) the number of shares of Warrant Stock for which this Warrant is exercisable shall be
adjusted to equal the product of the number of shares of Warrant Stock for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of
which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B)
the denominator of which shall be such Per Share Market Value minus the amount allocable to one
share of Common Stock of any such cash so distributable and of the fair value (as determined in
good faith by the Board of Directors of the Issuer and supported by an opinion from an investment
banking firm reasonably acceptable to the Holder) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription or purchase rights
so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Warrant Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of
Warrant Stock for which this Warrant is exercisable immediately after such adjustment. A
reclassification of the Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within the meaning of this
Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
(i) In the event the Issuer shall at any time following the Original Issue Date issue
any Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less than the Warrant
Price then in effect or without consideration, then the Warrant Price upon each such
issuance shall be adjusted to the price equal to the consideration per share paid for such
Additional Shares of Common Stock.
(ii) No adjustment of the Warrant Price shall be made under paragraph (i) of
Section 4(d) upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise or conversion of any Common Stock Equivalents if any such
adjustment shall previously have been made upon the issuance of such Common Stock
Equivalents, or upon the issuance of any warrant or other rights therefor pursuant to
Sections 4(e) or 4(f), or in connection with any Permitted Issuances.
such issuance or sale be adjusted to the price equal to the Common Stock Equivalent Consideration
per share paid for such Common Share Equivalents. No further adjustment of the Warrant Price then
in effect shall be made under this Section 4(f) upon the issuance of any Common Stock Equivalents
which are issued pursuant to the exercise of any warrants or other subscription or purchase rights
therefor, if any such adjustment shall previously have been made upon the issuance of such warrants
or other rights pursuant to Section 4(e). No further adjustments of the Warrant Price then in
effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such
Common Stock Equivalents if adjustment shall have previously been made pursuant to this section.
No adjustments of the Warrant Price shall be made under this Section 4(f) in connection with any
Permitted Issuances.
(h) [Reserved].
(i) Computation of Consideration. To the extent that any Additional Shares of
Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor)
shall be issued for cash consideration, the consideration received by the Issuer
therefor shall be the amount of the cash received by the Issuer therefor, or, if such
Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for
subscription, the subscription price, or, if such Additional Shares of Common Stock or
Common Stock Equivalents are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Issuer for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To the extent
that such issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as mutually determined in good
faith by the Board of Directors of the Issuer and the Majority Holders. The consideration
for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights
to subscribe for or purchase the same shall be the consideration received by the Issuer for
issuing such warrants or other rights divided by the number of shares of Common Stock
issuable upon the exercise of such warrant or right plus the additional consideration
payable to the Issuer upon exercise of such warrant or other right for one share of Common
Stock (together the “Warrant Consideration”). The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall
be the consideration received by the Issuer for issuing such Common Stock Equivalent,
divided by the number of shares of Common Stock issuable upon the conversion or other
exercise of such Common Stock Equivalent, plus the additional consideration, if any, payable
to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock
Equivalent for one share of Common Stock (together the “Common Stock Equivalent
Consideration”). In case of the issuance at any time of any Additional Shares of Common
Stock or Common Stock Equivalents in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Issuer shall be deemed to have received for such
Additional Shares of Common Stock or Common Stock Equivalents a consideration equal to the
amount of such dividend so paid or satisfied.
(ii) [Reserved].
7. [Reserved].
(a) Notwithstanding anything to the contrary set forth in this Warrant, at no time may a
Holder of this Warrant exercise this Warrant if the number of shares of Warrant Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned
by such Holder at such time, the number of shares of Common Stock which would result in such Holder
beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules thereunder) in
excess of 4.99% of all of the Common Stock outstanding at such time; provided,
however, that upon a Holder of this Warrant providing the Issuer with sixty-one (61) days
notice (pursuant to Section 13 hereof) (the “Waiver Notice”) that such Holder would like to
waive this Section 8(a) with regard to any or all shares of Common Stock issuable upon exercise of
this Warrant, this Section 8(a) will be of no force or effect with regard to all or a portion of
the Warrant referenced in the Waiver Notice; provided, further, that this Section 8(a) shall be of
no further force or effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant.
(b) Notwithstanding anything to the contrary set forth in this Warrant, at no time may a
Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned
by such Holder at such time, the number of shares of Common Stock which would result in such Holder
beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules thereunder) in excess of 9.99% of all of the Common Stock
outstanding at such time; provided, however, that upon a Holder of this Warrant providing the
Issuer with sixty-one (61) days notice (pursuant to Section 13 hereof) (the “Waiver Notice”) that
such Holder would like to waive this Section 8(b) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 8(b) will be of no force or effect with regard
to all or a portion of the Warrant referenced in the Waiver Notice; provided, further, that this
Section 8(b) shall be of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.
“Additional Shares of Common Stock” means all shares of Common Stock issued by
the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by
the Issuer after the Original Issue Date, except for Permitted Issuances.
“Board” shall mean the Board of Directors of the Issuer.
“Capital Stock” means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated) corporate stock,
including, without limitation, shares of preferred or preference stock, (ii) all partnership
interests (whether general or limited) in any Person which is a partnership, (iii) all
membership interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any other type.
“Certificate of Incorporation” means the Articles of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended,
modified, supplemented or restated in accordance with the terms hereof and thereof and
pursuant to applicable law.
“Common Stock” means the common stock, par value $.01 per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
“Common Stock Equivalent” means any Convertible Security or warrant, option or
other right to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Security.
“Common Stock Equivalent Consideration” has the meaning specified in
Section 4(i)(i) hereof.
“Convertible Securities” means evidences of Indebtedness, shares of Capital
Stock or other Securities which are or may be at any time convertible into or exchangeable
for Additional Shares of Common Stock. The term “Convertible Security” means one of the
Convertible Securities.
“Equity Conditions” shall mean, during the period in question, (i) the Issuer
shall have duly honored all exercises of this Warrant by the Holder, if any, (ii) all
liquidated damages and other amounts owing to the Holder in respect of this Warrant and the
other Transaction Documents shall have been paid; (iii) (A) there is an effective
Registration Statement pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares issuable pursuant to this Warrant (and the Issuer
believes, in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), or (B) the Holder is able to resell the shares to be issued for which
the Equity Conditions must be satisfied pursuant to Rule 144, without compliance with any of
the conditions of such rule (including volume limitations or availability of current public
information with respect to the Issuer) (and the Issuer believes, in good faith, that the
availability of Rule 144 for such sales will continue uninterrupted for the foreseeable
future), (iv) the Common Stock is trading on the Trading Market and all of the shares
issuable pursuant to this Warrant are listed for trading on a Trading Market (and the Issuer
believes, in good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized
but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is then existing no
default or event of default or event which, with the passage of time or the giving of
notice, would constitute a default or an event of default under the Transaction Documents,
and (vii) no public announcement of a pending or proposed Major Transaction or Triggering
Event has occurred (each as defined in the Notes on the date hereof).
“Governmental Authority” means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or instrumentality,
whether federal, state or local, and whether domestic or foreign.
“Holders” mean the Persons who shall from time to time own any Warrant. The
term “Holder” means one of the Holders.
“Independent Appraiser” means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of appraising the
Capital Stock or assets of corporations or other entities as going concerns, and which is
not affiliated with either the Issuer or the Holder of any Warrant.
“Majority Holders” means at any time the Holders of Warrants, substantially in
the form of this Warrant and issued on the Original Issue Date (including this Warrant),
exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the
time outstanding.
“Notes” has the meaning assigned to that term in the Purchase Agreement.
“Original Issuance Date” means February 11, 2008.
“OTC Bulletin Board” means the over-the-counter electronic bulletin board.
“Other Common” means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than Common Stock) and
which shall have the right to participate in the distribution of earnings and assets of the
Issuer without limitation as to amount.
“Permitted Issuances” means (1) issuances of shares of Common Stock or options
to employees, officers, directors or consultants of the Issuer duly approved by a majority
of the non-employee members of the Board of Directors of the Issuer or a majority of the
members of a committee of non-employee directors established for such purpose, that would
otherwise cause an adjustment to the Warrant Price hereunder, to the extent the same do not,
in the aggregate (and on an as-converted basis), exceed 10% of the issued and outstanding shares of Common Stock on the date hereof; (2) issuances of securities upon the exercise or
exchange of or conversion of any securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the Original Issuance Date, provided
that such securities have not been amended since the Original Issuance Date to increase the
number of such securities or to decrease the exercise, exchange or conversion price of any
such securities; (3) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors, but not including a transaction with
an entity whose primary business is investing in securities or a transaction, the primary
purpose of which is to raise capital; (4) the exercise of any of the Warrants; (5) the
issuance of securities pursuant to any equipment financing or commercial business
arrangement with one or more banks or similar financial or lending institutions approved by
the Board of Directors to the extent such issuances do not, in the aggregate, exceed two
percent (2%) of the issued and outstanding shares of Common Stock on the date hereof; (6)
the issuance of Interest Shares (as defined in the Notes); and (7) securities issued in any
transaction that is approved in writing by the Holders of Warrants, substantially in the
form of this Warrant and issued on the Original Issuance Date (including this Warrant),
exercisable for at least two-thirds of the shares of Warrant Stock issuable under such
Warrants (without regard to the limitations set forth in Section 8 hereof).
“Person” means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint venture,
Governmental Authority or other entity of whatever nature.
“Per Share Market Value” means on any particular date (a) the last trading
price on the principal trading market where the Common Stock is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national reputation
selected by the Issuer and reasonably acceptable to the holder hereof if Bloomberg Financial
Markets is not then reporting closing sales prices of such security) (“Bloomberg”),
or (b) if the foregoing does not apply, the last reported sales price of such security on a
national exchange or in the over-the-counter market on the electronic bulletin board for the
Common Stock as reported by Bloomberg, or, if no such price is reported for such security by
Bloomberg, the average of the bid prices of all market makers for such security as reported
in the “pink sheets” by the National Quotation Bureau, Inc., in each case for such date or,
if such date was not a Trading Day for such security, on the next preceding date which was a
Trading Day, or (c) if the Common Stock is not then publicly traded the fair market value of
a share of Common Stock on such date as determined by the Board in good faith;
provided, however, that the Majority Holders, after receipt of the
determination by the Board, shall have the right to select, jointly with the Issuer, an
Independent Appraiser, in which case, the fair market value shall be the determination by
such Independent Appraiser; and provided, further that all determinations of
the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during the period between the date as of which such
market value was required to be determined and the date it is finally determined. The
determination of fair market value shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing seller and
taking into account all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any shares of Common Stock,
no consideration shall be given to any restrictions on transfer of the Common Stock imposed
by agreement or by federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
“Purchase Agreement” means that certain Note and Warrant Purchase Agreement,
entered into concurrently with the date hereof, between Issuer and certain purchasers
identified therein, relating to the purchase and sale of certain of the Company’s
securities.
“Securities” means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any Security.
“Security” means one of the Securities.
“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
“Subsidiary” means any corporation at least fifty percent (50%) of whose
outstanding Voting Stock, and a limited liability company at least fifty percent (50%) of
whose membership interests, shall at the time be owned directly or indirectly by the
Issuer or by one or more of its Subsidiaries.
“Trading Day” means (a) a day on which the Common Stock is traded on the OTC
Bulletin Board or a national securities exchange, or (b) if the Common Stock is not traded
on the OTC Bulletin Board or a national securities exchange, a day on which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other government
action to close.
“Trading Market” means the Over the Counter Bulletin Board, the New York Stock
Exchange, the Nasdaq Capital Markets, the Nasdaq Global Markets, the Nasdaq Global Select
Market or the American Stock Exchange.
“Transaction Documents” has the meaning assigned to that term in the Purchase
Agreement.
“Voting Stock” means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary voting power for
the election of a majority of the members of the Board of Directors (or other governing
body) of such corporation, other than Capital Stock having such power only by reason of the
happening of a contingency.
“Warrants” means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants of like tenor
issued in substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant Consideration” has the meaning specified in Section 4(i)(i) hereof.
“Warrant Price” initially means U.S. $1.69, as such price may be adjusted from
time to time as shall result from the adjustments specified in this Warrant, including
Section 4 hereto.
“Warrant Share Number” means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant, after
giving effect to all prior adjustments and increases to such number made or required to be
made under the terms hereof.
“Warrant Stock” means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
| (A) | the Issuer shall make any distributions to the holders of Common Stock; or | ||
| (B) | the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or of any Common Stock Equivalents or other rights; or | ||
| (C) | there shall be any reclassification of the Capital Stock of the Issuer; or | ||
| (D) | there shall be any capital reorganization by the Issuer; or | ||
| (E) | there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer’s property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or | ||
| (F) | there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock; |
then, in each of such cases, the Issuer shall give written notice to the Holder of the date on
which (i) the books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be entitled to exchange
their certificates for Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or
winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the
action in question and not less than twenty (20) days prior to the record date or the date on which
the Issuer’s transfer books are closed in respect thereto. The Holder shall have the right to send
two (2) representatives selected by it to each meeting, who shall be permitted to attend, but not
vote at, such meeting and any adjournments thereof. This Warrant entitles the Holder to receive
copies of all financial and other information distributed or required to be distributed to the
holders of the Common Stock.
12. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
| Echo Therapeutics, Inc. | ||||
| 00 Xxxxx Xxxxxxx | ||||
| Franklin, MA 02038 | ||||
| Tel. No.: | (000) 000-0000 | |||
| Fax No.: | (000) 000-0000 | |||
| Attention: | Chief Financial Officer | |||
| with a copy to (which transmittal shall not constitute notice hereunder): | ||||
| Drinker Xxxxxx & Xxxxx LLP | ||||
| Xxx Xxxxx Xxxxxx | ||||
| 18th and Cherry Streets | ||||
| Philadelphia, PA 00000-0000 | ||||
| Telephone: | (000) 000-0000 | |||
| Facsimile: | (000) 000-0000 | |||
| Attention: | Xxxxxxx X. Xxxxxxx | |||
14. Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of issuing shares of
Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof,
exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year first above
written.
| ECHO THERAPEUTICS, INC. |
||||
| By: | ||||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Chief Executive Officer | |||
EXHIBIT A
WARRANT EXERCISE FORM
The undersigned , pursuant to the provisions of Warrant No. W- , accompanying this
Exercise Form, hereby elects to purchase shares of Common Stock of Echo Therapeutics, Inc.
covered by the within Warrant.
Dated:
|
Signature | |||||||||
| Address | ||||||||||
Number of shares of Common Stock beneficially owned or deemed beneficially owned (excluding shares
issuable upon exercise of the Warrant) by the Holder on the date of Exercise:
The undersigned represents and warrants that it is an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended.
The undersigned intends that payment of the Warrant Price shall be made as (check one):
Cash Exercise
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ by certified
or official bank check (or via wire transfer) to the Issuer in accordance with the terms of the
Warrant.
If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the
number of shares equal to the whole number portion of the product of the calculation set forth
below, which is .
| X | = | Y | - | (A)(Y) | ||||||||
| B |
Where:
The number of shares of Common Stock to be issued to the Holder (“X”).
The number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a
portion of the Warrant is being exercised, the portion of the Warrant being exercised
(“Y”).
The Warrant Price (“A”).
The Per Share Market Value of one share of Common Stock (“B”).
This Warrant No. W-
canceled (or transferred or exchanged) this day of ,
, shares of Common Stock issued therefor in the name of , Warrant No. W-
issued
for shares of Common Stock in the name of .
EXHIBIT B
WARRANT ASSIGNMENT FORM
ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
the Warrant No. W- , accompanying this Assignment Form, and all rights evidenced thereby and does
irrevocably constitute and appoint , attorney, to transfer the said Warrant on the
books of the within named corporation.
Dated:
|
Signature | |||||||||
| Address | ||||||||||
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
the right to purchase shares of Warrant Stock evidenced by the Warrant No. W- ,
accompanying this Assignment Form, together with all rights therein, and does irrevocably
constitute and appoint , attorney, to transfer that part of the said Warrant on
the books of the within named corporation.
Dated:
|
Signature | |||||||||
| Address | ||||||||||
This Warrant No. W- canceled (or transferred or exchanged) this day of
, ,
shares of Common Stock issued therefor in the name of , Warrant No. W- issued
for shares of Common Stock in the name of .