ANNEX VI
TO SECURITIES PURCHASE AGREEMENT
FORM OF WARRANT
THESE SECURITIES INCLUDING ANY UNDERLYING SECURITIES (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ADVANCED VIRAL RESEARCH CORP.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and
valuable consideration, the receipt of which is hereby acknowledged by ADVANCED
VIRAL RESEARCH CORP., a Delaware corporation (the "Company"), ENDEAVOUR CAPITAL
FUND S.A. or registered assigns (the "Holder") is hereby granted the right to
purchase at any time until 5:00 P.M., New York City time, on December 31, , 2002
(the "Expiration Date"), Thousand ( ) fully paid and nonassessable shares of the
Company's Common Stock, par value $.00001 per share (the "Common Stock") at an
initial exercise price per share (the "Exercise Price") of $0.19916667 per
share, subject to further adjustment as set forth herein. This Warrant is being
issued pursuant to the terms of that certain Securities Purchase Agreement,
dated as of December 28, 1999 (the "Securities Purchase Agreement"), to which
the Company and Holder (or Holder's predecessor in interest) are parties.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement.
2. Exercise of Warrants.
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2.1 General. This Warrant is exercisable in whole or
in part at any time and from time to time by means of tendering this Warrant
Certificate together with a completed copy of the annexed Notice of Exercise
Form duly executed (which Notice of Exercise Form may be submitted either by
delivery to the Company or by facsimile transmission as provided in Section 8
hereof). Upon surrender of this Warrant Certificate with, together with
appropriate payment of the Exercise Price for the shares of Common Stock
purchased, the Holder shall be entitled to receive a certificate or certificates
for the shares of Common Stock so purchased. If the Notice of Exercise Form
elects a "cash" exercise, at the Exercise Price per share of Common Stock for
the shares then being exercised shall be payable in cash or by certified or
official bank check. If the Notice of Exercise Form elects a "cashless"
exercise, the Holder shall thereby be entitled to receive a number of shares of
Common Stock equal to (x) the excess of the Current Market Value (as defined
below)
over the total cash exercise price of the portion of the Warrant then being
exercised, divided by (y) the Market Price of the Common Stock as of the
Conversion Date. For the purposes of this Section 2, "Current Market Value"
shall be an amount equal to the Market Price of the Common Stock as of the
Conversion Date, multiplied by the number of shares of Common Stock specified in
such Notice of Exercise Form.
2.2 Limitation on Exercise. Notwithstanding the
provisions of this Warrant, the Securities Purchase Agreement or of the other
Transaction Agreements, in no event (except (i) after the Maturity Date of the
Debentures, (ii) as specifically provided in this Warrant as an exception to
this provision, or (iii) while there is outstanding a tender offer for any or
all of the shares of the Company's Common Stock) shall the Holder be entitled to
exercise this Warrant, or shall the Company have the obligation to issue shares
upon such exercise of all or any portion of this Warrant, to the extent that,
after such exercise the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debentures or unexercised portion of the Warrants),
and (2) the number of shares of Common Stock issuable upon the exercise of the
Warrants with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 9.99% of the outstanding shares of Common Stock (after taking into account
the shares to be issued to the Holder upon such exercise). For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of
such sentence. The Holder, by its acceptance of this Warrant, further agrees
that if the Holder transfers or assigns any of the Warrants to a party who or
which would not be considered such an affiliate, such assignment shall be made
subject to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section 2.2 as if such transferee or assignee were the
original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for issuance
upon exercise of this Warrant such number of shares of its Common Stock as shall
be required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
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6. Protection Against Dilution.
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6.1 Adjustment Mechanism. If an adjustment of the
Exercise Price is required pursuant to this Section 6, the Holder shall be
entitled to purchase such number of additional shares of Common Stock as will
cause (i) the total number of shares of Common Stock Holder is entitled to
purchase pursuant to this Warrant, multiplied by (ii) the adjusted Exercise
Price per share, to equal (iii) the dollar amount of the total number of shares
of Common Stock Holder is entitled to purchase before adjustment multiplied by
the total Exercise Price before adjustment.
6.2 Capital Adjustments. In case of any stock split
or reverse stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original Exercise Price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof. A rights offering to stockholders shall be deemed a stock dividend to
the extent of the bargain purchase element of the rights.
6.3 Adjustment for Spin Off. If, for any reason,
prior to the exercise of this Warrant in full, the Company spins off or
otherwise divests itself of a part of its business or operations or disposes all
or of a part of its assets in a transaction (the "Spin Off") in which the
Company does not receive compensation for such business, operations or assets,
but causes securities of another entity (the "Spin Off Securities") to be issued
to security holders of the Company, then
(a) the Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on
the record date (the "Record Date") for determining the amount and
number of Spin Off Securities to be issued to security holders of the
Company (the "Outstanding Warrants") been exercised as of the close of
business on the trading day immediately before the Record Date (the
"Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
exercise of all or any of the Outstanding Warrants, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares
multiplied by (y) a fraction, of which (I) the numerator is the amount
of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants; and
(b) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by multiplying
the Exercise Price by a fraction (if, but only if, such fraction is
less than 1.0), the numerator of which is the Average Market Price of
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the Common Stock (as defined below) for the five (5) trading days
immediately following the fifth trading day after the Record Date, and
the denominator of which is the Average Market Price of the Common
Stock on the five (5) trading days immediately preceding the
Record Date; and such adjusted Exercise Price shall be deemed to be the
Exercise Price with respect to the Outstanding Warrants after the
Record Date. As used herein, the term "Average Market Price of the
Common Stock" means the average closing bid price of a share of Common
Stock, as reported by Bloomberg, LP or, if not so reported, as reported
on the over-the-counter market for the relevant period.
7. Transfer to Comply with the Securities Act; Registration
Rights.
7.1 Transfer. This Warrant has not been registered
under the Securities Act of 1933, as amended, (the "Act") and has been issued to
the Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to the
Registration Rights Agreement. The Company's obligations under the Registration
Rights Agreement and the other terms and conditions thereof with respect to the
Warrant Shares, including, but not necessarily limited to, the Company's
commitment to file a registration statement including the Warrant Shares, to
have the registration of the Warrant Shares completed and effective, and to
maintain such registration, are incorporated herein by reference.
(b) In addition to the registration rights referred
to in the preceding provisions of Section 7.2(a), effective after the expiration
of the effectiveness of the Registration Statement as contemplated by the
Registration Rights Agreement, the Holder shall have piggy-back registration
rights with respect to the Warrant Shares then held by the Holder or then
subject to issuance upon exercise of this Warrant (collectively, the "Remaining
Warrant Shares"), subject to the conditions set forth below. If, at any time
after the Registration Statement has ceased to be effective, the Company
participates (whether voluntarily or by reason of an obligation to a third
party) in the registration of any shares of the Company's stock (other than a
registration on Form S-8), the Company shall give written notice thereof to the
Holder and the Holder shall have the right, exercisable within ten (10) business
days after receipt of such notice, to demand inclusion of all or a portion of
the Holder's Remaining Warrant Shares in such registration statement. If the
Holder exercises such election, the Remaining Warrant Shares so designated shall
be included in the registration statement at no cost or expense to the Holder
(other than any costs or commissions which would be borne by the Holder under
the terms of the Registration Rights Agreement). The Holder's rights under this
Section 7 shall expire at such time as the Holder can sell all of the Remaining
Warrant Shares under Rule 144 without volume or other restrictions or limit.
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8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage pre-paid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit in the United
States mails, as follows:
(i) if to the Company, to:
ADVANCED VIRAL RESEARCH CORP.
000 Xxxxxxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(ii) if to the Holder, to:
ATTN:
Telephone No.: ( ) -
Telecopier No.: ( ) -
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
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Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant
may be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant of even date herewith contain the full
understanding of the parties hereto with respect to the subject matter hereof
and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of
Wilmington or the state courts of the State of Delaware sitting in the City of
Wilmington in connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
11. Counterparts. This Warrant may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 28th day of December 28, 1999.
ADVANCED VIRAL RESEARCH CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
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