NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS 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, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT IF SO REQUIRED BY THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
----------
Initial Issue Date: September 29, 2006
Diomed Holdings, Inc.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ (the "Holder"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date of approval of the listing of the Warrant
Shares (as defined below) by the Trading Market (the "Initial Exercise Date")
and on or prior to the close of business on earlier of (i) the five year
anniversary of the date of listing of the Warrant Shares with the Principal
Trading Market and (ii) such earlier date as the warrant shall no longer be
exercisable pursuant to the terms hereof (in either case, the "Termination
Date"), but not thereafter, to subscribe for and purchase from Diomed Holdings,
Inc., a Delaware corporation (the "Company"), up to ______ shares (the "Warrant
Shares") of Common Stock, par value $0.001 per share, of the Company (the
"Common Stock"). The purchase price of one share of Common Stock (the "Exercise
Price") under this Warrant shall be $1.15, subject to adjustment hereunder.
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "Purchase Agreement"), dated July 27, 2006, by and among the
Company and the purchasers signatory thereto.
Section 2. Exercise. (a) Exercise of Warrant. Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any time
or times on or after the Initial Exercise Date and on or before the Termination
Date by delivery to the Company of a duly executed facsimile copy of the Notice
of Exercise Form annexed hereto (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder at the address
of such Holder appearing on the books of the Company); provided, that within
three Trading Days of the date said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company and the
Company shall have received (i) payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank or (ii) if the Holder is effectuating a cashless exercise pursuant
to Section 2(c), a written notice of an election to effect a cashless exercise
for the Warrant Shares specified in the Notice of Exercise Form duly executed by
the Holder.
(b) Exercise Price. The Exercise Price of each share of Common
Stock under this Warrant shall be $1.15, subject to adjustment hereunder.
(c) Cashless Exercise. This Warrant may also be exercised at
by means of a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the
date of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by
means of a cash exercise rather than a cashless exercise.
Where:
(")VWAP" means, for any security as of any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average price of
the Common Stock for such date on the Trading Market on which the Common Stock
is then listed or quoted as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date on the OTC Bulletin Board; (c)
if the Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets" published
by the National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the holders of the Preferred Stock and
reasonably acceptable to the Corporation, where "Trading Day" means a day on
which the Common Stock is traded on a Trading Market, and "Trading Market" means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange or the Nasdaq National Market.
2
(d) Intentionally Omitted.
(e) Mechanics of Exercise.
(i) Authorization of Warrant Shares; Listing. The
Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
The Company covenants that during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon
the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be
listed. The Company shall promptly secure the listing or quotation of the
shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated or electronic quotation system,
if any, upon which shares of Common Stock are then listed or quoted or
become listed or quoted (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed or quoted, such listing or quotation of
all shares of Common Stock from time to time issuable upon the exercise of
this Warrant; and the Company shall so list or apply for quotation on each
national securities exchange or automated or electronic quotation system,
as the case may be, and shall maintain such listing or quotation of, any
other shares of capital stock of the Company issuable upon the exercise of
this Warrant if and so long as any shares of the same class shall be
listed or quoted on such national securities exchange or automated or
electronic quotation system. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or
obtain exemption for the Warrant Shares for, sale to the holder of this
Warrant upon the exercise hereof under applicable securities or "blue sky"
laws of the states of the United States, and shall provide evidence of any
such action so taken to the holder of this Warrant prior to such date;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (i) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this provision, (ii) subject itself to general taxation in any such
jurisdiction or (iii) file a general consent to service of process in any
such jurisdiction.
3
(ii) Delivery of Certificates Upon Exercise. The Company
shall instruct its transfer agent to deliver to the Holder certificates
for shares purchased hereunder within two Trading Days from the delivery
to the Company of the Notice of Exercise Form, surrender of this Warrant
and payment of the aggregate Exercise Price (unless a cashless exercise)
as set forth above ("Warrant Share Delivery Date"). This Warrant shall be
deemed to have been exercised as of the close of business on the date the
Notice of Exercise form and the payment of the Exercise Price or notice of
cashless exercise, as applicable, is received by the Company or, if such
date is not a business day, on the next succeeding business day, and the
Warrant Shares shall be deemed to have been issued, and the Holder or any
other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of such
date.
(iii) Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall, as soon as
practicable after the transfer agent's delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant.
(iv) Exercise Default. If, at any time, a holder of this
Warrant submits this Warrant, a Notice of Exercise and payment to the
Company of the Exercise Price for each of the Warrant Shares specified in
the Notice of Exercise (including pursuant to a cashless exercise), and
the Company fails for any reason to deliver, on or prior to the fourth
business day following the Warrant Share Delivery Date for such exercise,
the number of shares of Common Stock to which the Holder is entitled upon
such exercise (an "Exercise Default"), then, subject to the Liquidated
Damages Cap, the Company shall pay to the Holder payments ("Exercise
Default Payments") for an Exercise Default in the amount of (i) (N/365),
multiplied by (ii) the amount by which the Market Price of the Common
Stock on the date the Notice of Exercise giving rise to the Exercise
Default is transmitted in accordance with the terms hereof (the "Exercise
Default Date") exceeds the Exercise Price in respect of such Warrant
Shares, multiplied by (iii) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (iv)
R, where N equals the number of days from the Exercise Default Date to the
date that the Company effects the full exercise of this Warrant which gave
rise to the Exercise Default and R equals the lower of 0.18 (eighteen
percent) and the highest interest rate per annum permitted by applicable
law, expressed as a decimal. The accrued Exercise Default Payment for each
calendar month shall be paid in cash and shall be made to the Holder by
the fifth day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages for
the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms hereof or to otherwise
issue shares of Common Stock upon exercise of this Warrant in accordance
with the terms hereof, and the Holder shall have the right to pursue all
remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
4
(v) No Fractional Shares or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would
otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction in an amount equal
to such fraction multiplied by the Exercise Price.
(vi) Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
(D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company or (E) takes any similar action having the effect
of increasing or decreasing the number of shares of Common Stock outstanding
immediately prior to the taking effect of such action, then in each case the
Exercise Price shall be multiplied by a fraction: (i) the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) 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,
combination or re-classification.
5
(b) Distributions. If, at any time this Warrant is outstanding, the
Company declares or makes any distribution of its assets (or rights to acquire
its assets) pro rata to the record holders of any class of Common Stock, whether
as a partial liquidating dividend, by way of return of capital or otherwise,
(including any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder shall be entitled, upon any
exercise of this Warrant after the date of record for determining stockholders
entitled to such Distribution (or if no such record is taken, the date on which
such Distribution is declared or made), to receive the amount of such assets
which would have been payable to the Holder with respect to the Warrant Shares
issuable upon such exercise had the Holder been the holder of such Warrant
Shares on the record date for the determination of stockholders entitled to such
Distribution (or if no such record is taken, the date on which such Distribution
is declared or made).
(c) Convertible Securities and Purchase Rights. If, at any time while this
Warrant is outstanding, the Company issues pro rata to the record holders of any
class of Common Stock any securities or other instruments which are convertible
into or exercisable or exchangeable for Common Stock ("Convertible Securities")
or options, warrants or other rights to purchase or subscribe for Common Stock
or Convertible Securities ("Purchase Rights"), whether or not such Convertible
Securities or Purchase Rights are immediately convertible, exercisable or
exchangeable, then the Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to
receive such Convertible Securities or Purchase Rights (or if no such record is
taken, the date on which such Convertible Securities or Purchase Rights are
issued), to receive the aggregate number of Convertible Securities or Purchase
Rights which the Holder would have received with respect to the Warrant Shares
issuable upon such exercise (without giving effect to the limitations contained
in Section 2(d)) had the Holder been the holder of such Warrant Shares on the
record date for the determination of stockholders entitled to receive such
Convertible Securities or Purchase Rights (or if no such record is taken, the
date on which such Convertible Securities or Purchase Rights were issued). If
the right to exercise or convert any such Convertible Securities or Purchase
Rights would expire in accordance with their terms prior to the exercise of this
Warrant, then the terms of such Convertible Securities or Purchase Rights shall
provide that such exercise or convertibility right shall remain in effect until
30 days after the date the Holder receives such Convertible Securities or
Purchase Rights pursuant to the exercise hereof.
(d) Subsequent Equity Sales.
(i) If at any time while this Warrant is issued and
outstanding, other than in an Exempt Issuance, the Company shall offer,
sell, grant any option to purchase or offer, sell or grant any right to
reprice its securities, or otherwise dispose of or issue (or announce or
be deemed to have made any offer, sale, grant or any option to purchase or
other disposition) any Common Stock or Common Stock Equivalents (as
defined below) entitling any Person to acquire shares of Common Stock at
an effective price per share less than the then Exercise Price (such lower
price, with respect to each class of securities being issued, the "Base
Share Price" of such securities and each such issuance a "Dilutive
Issuance"), as adjusted hereunder, then the Exercise Price shall be
reduced according to the following formula:
((Fully Diluted Shares Outstanding Before x Adjusted Exercise Price) + Total
Consideration) Fully Diluted Shares Outstanding After
6
Where:
"Fully Diluted Shares Outstanding Before" shall mean the total
number of shares of Common Stock outstanding immediately prior to
the consummation of such Dilutive Issuance, assuming the issuance of
all shares of Common Stock underlying Common Stock Equivalents then
outstanding;
"Common Stock Equivalents" shall mean any securities of the Company
or its Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including without limitation, any
Purchase Rights or Convertible Securities, including without
limitation the Preferred Stock and the Warrants;
"Adjusted Exercise Price" shall mean the Exercise Price in effect
immediately prior to the Dilutive Issuance;
"Total Consideration" shall mean the sum of all consideration
received by the Company in the Dilutive Issuance, calculated
pursuant to Section 3(d)(ii); and
"Fully Diluted Shares Outstanding After" shall mean the total number
of shares of Common Stock outstanding immediately after the
consummation of such Dilutive Issuance, assuming the issuance of all
shares of Common Stock underlying Common Stock Equivalents then
outstanding.
In each instance of an adjustment pursuant to the foregoing clauses
(A) and (B), such adjustment shall be made whenever Common Stock or
Common Stock Equivalents are issued in a Dilutive Issuance. The
Company shall notify the Holder in writing, no later than five (5)
Trading Days following the consummation of a Dilutive Issuance,
indicating therein the applicable issuance price and other pricing
terms. For the avoidance of doubt, in no event shall the Exercise
Price after giving effect to any Dilutive Issuance be greater than
the Exercise Price in effect prior to such Dilutive Issuance,
subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the
Common Stock that occur in connection with the Dilutive Issuance
7
(ii) Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under clause (i)
of this Section 3(d), the following will be applicable:
(A) Issuance of Purchase Rights. If
the Company issues or sells any Purchase Rights,
whether or not immediately exercisable, and the price
per share for which Common Stock is issuable upon the
exercise of such Purchase Rights (and the price of
any conversion of Convertible Securities, if
applicable) is less than the Exercise Price in effect
on the date of issuance or sale of such Purchase
Rights, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such
Purchase Rights (assuming full conversion, exercise
or exchange of Convertible Securities, if applicable)
shall, as of the date of the issuance or sale of such
Purchase Rights, be deemed to be outstanding and to
have been issued and sold by the Company for such
price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Purchase
Rights" shall be determined by dividing (x) the total
amount, if any, received or receivable by the Company
as consideration for the issuance or sale of all such
Purchase Rights, plus the minimum aggregate amount of
additional consideration, if any, payable to the
Company upon the exercise of all such Purchase
Rights, plus, in the case of Convertible Securities
issuable upon the exercise of such Purchase Rights,
the minimum aggregate amount of additional
consideration payable upon the conversion, exercise
or exchange thereof (determined in accordance with
the calculation method set forth in clause (ii)(B) of
this Section 3(d)) at the time such Convertible
Securities first become convertible, exercisable or
exchangeable, by (y) the maximum total number of
shares of Common Stock issuable upon the exercise of
all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if
applicable). No further adjustment to the Exercise
Price shall be made upon the actual issuance of such
Common Stock upon the exercise of such Purchase
Rights or upon the conversion, exercise or exchange
of Convertible Securities issuable upon exercise of
such Purchase Rights.
(B) Issuance of Convertible
Securities. If the Company issues or sells any
Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the
price per share for which Common Stock is issuable
upon such conversion, exercise or exchange is less
than the Exercise Price in effect on the date of
issuance or sale of such Convertible Securities, then
the maximum total number of shares of Common Stock
issuable upon the conversion, exercise or exchange of
all such Convertible Securities shall, as of the date
of the issuance or sale of such Convertible
Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price
per share. If the Convertible Securities so issued or
sold do not have a fluctuating conversion or exercise
price or exchange ratio, then for the purposes of the
preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion,
exercise or exchange" shall be determined by dividing
(x) the total amount, if any, received or receivable
by the Company as consideration for the issuance or
sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion,
exercise or exchange thereof (determined in
accordance with the calculation method set forth in
this clause (ii)(B) of this Section 3(d)) at the time
such Convertible Securities first become convertible,
exercisable or exchangeable, by (y) the maximum total
number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such
Convertible Securities. If the Convertible Securities
so issued or sold have a fluctuating conversion or
exercise price or exchange ratio (a "Variable Rate
Convertible Security"), then for purposes of the next
preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion,
exercise or exchange" shall be deemed to be the
lowest price per share which would be applicable
(assuming all holding period and other conditions to
any discounts contained in such Variable Rate
Convertible Security have been satisfied) if the
conversion price of such Variable Rate Convertible
Security on the date of issuance or sale thereof was
seventy-five percent (75%) of the actual conversion
price on such date (the "Assumed Variable Market
Price"), and, further, if the conversion price of
such Variable Rate Convertible Security at any time
or times thereafter is less than or equal to the
Assumed Variable Market Price last used for making
any adjustment under this Section 3(d) with respect
to any Variable Rate Convertible Security, the
Exercise Price in effect at such time shall be
readjusted to equal the Exercise Price which would
have resulted if the Assumed Variable Market Price at
the time of issuance of the Variable Rate Convertible
Security had been seventy-five percent (75%) of the
actual conversion price of such Variable Rate
Convertible Security existing at the time of the
adjustment required by this sentence. No further
adjustment to the Exercise Price shall be made upon
the actual issuance of such Common Stock upon
conversion, exercise or exchange of such Convertible
Securities.
8
(C) Change in Option Price or
Conversion Rate. If there is a change at any time in
(x) the amount of additional consideration payable to
the Company upon the exercise of any Purchase Rights;
(y) the amount of additional consideration, if any,
payable to the Company upon the conversion, exercise
or exchange of any Convertible Securities; or (z) the
rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for
Common Stock (in each such case, other than under or
by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time
of such change shall be readjusted to the Exercise
Price which would have been in effect at such time
had such Purchase Rights or Convertible Securities
still outstanding provided for such changed
additional consideration or changed conversion,
exercise or exchange rate, as the case may be, at the
time initially issued or sold.
9
(D) Calculation of Consideration
Received. If any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for cash,
the consideration received therefor will be the
amount received by the Company therefor (in the case
of an underwritten public offering, after deduction
of all underwriting discounts or allowances) in
connection with such issuance, grant or sale. In case
any Common Stock, Purchase Rights or Convertible
Securities are issued or sold for a consideration
part or all of which shall be other than cash,
including in the case of a strategic or similar
arrangement in which the other entity will provide
services to the Company, purchase services from the
Company or otherwise provide intangible consideration
to the Company, the amount of the consideration other
than cash received by the Company (including the net
present value of the consideration expected by the
Company for the provided or purchased services) shall
be the fair market value of such consideration,
except where such consideration consists of
securities, in which case the amount of consideration
received by the Company will be the Market Price
thereof as of the date of receipt. In case any Common
Stock, Purchase Rights or Convertible Securities are
issued in connection with any merger or consolidation
in which the Company is the surviving corporation,
the amount of consideration therefor will be deemed
to be the fair market value of such portion of the
net assets and business of the non-surviving
corporation as is attributable to such Common Stock,
Purchase Rights or Convertible Securities, as the
case may be. Notwithstanding anything else herein to
the contrary, if Common Stock, Purchase Rights or
Convertible Securities are issued or sold in
conjunction with each other as part of a single
transaction or in a series of related transactions,
the Holder may elect to determine the amount of
consideration deemed to be received by the Company
therefor by deducting the fair value of any type of
securities (the "Disregarded Securities") issued or
sold in such transaction or series of transactions.
If the Holder makes an election pursuant to the
immediately preceding sentence, no adjustment to the
Exercise Price shall be made pursuant to this Section
3(d) for the issuance of the Disregarded Securities
or upon any conversion, exercise or exchange thereof.
The Company shall calculate, using standard
commercial valuation methods appropriate for valuing
such assets, the fair market value of any
consideration other than cash or securities;
provided, however, that if the Holder does not agree
to such fair market value calculation within three
business days after receipt thereof from the Company,
then such fair market value shall be determined in
good faith by an investment banker or other
appropriate expert of national reputation selected by
the Company and reasonably acceptable to the Holder,
with the costs of such appraisal to be borne by the
Company.
10
(e) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. For purposes of this Section 3, the number of shares of Common
Stock outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) outstanding.
(f) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 3, the
number of shares of Common Stock issuable upon exercise of this Warrant at
each such Exercise Price shall be adjusted by multiplying a number equal
to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable upon exercise of this
Warrant at such Exercise Price immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
(g) Notice to Holders.
(i) Adjustment to Exercise Price. Whenever
the Exercise Price is adjusted pursuant to this
Section 3, the Company shall promptly mail to each
Holder notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement
of the facts requiring such adjustment. If the
Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities
may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price
in the case of an MFN Transaction (as defined in the
Purchase Agreement).
(ii) Notice to Allow Exercise by the Holder.
If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C)
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; (D) 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, of
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in
each case, the Company shall cause to be mailed to
the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least
ten business 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 the
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 the Common Stock of
record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other
property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share
exchange; provided, 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. The Holder is entitled to exercise this
Warrant during the ten business day period commencing
the date of such notice to the effective date of the
event triggering such notice.
11
(h) Fundamental Transaction. If, at any time while this
Warrant is outstanding, (A) the Company effects a Change of Control (as
defined below in this Section 3(h)), (B) there shall occur any
liquidation, dissolution or winding up of the Company (other than a
transaction constituting a Change of Control), (C) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions (other than a transaction constituting a Change of
Control), (D) the Company shall merge or consolidate with or into, or
engage in any other business combination with, any other person or entity,
in any case, which results in either (x) the holders of the voting
securities of the Company immediately prior to such transaction holding or
having the right to direct the voting of fifty percent (50%) or less of
the total outstanding voting securities of the Company or such other
surviving or acquiring person or entity immediately following such
transaction or (y) the members of the board of directors or other
governing body of the Company comprising fifty percent (50%) or less of
the members of the board of directors or other governing body of the
Company or such other surviving or acquiring person or entity immediately
following such transaction, (other than a transaction constituting a
Change of Control), (E) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property (other than a transaction constituting a
Change of Control), or (F) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities,
cash or property (any such case, a "Fundamental Transaction"), then, upon
any subsequent exercise of this Warrant, the Holder shall have the right
to receive, for each Warrant Share that would have been issuable upon such
exercise absent such Fundamental Transaction, upon exercise of this
Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and the such shares of stock, securities and/or other
property as would have been issued or payable in such Fundamental
Transaction with respect to or in exchange for the number of Warrant
Shares which would have been issuable upon exercise had such Fundamental
Transaction not taken place (without giving effect to the limitations on
ownership contained in Section 2(d)) (the "Alternate Consideration"), and,
in any such case, appropriate provisions (in form and substance reasonably
satisfactory to the Holder) shall be made with respect to the rights and
interests of the Holder to the end that the economic value of this Warrant
is in no way diminished by such Fundamental Transaction and that the
provisions hereof (including, without limitation, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing
entity is not the Company, an immediate adjustment of the Exercise Price
and Warrant Shares so that the Exercise Price and Warrant Shares
immediately after the Fundamental Transaction reflects the same relative
value as compared to the value of the surviving entity's common stock that
existed between the Exercise Price and the Warrant Shares and the value of
the Company's Common Stock immediately prior to such Fundamental
Transaction) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise thereof. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder
a new warrant consistent with the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this Section 3(h) and ensuring
that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary set forth in this
Section 3(h), in the event of a transaction constituting a Change of
Control, if the Company is unable, after using its best efforts, to cause
the successor to the Company or surviving entity in such Change of Control
to issue to the Holder a new warrant consistent with the foregoing
provisions and evidencing the Holder's right to exercise such warrant into
Alternate Consideration, then the Company shall pay the Holder in cash
(the "Change of Control Consideration") an amount equal to the intrinsic
value of the Warrant, as determined by the mutual agreement of the Company
and the Holder. The Company shall tender the Change of Control
Consideration to the Holder at the same time consideration is delivered to
the Company's stockholders pursuant to the Change of Control. For purposes
of this Warrant, "Change of Control" shall mean the occurrence of either
of the following events:
12
(i) the Company shall sell, convey or
dispose of all or substantially all of its assets
(the presentation of any such transaction for
stockholder approval being conclusive evidence that
such transaction involves the sale of all or
substantially all of the assets of the Company); or
(ii) merge or consolidate with or into, or
engage in any other business combination with, any
other person or entity, in any case, which results in
either (x) the holders of the voting securities of
the Company immediately prior to such transaction
holding or having the right to direct the voting of
fifty percent (50%) or less of the total outstanding
voting securities of the Company or such other
surviving or acquiring person or entity immediately
following such transaction or (y) the members of the
board of directors or other governing body of the
Company comprising fifty percent (50%) of less of the
members of the board of directors or other governing
body of the Company or such other surviving or
acquiring person or entity immediately following such
transaction.
13
(i) Exempt Issuance. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid or
issued under this Section 3 in respect of an Exempt Issuance.
(j) Voluntary Adjustment by the Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the
Board of Directors in its good faith judgment.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 4(d) and 5(a)
hereof and to the provisions of Section 4.1 of the Purchase Agreement
(which are hereby incorporated by reference), this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly
be cancelled. A Warrant, if properly assigned, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant
issued.
(b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with Section 4(a), as to
any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange
for the Warrant or Warrants to be divided or combined in accordance with
such notice.
(c) Warrant Register. 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, absent actual
notice to the contrary.
14
(d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the transfer
of this Warrant shall not be registered pursuant to an effective
registration statement under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant,
as the case may be, furnish to the Company a written opinion of counsel
(which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such
transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the Holder
or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee
be an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7), or (a)(8) promulgated under the Securities Act or a qualified
institutional buyer as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
(a) Title to Warrant. Prior to the Termination Date and
subject to compliance with applicable laws and Section 4 of this Warrant,
this Warrant and all rights hereunder are transferable, in whole or in
part, at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed. The transferee shall
sign an investment letter in form and substance reasonably satisfactory to
the Company.
(b) No Rights or Liabilities as a Stockholder Until Exercise.
This Warrant does not entitle the Holder to any voting rights or other
rights as a stockholder of the Company prior to the exercise hereof in
accordance with its terms. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no
mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(c) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of
such cancellation, in lieu of such Warrant or stock certificate.
15
(d) Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.
(e) Protection of Holder's Rights. Except and to the extent as
waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder as set
forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (i) not increase the par value of any
Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (ii) take all such action
as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (iii) obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its
obligations under this Warrant. Before taking any action which would
result in an adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may
be necessary from any public regulatory body or bodies having jurisdiction
thereof.
(f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
(g) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities
laws.
(h) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice the Holder's
rights, powers or remedies, notwithstanding all rights hereunder terminate
on the Termination Date. If the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such amounts as
shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
16
(i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase
Agreement.
(j) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by the Holder to exercise this Warrant
or purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors
of the Company.
(k) Remedies. The Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(l) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of the Holder. The provisions of
this Warrant are intended to be for the benefit of all Holders from time
to time of this Warrant and shall be enforceable by any such Holder or
holder of Warrant Shares. (m) Amendment. This Warrant may be modified or
amended or the provisions hereof waived with the written consent of the
Company and the Holder.
(n) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions
of this Warrant.
(o) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
********************
[SIGNATURE PAGE FOLLOWS]
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: September 29, 2006
DIOMED HOLDINGS, INC.
By:/S/
--------------------------
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
18
NOTICE OF EXERCISE
TO: Diomed Holdings, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2)______Payment shall take the form of (check applicable box):
[ ] lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number of
Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
The Warrant Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities
Act of 1933, as amended.
NAME OF XXXXXX:
------------------------
By:
--------------------------
Name:
Title:
Dated:
--------------------
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
whose address is
------------------------------------------------
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ,
------------- -----
Holder's Signature:
------------------------
Holder's Address:
------------------------
Signature Guaranteed:
--------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
