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, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO 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
ELITE PHARMACEUTICALS, 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 Initial Exercise Date (as defined in
Section 2) and on or prior to the close of business on the five year anniversary
of the Initial Exercise Date (the "TERMINATION DATE") but not thereafter, to
subscribe for and purchase from Elite Pharmaceuticals, Inc., a Delaware
corporation (the "COMPANY"), up to ______ shares (the "WARRANT SHARES") of
Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK"). The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
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 March 15, 2006, 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 date of issue of this Warrant (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); and, within 3 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 payment of
the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank. Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares purchasable hereunder in
an amount equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence
of manifest error.
b) EXERCISE PRICE. The exercise price per share of the Common Stock
under this Warrant shall be $2.75, subject to adjustment hereunder (the
"EXERCISE PRICE").
c) CASHLESS EXERCISE. If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the
Warrant Shares by the Holder, then this Warrant may also be exercised at
such time 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.
d) EXERCISE LIMITATIONS.
i. HOLDER'S RESTRICTIONS. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, such
Holder (together with such Holder's Affiliates, and any other person
or entity acting as a group together with such Holder or any of such
Holder's Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by such Holder
and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of
2
Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by
such Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Preferred Stock or
Warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by such Holder
or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d)(i), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder, it being
acknowledged by a Holder that the Company is not representing to such
Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and such Holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder together with any Affiliates)
and of which a portion of this Warrant is exercisable shall be in the
sole discretion of a Holder, and the submission of a Notice of
Exercise shall be deemed to be each Holder's determination of whether
this Warrant is exercisable (in relation to other securities owned by
such Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of this
Section 2(d), in determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company's most recent Form 10-Q
or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or
the Company's Transfer Agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and
in writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by such
Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The "Beneficial
Ownership Limitation" shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Beneficial Ownership Limitation provisions of this
Section 2(d)(i) may be waived by such Xxxxxx, at the election of such
Holder, upon not less than
3
61 days' prior notice to the Company to change the Beneficial
Ownership Limitation to 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d) shall continue to apply. Upon such a
change by a Holder of the Beneficial Ownership Limitation from such
4.99% limitation to such 9.99% limitation, the Beneficial Ownership
Limitation may not be further waived by such Holder. The provisions of
this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
2(d)(i) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of this Warrant.
ii. TRADING MARKET RESTRICTIONS. If the Company has not obtained
Shareholder Approval (as defined below), then the Company may not
issue upon exercise of this Warrant a number of shares of Common
Stock, which, when aggregated with any shares of Common Stock issued
(A) upon conversion of or as payment of dividends on the Preferred
Stock issued pursuant to the Purchase Agreement, (B) upon prior
exercise of this or any other Warrant issued pursuant to the Purchase
Agreement and (C) pursuant to any warrants issued to any registered
broker-dealer as a fee in connection with the Securities pursuant to
the Purchase Agreement, would exceed 19.999% of the number of shares
of Common Stock outstanding on the Trading Day immediately preceding
the Closing Date (such number of shares, the "ISSUABLE MAXIMUM"). If
on any attempted exercise of this Warrant, the issuance of Warrant
Shares would exceed the Issuable Maximum and the Company shall not
have previously obtained the vote of shareholders to approve the
issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "SHAREHOLDER APPROVAL"), then the
Company shall issue to the Holder requesting a Warrant exercise such
number of Warrant Shares as may be issued below the Issuable Maximum
and, with respect to the remainder of the aggregate number of Warrant
Shares, this Warrant shall not be exercisable until and unless
Shareholder Approval has been obtained.
e) MECHANICS OF EXERCISE.
i. AUTHORIZATION OF WARRANT SHARES. 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 created by the Company in respect of the issue
thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
4
ii. DELIVERY OF CERTIFICATES UPON EXERCISE. Certificates for
shares purchased hereunder shall be transmitted by the transfer agent
of the Company to the Holder by crediting the account of the Holder's
prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission ("DWAC") system if the Company is a
participant in such system, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise within 3
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 as set forth above ("WARRANT SHARE DELIVERY DATE").
This Warrant shall be deemed to have been exercised on the date the
Exercise Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and 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 the date the Warrant
has been exercised by payment to the Company of the Exercise Price (or
by cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid.
iii. DELIVERY OF NEW WARRANTS UPON EXERCISE. If this Warrant
shall have been exercised in part, the Company shall, upon surrender
of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of 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. RESCISSION RIGHTS. If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by
the Warrant Share Delivery Date, then the Holder will have the right
to rescind such exercise.
v. COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES UPON EXERCISE. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to an exercise on or before the Warrant Share
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 Shares which the Holder anticipated receiving upon such
exercise (a "BUY-IN"), then the Company 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
5
obtained by multiplying (A) the number of Warrant Shares that the
Company 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 Warrant Shares 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 Company 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 Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. 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
Company's failure to timely deliver certificates representing shares
of Common Stock upon exercise of the Warrant as required pursuant to
the terms hereof.
vi. 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 Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall at its election, either pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the
Exercise Price or round up to the next whole share.
vii. CHARGES, TAXES AND EXPENSES. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event certificates for Warrant
Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
viii. 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.
6
all Notices of Exercise delivered by 6:30 p.m. (New York City time) on
the Call Date, (ii) the Registration Statement shall be effective as
to all Warrant Shares and the prospectus thereunder available for use
by the Holder for the resale of all such Warrant Shares and (iii) the
Common Stock shall be listed or quoted for trading on the Trading
Market, and (iv) there is a sufficient number of authorized shares of
Common Stock for issuance of all Securities under the Transaction
Documents, and (v) the issuance of the shares shall not cause a breach
of any provision of 2(d) herein. The Company's right to Call the
Warrant shall be exercised ratably among the Holders based on each
Holder's initial purchase of Warrants.
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
make 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 upon exercise of 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, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately 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.
b) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase or sell or grant any right
to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling
any Person to acquire shares of Common Stock, at an effective price
per share less than the then applicable Conversion Price (as such term
is defined in the Certificate of Designations) of the Preferred Stock
(such issuances collectively, a "DILUTIVE ISSUANCE") (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any
time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which are
issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the
then applicable Conversion Price, such issuance shall be deemed to
have occurred for less than the then applicable Conversion Price on
such date of the Dilutive Issuance), then the Exercise Price shall be
reduced and only reduced by multiplying the Exercise Price by a
fraction, the numerator
7
of which is the number of shares of Common Stock issued and
outstanding immediately prior to the Dilutive Issuance plus the number
of shares of Common Stock which the offering price for such Dilutive
Issuance would purchase at the then applicable Conversion Price, and
the denominator of which shall be the sum of the number of shares of
Common Stock issued and outstanding immediately prior to the Dilutive
Issuance plus the number of shares of Common Stock so issued or
issuable in connection with the Dilutive Issuance and the number of
Warrant Shares issuable hereunder shall be increased such that the
aggregate Exercise Price payable hereunder, after taking into account
the decrease in the Exercise Price, shall be equal to the aggregate
Exercise Price prior to such adjustment. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustments shall be made, paid or
issued under this Section 3(b) in respect of an Exempt Issuance. The
Company shall notify the Holder in writing, no later than the Trading
Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion
price and other pricing terms (such notice the "DILUTIVE ISSUANCE
NOTICE"). For purposes of clarification, whether or not the Company
provides a Dilutive Issuance Notice pursuant to this Section 3(b),
upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of
Warrant Shares based upon the adjusted Exercise Price regardless of
whether the Holder accurately refers to the adjusted Exercise Price in
the Notice of Exercise.
c) SUBSEQUENT RIGHTS OFFERINGS. If the Company, at any time while
the Warrant is outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than the VWAP at the record date mentioned below, then the
Exercise Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered
(assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at
such VWAP. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such rights, options or warrants. If any such rights, options or
warrants expire without having been exercised, the Exercise Price as
adjusted upon the issuance of such rights, options or warrants shall
be readjusted to the Exercise Price which would have been in effect
had an adjustment been made on the basis that only additional shares
of Common Stock so issued were the additional shares of Common Stock,
if any, actually issued or sold on the exercise of such rights,
options or warrants and such additional shares of Common Stock, if
any, were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting of all such
rights, options or warrants, whether or not exercised, provided that
such readjustment shall not apply to prior exercises of the Warrant.
8
d) PRO RATA DISTRIBUTIONS. If the Company, at any time prior to
the Termination Date, shall distribute to all holders of Common Stock
(and not to Holders of the Warrants) evidences of its indebtedness or
assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section 3(b)), then in each such case the
Exercise Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such
record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock
as determined by the Board of Directors in good faith. In either case
the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
e) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (C) 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, or (D) 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 (in
any such case, a "FUNDAMENTAL TRANSACTION"), then,
i. subject to clause (ii) below, 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 immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, (a) upon
exercise of this Warrant and payment of the Exercise Price, the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the "ALTERNATE
CONSIDERATION") receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately
prior to such event or (b) if the Company is acquired in an all
cash transaction, cash equal to the value of this Warrant as
determined in accordance with the Black-Scholes option pricing
formula; or
ii. if the Company is acquired in an all cash transaction,
in the option of the Company or its acquiror, the Holder may be
paid cash equal to the
9
value of this Warrant as determined in accordance with the
Black-Scholes option pricing formula and upon payment of such
cash, the Warrant shall terminate.
For purposes of any such exercise by the Holder, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. 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(d) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
f) 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 deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) VOLUNTARY ADJUSTMENT BY 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 of the Company.
h) NOTICE TO HOLDERS.
i. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price
is adjusted pursuant to any provision of this Section 3, the
Company shall promptly mail to each Holder a 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).
10
ii. NOTICE TO ALLOW EXERCISE BY HOLDER. If (A) the Company
shall declare a dividend (or any other distribution in whatever
form) 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 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of 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 20-day period commencing on the date of
such notice to the effective date of the event triggering such
notice.
SECTION 4. TRANSFER OF WARRANT.
a) TRANSFERABILITY. The Warrant and the other rights of the
Holder pursuant to this Warrant certificate are not severable from
this Warrant certificate, and shall not be assignable or transferable
except in connection with a transfer or assignment of this Warrant
certificate in accordance with the terms hereof. Any instrument
purporting to make a transfer or assignment in violation of this
Section 4(a) shall be void and of no effect. Subject to compliance
with any applicable securities laws and the conditions set forth in
Section 4(d) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in
whole or in part, upon surrender of this Warrant certificate at the
principal office of the Company or its designated agent, together with
a written assignment of this Warrant substantially in the form
attached hereto duly
11
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 compliance with the foregoing and 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.
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) NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof as set forth
in Section 2(e)(ii).
12
b) 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.
c) 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 not be a Business Day, then such
action may be taken or such right may be exercised on the next
succeeding Business Day.
d) AUTHORIZED SHARES.
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.
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 Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company will (a) 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, (b) 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 (c) use
commercially reasonable efforts to 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.
13
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.
e) 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.
f) 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.
g) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers or remedies, notwithstanding the fact that 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 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 Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
h) 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.
i) LIMITATION OF LIABILITY. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of 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.
j) REMEDIES. 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 and not to
assert the defense in any action for specific performance that a
remedy at law would be adequate.
k) 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 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.
14
l) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
m) 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.
n) 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.
********************
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: March ___, 2006
ELITE PHARMACEUTICALS, INC.
By:______________________________
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer
16
NOTICE OF EXERCISE
TO: ELITE PHARMACEUTICALS, 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):
[ ] in lawful money of the United States; or
[ ] [if permitted] 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 DWAC Account Number or by
physical delivery of a certificate to:
------------------------------------
------------------------------------
------------------------------------
(4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ______________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________
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, [____] all of or [_______] shares of 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.
