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THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE
NOTE PURCHASE AGREEMENT DATED AS OF FEBRUARY 26, 1997, OR THE
REGISTRATION RIGHTS AGREEMENT, DATED AS OF FEBRUARY 26, 1997,
NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE, ASSIGNMENT
OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES
LAWS.
Right to Purchase
________Shares of
Common Stock, no par
value
CLASS G
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC
INTERNATIONAL INVESTORS, LDC, a Cayman Islands corporation, or
its registered assigns (the "Holder"), is entitled to purchase
from LIDAK PHARMACEUTICALS, a California corporation (the
"Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, [before issuance fill in number
equal to 50% of number of shares issuable upon related conversion
of note] ( ) fully paid and nonassessable shares of the
Company's Class A Common Stock, no par value (the "Common
Stock"), at an exercise price of $2.97 per share (the "Exercise
Price"). The term "Warrant Shares", as used herein, refers to
the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as
provided in Paragraph 4 hereof. The term Warrants means this
Warrant and the other warrants of the Company issued upon
conversion of the Convertible Note, dated February 26, 1997 and
issued by the Company (the "Note").
This Warrant is subject to the following terms,
provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. Subject to the provisions hereof, this Warrant may be
exercised by the Holder, in whole or in part, by the surrender of
this Warrant, together with a completed exercise agreement in the
form attached hereto (the "Exercise Agreement"), to the Company
during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of
the Company as
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it may designate by notice to the Holder), and upon (i) payment
to the Company in cash, by certified or official bank check or by
wire transfer for the account of the Company of the Exercise
Price for the Warrant Shares specified in the Exercise Agreement
or (ii) if the resale of the Warrant Shares by the Holder is not
then registered pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"),
delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below)
for the Warrant Shares specified in the Exercise Agreement. The
Warrant Shares so purchased shall be deemed to be issued to the
Holder or the Holder's designee, as the record owner of such
shares, as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been
made for such shares as set forth above. Certificates for the
Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to
the Holder within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised.
The certificates so delivered shall be in such denominations as
may be requested by the Holder and shall be registered in the
name of the Holder or such other name as shall be designated by
the Holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall,
at its expense, at the time of delivery of such certificates,
deliver to the Holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have
been exercised.
Notwithstanding anything in this Warrant to the
contrary, in no event shall the Holder be entitled to exercise a
number of Warrants (or portions thereof) in excess of the number
of Warrants (or portions thereof) upon exercise of which the sum
of (i) the number of shares of Common Stock beneficially owned by
the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of
the unexercised Warrants and unconverted portion of the Note) and
(ii) the number of shares of Common Stock issuable upon exercise
of the Warrants (or portions thereof) with respect to which the
determination described herein is being made, would result in
beneficial ownership by the Holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (i)
hereof.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any
time or from time to time on or after the earlier of (1) the
first date after February 26, 1997 on which the trading price of
the Common Stock is $6.00 or more (2) the date that is six months
after February 26, 1997, and in either case before 5:00 p.m., New
York City time, on the fifth (5th) anniversary of the date of
issuance (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:
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(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly
issued, fully paid, and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of
this Warrant.
(c) LISTING. The Company shall promptly secure the listing
of the shares of Common Stock issuable upon exercise of the
Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (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, such listing of all shares of
Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case
may be, and shall maintain such listing 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 on such national securities exchange or automated
quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter 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 to be observed
or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be
requested by the Holder in order to protect the exercise
privilege of the Holder against dilution or other impairment,
consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may
be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding
upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the
Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period,
the Exercise Price and the number of Warrant Shares shall be
subject to adjustment from time to time as provided in this
Paragraph 4.
In the event that any adjustment of the Exercise
Price as required herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the nearest cent.
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(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in
Paragraphs 4(c) and 4(e) hereof, if and whenever on or after
February 26, 1997, the Company issues or sells, or in accordance
with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses
or commissions or underwriting discounts or allowances in
connection therewith) less than the Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise
Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the
sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y)
the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance,
divided by the Market Price in effect immediately prior to the
Dilutive Issuance, and (ii) the denominator of which is the total
number of shares of Common Stock Deemed Outstanding immediately
after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Exercise Price under
Paragraph 4(a) hereof, the following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether
or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable
for Common Stock ("Convertible Securities") (such warrants,
rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the
price per share for which Common Stock is issuable upon the
exercise of such Options is less than the Market Price on the
date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will,
as of the date of the issuance or grant of such Options, 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 Options" is determined by dividing (i)
the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such
Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise
of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other
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than where the same are issuable upon the exercise of Options)
and the price per share for which Common Stock is issuable upon
such conversion or exchange is less than the Market Price on the
date of issuance, then the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to
have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon such conversion
or exchange" is determined by dividing (i) 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 or exchange thereof at
the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any
Options; (ii) the amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued
or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not,
in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have
expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise
or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or
sold for cash, the consideration received therefor for purposes
of this Warrant will be the amount received by the Company
therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance,
grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of
such consideration, except where such
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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,
Options 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 value of such portion of the net assets and
business of the non-surviving corporation as is attributable to
such Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of
Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the
exercise of any warrants, options or convertible securities
issued and outstanding on February 26, 1997; (ii) upon the grant
or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the
Company now existing or to be implemented in the future, so long
as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of
the Company or a majority of the members of a committee of
independent directors established for such purpose; (iii) upon
the exercise of the Warrants or the conversion of the Note issued
pursuant to the Note Purchase Agreement, dated as of February 26,
1997, by and between the Company and the original Holder of the
Note (the "Note Purchase Agreement"), or upon the issuance of
Common Stock pursuant to a bona fide firm commitment underwritten
public offering registered under the 1933 Act.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a
greater number of shares, then, after the date of record for
effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by reverse stock
split, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a
smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment
of the Exercise Price pursuant to the provisions of this
Paragraph 4, the number of shares of Common Stock issuable upon
exercise of this Warrant 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 immediately prior to such
adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into
any other corporation, or in case of any sale or conveyance of
all or substantially all of the assets of the Company other than
in connection with a plan of complete liquidation of the Company,
then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder
will have the right to
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acquire and receive upon exercise of this Warrant in lieu of the
shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In
any such case, the Company will make appropriate provision to
insure that the provisions of this Paragraph 4 hereof will
thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the
exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than
the Company) assumes by written instrument the obligations under
this Paragraph 4 and the obligations to deliver to the Holder
such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall
declare or make any distribution of its assets (including cash)
to holders of Common Stock as a partial liquidating dividend, by
way of return of capital or otherwise, then, after the date of
record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the Holder
shall be entitled upon exercise of this Warrant for the purchase
of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable
to the Holder had the Holder been the holder of such shares of
Common Stock on the record date for the determination of
stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in
each such case, the Company shall give notice thereof to the
Holder, which notice shall state the Exercise Price resulting
from such adjustment and the increase or decrease in the number
of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of
the Exercise Price shall be made in an amount of less than 1% of
the Exercise Price in effect at the time such adjustment is
otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with
any adjustments so carried forward, shall amount to not less than
1% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the
Company shall pay a cash adjustment in respect of any fractional
share which would otherwise be issuable in an amount equal to the
same fraction of the Market Price of a share of Common Stock on
the date of such exercise.
(j) OTHER NOTICES. In case at any time:
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(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in
cash out of retained earnings) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of
any class or other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into, or sale of
all or substantially all its assets to, another corporation or
entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each such case, the Company shall give to the
Holder (a) notice of the date on which the books of the Company
shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend,
distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, notice of the date
(or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription
rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice
shall be given at least 15 days prior to the record date or the
date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but
not expressly provided for by such provisions, the Company will
give notice of such event as provided in Paragraph 4(g) hereof,
and the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the
rights of the Holder shall be neither enhanced nor diminished by
such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
of shares of Common Stock actually outstanding (not including
shares of Common Stock held in the treasury of the Company), plus
(x) pursuant to Paragraph 4(b)(i) hereof, the maximum total
number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof,
the maximum total number of shares of Common Stock issuable upon
conversion or exchange of
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Convertible Securities, as of the date of issuance of such
Convertible Securities, if any (whether the Options or
Convertible Securities are actually convertible or exercisable at
such time), excluding any shares issuable upon conversion of the
Note.
(ii) "MARKET PRICE," as of any date, (i) means the average
of the last reported sale prices for the shares of Common Stock
as reported by the National Association of Securities Dealers
Automated Quotation National Market ("NASDAQ-NMS") for the ten
(10) trading days immediately preceding such date, or (ii) if the
NASDAQ-NMS is not the principal trading market for the shares of
Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same
period, or (iii) if market value cannot be calculated as of such
date on any of the foregoing bases, the Market Price shall be the
fair market value as reasonably determined in good faith by (a)
the Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Warrants
by (b) an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business
of the corporation. The manner of determining the Market Price of
the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Paragraph 4,
includes the Class A Common Stock, par value $.001 per share, and
any additional class of stock of the Company having no preference
as to dividends or distributions on liquidation, provided that
the shares purchasable pursuant to this Warrant shall include
only shares of Common Stock, par value $.001 per share, in
respect of which this Warrant is exercisable, or shares resulting
from any subdivision or combination of such Common Stock, or in
the case of any reorganization, reclassification, consolidation,
merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in
such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant
Shares upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other
costs in respect thereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate
in a name other than the Holder.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This
Warrant shall not entitle the Holder to any voting rights or
other rights as a shareholder of the Company. No provision of
this Warrant, in the absence of affirmative action by the Holder
to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any
liability of the Holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. On or after the first
anniversary date of the conversion of at least $100,000.00 in the
principal balance of the Note, this Warrant and the related
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rights granted to the Holder will be transferable, in whole or in
part, upon surrender of this Warrant, together with a properly
executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below;
PROVIDED, HOWEVER, that any transfer or assignment of this
Warrant and the related rights granted to the Holder, in whole or
in part, shall (i) cover not less than 100,000 Warrant Shares and
(ii) be subject to the conditions set forth in Paragraphs 7(f)
and 7(g) hereof and to the applicable provisions of the Note
Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the
registered Holder as the owner and holder hereof for all
purposes, and the Company shall not be affected by any notice to
the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Paragraph 8 are
assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of February 26, 1997, by
and among the Company and the other signatories thereto (the
"Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the Holder
at the office or agency of the Company referred to in Paragraph
7(e) below, for new Warrants of like tenor representing in the
aggregate the right to purchase the number of shares of Common
Stock which may be purchased hereunder, each of such new Warrants
to represent the right to purchase such number of shares as shall
be designated by the Holder at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of
any such loss, theft, or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender
of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall
be promptly canceled by the Company. The Company shall pay all
taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company
as it may designate by notice to the Holder), a register for this
Warrant, in which the Company shall record the name and address
of the person in whose name this Warrant has been issued, as well
as the name and address of each transferee and each prior owner
of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the
time of the surrender of this Warrant in connection with any
exercise, transfer, or exchange of this Warrant, this Warrant
(or, in the case of any exercise, the Warrant Shares issuable
hereunder), shall not be registered under the 1933 Act and under
applicable state securities or blue sky laws, the Company
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may require, as a condition of allowing such exercise, transfer,
or exchange, (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 and counsel are reasonably acceptable to
the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said 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 reasonably acceptable to
the Company, (iii) that the transferee be an "ccredited investor"
as defined in Rule 501(a) promulgated under the 1933 Act and (iv)
that, upon such transfer, the transferee beneficially own
Registrable Securities (as defined in the Registration Rights
Agreement) having an aggregate Market Price of at least $500,000;
provided that no such opinion, letter, status as an "accredited
investor" or aggregate Market Price condition shall be required
in connection with a transfer pursuant to Rule 144 under the 1933
Act. The first Holder of this Warrant, by taking and holding the
same, represents to the Company that such Holder is acquiring
this Warrant for investment and not with a view to the
distribution thereof.
(g) RIGHT OF FIRST OFFER. Subject to the
terms and conditions specified in this Section 7, the Holder
hereby grants to the Company a right of first offer with respect
to any future sale, transfer or assignment by the Holder of this
Warrant and the rights granted hereunder, in whole or in part.
Each time the Holder proposes to offer this Warrant and the
rights granted hereunder, in whole or in part, for sale, transfer
or assignment (the "Offered Warrant"), the Holder will first make
an offering of the Offered Warrant to the Company in accordance
with the following provisions:
(i) NOTICE. The Holder will deliver notice (the "Offer No
xxxx") to the Company stating (i) its bona fide intention to
offer the Offered Warrant, and (ii) the price and terms upon
which it proposes to offer the Offered Warrant; and
(ii) MECHANICS. Within ten (10) business days after its
receipt of the Offer Notice (the "Election Period"), the Company
may elect to purchase or obtain, at the price and on the terms
specified in the Offer Notice, the Offered Warrant. In the event
that the Company does not elect to purchase or obtain the Offered
Warrant as specified in the Offer Notice within the Election
Period, the Company may, during the 45 calendar days following
the expiration of the Election Period, sell the Offered Warrant
to any person or persons at a price not less than that, and upon
terms no more favorable than those, specified in the Offer
Notice. If the Holder does not sell the Offered Warrant within
such 45-calendar day period, then the right of first offer
provided pursuant to this Paragraph 7(g) will be deemed to be
revived and the Offered Warrant will not be offered unless again
reoffered to the Company in accordance with this Paragraph 7(g).
(h) CERTAIN RIGHT TO PLEDGE. The provisions
of Paragraphs 7(a), 7(f) and 7(g) shall not apply with respect
to, and nothing herein shall limit or in any way affect, the
right to pledge this Warrant in connection with a bona fide
margin account or lending arrangement.
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8. REGISTRATION RIGHTS.
The initial Holder (and certain assignees thereof)
is entitled to the benefit of such registration rights in respect
of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.
9. NOTICES. All notices, requests, and other
communications required or permitted to be given or delivered
hereunder to the Holder shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and
addressed, to the Holder at the address shown for the Holder on
the books of the Company, or at such other address as shall have
been furnished to the Company by notice from the Holder. All
notices, requests, and other communications required or permitted
to be given or delivered hereunder to the Company shall be in
writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to the office of the
Company at 00000 X. Xxxxxx Xxxxx Xxxx, Xx Xxxxx, Xxxxxxxxxx
00000, Attention: Chief Financial Officer or at such other
address as shall have been furnished to the Holder by notice from
the Company. Any such notice, request, or other communication
may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified
or registered mail or by recognized overnight mail courier as
provided above. All notices, requests, and other communications
shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Paragraph 9, or,
if mailed by registered or certified mail or with a recognized
overnight mail courier upon deposit with the United States Post
Office or such overnight mail courier, if postage is prepaid and
the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO THE BODY OF LAW
CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may
only be amended by an instrument in writing signed by the Company
and the Holder.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of
reference only, and shall not affect the meaning or construction
of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant
Shares by the Holder is not then registered pursuant to an
effective registration statement under the 1933 Act, this Warrant
may be exercised
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by presentation and surrender of this Warrant to the Company at
its principal executive offices with a written notice of the
Holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the Holder shall
surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which
it would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price
per share of Common Stock.
IN WITNESS WHEREOF, the Company has caused
this Warrant to be signed by its duly authorized officer.
LIDAK PHARMACEUTICALS
Dated: _____________ By:
Name:
Title:
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