Exhibit 10.1
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B)
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY THE SECURITIES.
HEMISPHERX BIOPHARMA, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. __ Number of Shares: 650,000
(subject to adjustment)
Date of Issuance: May 14, 2004
HEMISPHERX BIOPHARMA, INC., a Delaware corporation (the "Company"), hereby
certifies that, for Ten United States Dollars ($10.00) and other good and
valuable consideration including, without limitation, the Holder's current
exercise of warrants to purchase 500,000 shares of Common Stock (as defined)
with an expiration date of June 25, 2008, the receipt and sufficiency of which
are hereby acknowledged (provided, however, that the holders of the Warrants
shall withhold from the exercise price of the foregoing warrants in the
aggregate (x) $84,000 to pay the fees of the placement agent engaged by the
Company in connection with the transactions contemplated hereby and (y) 7,500
for the holders' reasonable, documented fees and expenses (including legal
expenses) incurred in connection with the consummation of the transactions
contemplated hereby), , the registered holder hereof or its permitted assigns,
is entitled, subject to the terms and conditions set forth below, to purchase
from the Company upon surrender of this Warrant, at any time or times on or
after November 14, 2004, but not after 11:59 P.M., New York City Time, on the
Expiration Date (as defined herein) 650,000 fully paid nonassessable shares of
Common Stock (as defined herein) of the Company at the Warrant Exercise Price
per share provided in Section 1(b) below. Notwithstanding the foregoing, the
Company shall not effect the exercise of this Warrant and no holder of this
Warrant shall have the right to exercise this Warrant to the extent that after
giving effect to such exercise, such Person (together with such Person's
affiliates), would have acquired, through exercise of this Warrant or otherwise,
beneficial ownership of a number of shares of Common Stock that, when added to
the number of shares of Common Stock beneficially owned by such Person (together
with such Person's affiliates), exceeds 4.99% of the number of shares of Common
Stock outstanding immediately after giving effect to such exercise. For purposes
of the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes,
debentures or preferred stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. Upon the written request of any holder, the Company shall
promptly, but in no event later than two (2) Business Days following the receipt
of such notice, confirm in writing to any 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 exercise of Warrants
(as defined below) by such holder and its affiliates since the date as of which
such number of outstanding shares of Common Stock was last reported.
Section 1.
a. REGISTRATION RIGHTS AGREEMENT. This Warrant (as defined herein) is one of a
series of Warrants issued on the date hereof. The Company agrees that the
Warrant Shares (as defined herein) shall be treated as "Registrable Securities"
in accordance with, and shall be governed by, identical terms to the
Registration Rights Agreement, dated as of January 26, 2004 (as such agreement
may be amended from time to time, the "Registration Rights Agreement"), by and
among the Company and the buyers named therein (including the holder), as if the
Company and the holder hereof had executed such Registration Rights Agreement on
the Original Issuance Date; provided, however, that:
(1) Section 2(a) thereof shall not apply and instead the Company agrees to the
following:
The Company shall use its reasonable best efforts to file within 60
days of the Original Issuance Date (but in no event later than 90 days
following the Original Issuance Date) (such date being the "Filing
Deadline") with the SEC the Registration Statement on Form S-3 covering
the resale of all of the Registrable Securities. In the event that Form
S-3 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration, subject to the
provisions of Section 2(d) of the Registration Rights Agreement, in
which case the "Filing Deadline" shall be one hundred twenty (120) days
after the Original Issuance Date. The Registration Statement shall
register for resale at least 1,755,000 shares of Common Stock (with
respect to all of the Warrants in the aggregate), subject to adjustment
as provided in Section 2(e) of the Registration Rights Agreement. The
Company shall use its reasonable best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in
no event later than the date which is sixty (60) days after the date on
which the Registration Statement is filed (the "Filing Date"). Until
such time as the Registration Statement is declared effective by the
SEC, the Company shall not file with the SEC any other registration
statement under the 1933 Act with respect to the resale or initial
issuance of any Company securities; and
(2) Section 2(f) thereof shall not apply; and
(3) The first sentence of Section 3(a) shall not apply and instead the Company
shall promptly prepare and file with the SEC a Registration Statement with
respect to the Registrable Securities (but in no event later than the applicable
Filing Deadline) and use its best efforts to cause such Registration Statement
relating to the Registrable Securities required to be covered thereby to become
effective as soon as practicable after such filing (but in no event later than
the date which is sixty (60) days after the Filing Date).
For purposes of clarity, the issuance of this Warrant is unrelated to the
transaction pursuant to which the Registration Rights Agreement was entered
into.
b. DEFINITIONS. The location of definitions used in this Warrant is set forth on
the Index of Terms attached hereto and the following words and terms as used in
this Warrant shall have the following meanings:
(i) "Approved Stock Plan" means any employee benefit plan, stock incentive plan
or other similar plan or arrangement which has been approved by the Board of
Directors of the Company or a duly authorized committee thereof, pursuant to
which the Company's securities may be issued to any employee, consultant,
officer or director for services provided to the Company.
(ii) "Bloomberg" means Bloomberg Financial Markets or any other similar
financial reporting service as may be selected from time to time by the Company
and the holders of the Warrants representing not less than 60% of the shares of
Common Stock issuable upon exercise of all Warrants issued on the Original
Issuance Date then outstanding.
(iii) "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
(iv) "Closing Sale Price" means, for any security as of any date, the last
closing trade price for such security on the Principal Market as reported by
Bloomberg, or if the Principal Market begins to operate on an extended hours
basis, and does not designate the closing trade price, then the last trade price
at 4:00 p.m., New York City Time, as reported by Bloomberg, or if the foregoing
do not apply, the last closing trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the last closing ask price of such security as reported
by Bloomberg, or, if no last closing ask price is reported for such security by
Bloomberg, the average of the highest bid price and the lowest ask price of any
market makers for such security as reported in the "pink sheets" by the Pink
Sheets LLC. If the Closing Sale Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Sale Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the holders of the Warrants representing at least 60% of the shares
of Common Stock obtainable upon exercise of all Warrants issued on the Original
Issuance Date then outstanding. If the Company and the holders of the Warrants
are unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 2(a) below. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period. All fees and expenses of
such determinations shall be borne solely by the Company.
(v) "Common Stock" means (i) the Company's common stock, par value $0.001 per
share, and (ii) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of such Common
Stock.
(vi) "Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 8(b)(i) and
8(b)(ii) hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common Stock
owned or held by or for the account of the Company or issuable upon conversion
of the Convertible Debentures or exercise of the Warrants.
(vii) "Convertible Debentures" means all of the Company's $6,000,000 principal
amount of 6% Senior Secured Convertible Debentures Due January 31, 2006 issued
on, or issuable pursuant to certain additional investment rights issued on,
January 26, 2004.
(viii) "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exchangeable or exercisable
for Common Stock.
(ix) "Expiration Date" means April 30, 2009 or, if such date does not fall on a
Business Day or on a day on which trading takes place on the Principal Market,
then the next Business Day.
(x) "Initial Warrant Exercise Price" shall be equal to $4.50, subject to further
adjustment as provided in Section 8, Adjustment of Warrant Exercise Price and
Number of Shares.
(xi) "Option" means any rights, warrants or options to subscribe for or purchase
or otherwise acquire Common Stock or Convertible Securities.
(xii) "Original Issuance Date" means May 14, 2004.
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(xiii) "Person" means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(xiv) "Principal Market" means The American Stock Exchange ("Amex") or if the
Common Stock is not traded on Amex then the principal securities exchange or
trading market for the Common Stock.
(xv) "Reset Warrant Exercise Price" shall mean the greater of (x) the arithmetic
average of the Weighted Average Price of the Common Stock for each trading date
beginning on the first trading date immediately following the Original Issuance
Date and ending on the final trading date immediately prior to the one-year
anniversary of the Original Issuance Date (which Weighted Average Price on each
such trading date during such period shall be appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period) and
(y) 70% of the Initial Warrant Exercise Price (appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period);
provided, however, that in no event shall the Warrant Exercise Price be less
than $4.008 (subject to adjustments for stock splits, stock dividends, stock
combinations, reclassifications, reorganizations and similar events).
(xvi) "Securities Act" means the Securities Act of 1933, as amended.
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(xvii) "Strategic Financing" shall mean the issuance of Common Stock or Options
in connection with any acquisition by the Company, by whatever means, of any
business, assets or technologies, or to any strategic investor, vendor,
customer, lease or similar arrangement, the primary purpose of which is not to
raise equity capital, provided that the aggregate number of shares of Common
Stock which the Company may issue pursuant to this definition shall not exceed
(i) 25% of the total outstanding equity on January 26, 2004 in connection with
any one or more related issuances to strategic investors, vendors, customers,
lessors or similar parties or (ii) 40% of the total outstanding equity on
January 26, 2004 in connection with all issuances to strategic investors,
vendors, customers, lessors or similar parties (in each case, subject to
adjustment for stock splits, stock dividends, stock combination and similar
transactions).
(xviii) "Warrant" means the warrants to purchase shares of Common Stock issued
on the date hereof and all warrants issued in exchange, transfer or replacement
thereof.
(xix) "Warrant Exercise Price" shall be equal to: (i) from the Original Issuance
Date until the date immediately prior to the one-year anniversary of the
Original Issuance Date, the Initial Warrant Exercise Price, and (ii) from and
after such one-year anniversary, the lesser of (x) the Initial Warrant Exercise
Price and (y) the Reset Warrant Exercise Price, in each case appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period; provided, however, that in no event shall the Warrant Exercise
Price be less than $4.008 (subject to adjustments for stock splits, stock
dividends, stock combinations, reclassifications, reorganizations and similar
events). The Warrant Exercise Price shall be subject to further adjustment as
provided in Section 8, Adjustment of Warrant Exercise Price and Number of
Shares.
(xx) "Warrant Shares" means all shares of Common Stock issuable upon exercise of
the Warrants. (xxi) "Weighted Average Price" shall mean, for any security as of
any date, the dollar volume-weighted average price per share for such security
on the Principal Market during the period beginning at 9:30 a.m., New York City
Time, and ending at 4:00 p.m., New York City Time, as reported by Bloomberg
through its "Volume at Price" function or, if the foregoing does not apply, the
dollar volume-weighted average price per share of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30 a.m., New York City Time, and ending at 4:00
p.m., New York City Time, as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by the Pink Sheets LLC. If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the holders of the Warrants
representing at least 60% of the shares of Common Stock obtainable upon exercise
of the Warrants issued on the Original Issuance Date then outstanding. If the
Company and the holders of the Warrants are unable to agree upon the fair market
value of the Common Stock, then such dispute shall be resolved pursuant to
Section 2(a) below with the term "Weighted Average Price" being substituted for
the term "Closing Sale Price." All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period. All fees and expenses of such determinations shall be borne solely
by the Company.
Section 2. EXERCISE OF WARRANT.
a. Subject to the terms and conditions hereof, this Warrant may be exercised by
the holder hereof then registered on the books of the Company, in whole or in
part, at any time on any Business Day on or after the opening of business on the
date hereof and prior to 5:00 P.M., New York City Time, on the Expiration Date
by (i) delivery of a written notice, in the form of the subscription notice
attached as EXHIBIT A hereto or a reasonable facsimile thereof (the "Exercise
Notice"), to the Company and the Company's designated transfer agent (the
"Transfer Agent"), of such holder's election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased, (ii)(A)
payment to the Company of an amount equal to the Warrant Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the "Aggregate Exercise Price") in cash or delivery of a certified
check or bank draft payable to the order of the Company or wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is
being exercised pursuant to a Cashless Exercise (as defined in Section 2(e)),
and (iii) the surrender of this Warrant or a copy of this Warrant (provided it
is accompanied by an indemnification undertaking with respect to this Warrant in
the case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company or by delivery of a facsimile copy of this Warrant to
the Company as soon as practicable following such date; provided, that if such
Warrant Shares are to be issued in any name other than that of the registered
holder of this Warrant, such issuance shall be deemed a transfer and the
provisions of Section 7 shall be applicable. In the event of any exercise of the
rights represented by this Warrant in compliance with this Section 2(a), the
Company shall on the second (2nd) Business Day (the "Warrant Share Delivery
Date") following the date of its receipt of the Exercise Notice, the Aggregate
Exercise Price (or notice of Cashless Exercise) and the original or a copy of
this Warrant (provided it is accompanied by an indemnification undertaking or
other form of security reasonably satisfactory to the Company with respect to
this Warrant in the case of its loss, theft or destruction) (collectively, the
"Exercise Delivery Documents"), (A) in the case of a public resale of such
Warrant Shares in accordance with the provisions of the Irrevocable Transfer
Agent Instructions, provided the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer Program and,
if required by DTC, the holder provides a customary representation letter to
DTC, at the holder's request, credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system
or (B) issue and deliver to the address as specified in the Exercise Notice, a
certificate or certificates in such denominations as may be requested by the
holder in the Exercise Notice, registered in the name of the holder or its
designee, for the number of shares of Common Stock to which the holder shall be
entitled upon such exercise. Upon delivery of the Exercise Delivery Documents,
the holder of this Warrant shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of this Warrant
as required by clause (iii) above or the certificates evidencing such Warrant
Shares. In the case of a dispute as to the determination of the Warrant Exercise
Price, the Closing Sale Price of a security or the arithmetic calculation of the
number of Warrant Shares, the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the holder via facsimile
within two (2) Business Days of receipt of the holder's Exercise Notice. If the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price, the Closing Sale Price or arithmetic calculation of the number
of Warrant Shares within one (1) Business Day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile (i) the disputed determination of the Warrant
Exercise Price or the Closing Sale Price to an independent, reputable investment
banking firm selected jointly by the Company and the holder or (ii) the disputed
arithmetic calculation of the number of Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than ten (10)
Business Days from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
b. Unless the rights represented by this Warrant shall have expired or shall
have been fully exercised (without regard to any limitation on exercise
hereunder), the Company shall, as soon as practicable using reasonable best
efforts and in no event later than five (5) Business Days after its receipt of
the Exercise Delivery Documents (the "Warrant Delivery Date") and at its own
expense, issue a new Warrant identical in all respects to this Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable (without regard to any limitation on exercise hereunder) immediately
prior to such exercise under this Warrant, less the number of Warrant Shares
with respect to which such Warrant is exercised.
c. No fractional shares of Common Stock are to be issued upon the exercise of
this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up or down to the nearest whole
number.
d. If the Company shall fail for any reason or for no reason to issue to the
holder within five (5) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or to credit the holder's designee's balance account with
DTC, in accordance with Section 2 hereof, for such number of shares of Common
Stock to which the holder is entitled upon the holder's exercise of this
Warrant, the Company shall, in addition to any other remedies under this Warrant
or otherwise available to such holder, pay as additional damages in cash to such
holder on each day after the Warrant Share Delivery Date such exercise is not
timely effected in an amount equal to 0.05% multiplied by the product of (I) the
sum of the number of shares of Common Stock not issued to the holder on or prior
to the Warrant Share Delivery Date and to which such holder is entitled under
the holder's Exercise Notice and (II) the excess of the Closing Sale Price of
the Common Stock on the Warrant Share Delivery Date over the Warrant Exercise
Price then in effect. The foregoing notwithstanding, the damages set forth in
this Section 2(d) shall be stayed with respect to the number of shares of Common
Stock for which there is a good faith dispute being resolved pursuant to, and
within the time periods provided for in, Section 2(a), pending the resolution of
such dispute.
e. Notwithstanding anything contained herein to the contrary, if at any time
during the two (2) Business Day period immediately preceding the holder's
delivery of an Exercise Notice, a Registration Statement (as defined in the
Registration Rights Agreement) covering the Warrant Shares that are the subject
of the Exercise Notice (the "Unavailable Warrant Shares") is not available for
the resale of such Unavailable Warrant Shares, the holder of this Warrant may,
at its election exercised in its sole discretion, exercise this Warrant as to
any or all of such Unavailable Warrant Shares and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
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B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Common Stock on the
trading day immediately preceding the date of the
Exercise Notice.
C= the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and agrees
as follows:
a. This Warrant is, and any Warrants issued in substitution for or replacement
of this Warrant will upon issuance be, duly authorized and validly issued.
b. All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof in accordance
with the terms hereof, be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by or through the Company with respect
to the issue thereof.
c. During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved at least
135% of the number of shares of Common Stock needed to provide for the exercise
of the rights then represented by this Warrant (without regard to any limitation
on exercise hereunder)and the par value of said shares will at all times be less
than or equal to the applicable Warrant Exercise Price.
d. The Company shall promptly secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant (without regard to any limitation on
exercise hereunder) 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 (without regard to any limitation on exercise
hereunder); 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 (without regard to any limitation on exercise
hereunder) if and so long as any shares of the same class shall be listed on
such national securities exchange or automated quotation system.
e. The Company will not, by amendment of its Articles 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 to be
observed or performed by it hereunder. 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 Warrant
Exercise Price then in effect, (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 and (iii) will not take any action which results in any adjustment of
the Warrant Exercise Price if the total number of shares of Common Stock
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock then authorized by the Company's
Articles of Incorporation and available for the purpose of issue upon such
exercise.
f. This Warrant will be binding upon any entity succeeding to the Company by
merger, consolidation or acquisition of all or substantially all of the
Company's assets.
g. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction, in each case which is effected in such a way that
holders of Common Stock are entitled to receive securities or assets with
respect to or in exchange for Common Stock is referred to herein as an "Organic
Change." Prior to the consummation of any (i) sale of all or substantially all
of the Company's assets to an acquiring Person, (ii) other Organic Change
following which the Company is not a surviving entity or (iii) other Organic
Change following which the Company is a surviving entity but the Company's
stockholders no longer continue to own the publicly-traded stock of the Company,
the Company will secure from the Person purchasing such assets or the Person
issuing the securities or providing the assets in such Organic Change (in each
case, the "Acquiring Entity") a written agreement (in form and substance
reasonably satisfactory to the holders of Warrants representing at least a
majority of the shares of Common Stock obtainable upon exercise of the Warrants
then outstanding ("Majority Holders")) to deliver to the holder of this Warrant
in exchange for this Warrant, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
and reasonably satisfactory to the Majority Holders (including an adjusted
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant), if
the value so reflected is less than the Exercise Price in effect immediately
prior to such consolidation, merger or sale). In the event that an Acquiring
Entity is directly or indirectly controlled by a company or entity whose common
stock or similar equity interest is listed, designated or quoted on a securities
exchange or trading market, the holder of this Warrant may elect to treat such
Person as the Acquiring Entity for purposes of this Section 3(g).
Notwithstanding the foregoing, at the holder's option and request, the Acquiring
Entity shall, either (1) issue to such holder a new warrant substantially in the
form of this Warrant and consistent with the foregoing provisions, or (2)
purchase the Warrant from such holder for a purchase price, payable in cash
within five Business Days after such request (or, if later, on the effective
date of the Organic Change), equal to the Black Scholes value of the remaining
unexercised portion of this Warrant on the date of such request. The terms of
any agreement pursuant to which an Organic Change is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(g) and insuring that the Warrants (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to an Organic Change. Prior to the consummation of any other Organic
Change, the Company shall make appropriate provision (in form and substance
reasonably satisfactory to the Majority Holders) to insure that the holder
thereafter will have the right to acquire and receive in lieu of or in addition
to (as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant), such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with respect to or in exchange for the number of shares of Common Stock
which would have been acquirable and receivable upon the exercise of this
Warrant as of the date of such Organic Change (without regard to any limitations
on the exercise of this Warrant).
Section 4. TAXES.
a. The Company shall pay any and all documentary, stamp, transfer and other
similar taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issue or delivery of Common Stock or other
securities or property in a name other than that of the registered holder of
this Warrant to be exercised and such holder shall pay such amount, if any, to
cover any applicable transfer or similar tax.
b. The Company and the Company's transfer agent shall be permitted to withhold
from any amounts payable to a registered holder of this Warrant or any holder of
Warrant Shares any taxes required by law to be withheld from such amounts.
c. Notwithstanding any other provision of this Agreement or any other
Transaction Document, any assignee or transferee shall agree that the Company
and the Company's transfer agent shall be permitted to withhold from any amounts
payable to such assignee or transferee any taxes required by law to be withheld
from such amounts. Unless exempt from the obligation to do so, each assignee or
transferee shall execute and deliver to the Company or the Company's transfer
agent, as applicable, two properly completed and duly executed copies of either
(i) U.S. Internal Revenue Service Form W-8BEN, or any successor form, (ii) U.S.
Internal Revenue Service Form W-8ECI, or any successor form, (iii) U.S. Internal
Revenue Service Form W-9, or any successor form, or (iv) other applicable form,
certificate or document prescribed by the U.S. Internal Revenue Service, as
applicable, in each case, indicating that such assignee or transferee is not
subject to "back-up withholding" for U.S. Federal income tax purposes. Each
assignee or transferee that does not deliver such forms pursuant to the
preceding sentence shall have the burden of proving to the Company's reasonable
satisfaction that it is exempt from such requirement or the Company and the
Company's transfer agent shall be entitled to withhold as provided in the first
sentence hereof. In addition, each assignee or transferee that is organized
under the laws of a jurisdiction other than the United States, any State thereof
or the District of Columbia (each, a "Non-U.S. Assignee or Transferee") shall
deliver to the Company and the Company's transfer agent, to the extent legally
able to do so, with respect to payments of dividends by the Company for U.S.
Federal income tax purposes, if applicable, two properly completed and duly
executed copies of either (i) U.S. Internal Revenue Service Form W-8BEN
(claiming a reduction of U.S. Federal withholding tax under an applicable income
tax treaty, if any), or any successor form, (ii) U.S. Internal Revenue Service
Form W-8ECI (claiming complete exemption from U.S. Federal withholding tax
because the income is effectively connected with a U.S. trade or business), or
any successor form, or (iii) other applicable form, certificate or document
prescribed by the U.S. Internal Revenue Service certifying as to such assignee's
or transferee's entitlement to an exemption from, or a reduction of, U.S.
Federal withholding tax on payments of dividends by the Company for U.S. Federal
income tax purposes. Each Non-U.S. Assignee or Transferee that does not deliver
a form or other document claiming a complete exemption from U.S. Federal
withholding tax shall have the burden of proving to the Company's reasonable
satisfaction that it is completely exempt from such tax or the Company and the
Company's transfer agent shall be entitled to withhold as provided in the second
sentence of this Section 4(c). The forms and other documents required to be
delivered pursuant to this Section 4 shall be properly completed and duly
executed and shall be delivered on or prior to the date of such assignment or
transfer, and from time to time thereafter if requested by the Company or the
Company's transfer agent. In addition, each assignee and transferee shall
deliver such forms and other documents promptly upon the obsolescence or
invalidity of any form or documents previously delivered by such assignee or
transferee. Each assignee and transferee shall promptly notify the Company and
the Company's transfer agent at any time it determines that it is no longer in a
position to provide any previously delivered form, document or certificate to
the Company and the Company's transfer agent (or any form of certification
adopted by the U.S. taxing authorities for such purpose).
Section 5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he, she, or
it is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Section 6. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by the
acceptance hereof, represents and warrants that it is acquiring this Warrant,
and the Warrant Shares for its own account for investment only and not with a
view towards, or for sale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor").
Section 7. OWNERSHIP AND TRANSFER.
a. 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
hereof), 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. The Company may treat the person in
whose name any Warrant is registered on the register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.
b. This Warrant and all rights hereunder shall be assignable and transferable by
the holder hereof without the consent of the Company upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit B hereto) at
the principal executive offices of the Company (or such other office or agency
of the Company as it may designate in writing to the holder hereof); provided,
that (x) either (i) the Warrant shall have been registered under the Securities
Act or (ii) the Company first shall have been furnished with an opinion of
counsel, in a form reasonably satisfactory to the Company, to the effect that
such sale or transfer is exempt from the registration requirements of the
Securities Act and (y) such transfer or assignment of this Warrant does not
result in more than ten (10) holders of all outstanding Warrants and any such
part or portion of this Warrant constitutes at least 10% of the number of
Warrant Shares issuable upon exercise of all outstanding Warrants (subject to
appropriate adjustment for stock splits, stock dividends, combinations,
recapitalizations and other similar transactions) or such lesser number if such
transfer involves all of the Warrant Shares represented by the Warrants then
held by such transferor.
c. The Company is obligated to register the Warrant Shares for resale under the
Securities Act pursuant to the Registration Rights Agreement. The shares of
Common Stock issuable upon exercise of this Warrant shall constitute Registrable
Securities (as such term is defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the benefits afforded to a
holder of any such Registrable Securities under the Registration Rights
Agreement and such holder, by its acceptance of this Warrant, agrees and shall
agree to be bound by and to comply with the terms and conditions of the
Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
Section 8. ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES. The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
a. ADJUSTMENT OF WARRANT EXERCISE PRICE. If and whenever on or after the Warrant
Date and prior to the twelve (12) month anniversary of the Warrant Date, the
Company issues or sells, or is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding shares of Common Stock
(i) issued or deemed to have been issued by the Company in connection with an
Approved Stock Plan, (ii) issued or deemed to have been issued upon exercise of
the Warrants or issued upon the issuance or conversion of the Convertible
Debentures; (iii) issued upon exercise of Options or Convertible Securities
which are outstanding on the date immediately preceding the Warrant Date,
provided that such issuance of shares of Common Stock upon exercise of such
Options or Convertible Securities is made pursuant to the terms of such Options
or Convertible Securities in effect on the date immediately preceding the
Warrant Date and such Options or Convertible Securities are not amended after
the date immediately preceding the Warrant Date other than with respect to
Options originally issued pursuant to an Approved Stock Plan, (iv) issued
pursuant to a Strategic Financing; or (v) issued to the public pursuant to an
underwritten offering registered pursuant to the Securities Act (but in all
events excluding offerings pursuant to "equity lines" or similar products) ((i)
through (v) collectively, "Excluded Issuances")) for a consideration per share
(the "New Issuance Price") less than the Warrant Exercise Price in effect
immediately prior to such issuance or sale (each such sale or issuance, a
"Dilutive Issuance"), then concurrent with such issue or sale, the Warrant
Exercise Price then in effect shall be reduced to a price (subject to Section
8(f)) equal to the New Issuance Price; provided, however, that in no event shall
the Warrant Exercise Price be less than $4.008 (subject to adjustments for stock
splits, stock dividends, stock combinations, reclassifications, reorganizations
and similar events). If and whenever on or after the twelve (12) month
anniversary of the Warrant Date and prior to the Expiration Date, the Company
issues or sells, or is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock issued or
deemed to be issued pursuant to any Excluded Issuance) in a Dilutive Issuance,
then concurrent with such issue or sale, the Warrant Exercise Price then in
effect shall be reduced to a price (rounded to the nearest cent) equal to the
product of (x) the Warrant Exercise Price in effect immediately prior to such
issuance or sale and (y) the quotient determined by dividing (1) the sum of (I)
the product derived by multiplying the Warrant Exercise Price in effect
immediately prior to such Dilutive Issuance by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (II) the
consideration, if any, received by the Company upon such Dilutive Issuance, by
(2) the product derived by multiplying the (I) the Warrant Exercise Price in
effect immediately prior to such Dilutive Issuance by (II) the number of shares
of Common Stock Deemed Outstanding immediately after such Dilutive Issuance;
provided, however, that in no event shall the Warrant Exercise Price be less
than $4.008 (subject to adjustments for stock splits, stock dividends, stock
combinations, reclassifications, reorganizations and similar events).
b. EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:
(i) ISSUANCE OF OPTIONS. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exchange or exercise of any
Convertible Securities issuable upon exercise of any such Option is less than
the Warrant Exercise Price in effect immediately prior to such Dilutive
Issuance, then such share of Common Stock shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the granting or sale
of such Option for such price per share. For purposes of this Section 8(b)(i),
the "lowest price per share for which one share of Common Stock is issuable upon
exercise of any such Option or upon conversion, exchange or exercise of any
Convertible Securities issuable upon exercise of any such Option" shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon conversion,
exchange or exercise of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Warrant Exercise Price shall be made upon
the actual issuance of such Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such Common Stock
upon conversion, exchange or exercise of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon such conversion, exchange or exercise
thereof is less than the Warrant Exercise Price in effect immediately prior to
such Dilutive Issuance, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per share. For
the purposes of this Section 8(b)(ii), the "lowest price per share for which one
share of Common Stock is issuable upon such conversion, exchange or exercise"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to one share of Common Stock
upon the issuance or sale of the Convertible Security and upon conversion,
exchange or exercise of such Convertible Security. No further adjustment of the
Warrant Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exchange or exercise of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Warrant Exercise Price had been or
are to be made pursuant to other provisions of this Section 8(b), no further
adjustment of the Warrant Exercise Price shall be made by reason of such issue
or sale.
(iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If the purchase or exercise
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Warrant
Exercise Price in effect at the time of such change shall be adjusted to the
Warrant Exercise Price which would have been in effect at such time had such
Options or Convertible Securities provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold and the number of shares of Common Stock
acquirable hereunder shall be correspondingly readjusted. For purposes of this
Section 8(b)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon conversion, exchange or
exercise thereof shall be deemed to have been issued as of the date of such
change. No adjustment shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.
c. HOLDER'S RIGHT OF ALTERNATIVE WARRANT EXERCISE PRICE FOLLOWING ISSUANCE OF
CONVERTIBLE SECURITIES. If the Company issues or sells any Options or
Convertible Securities after the Original Issuance Date that are convertible
into or exchangeable or exercisable for Common Stock at a price which varies or
may vary with the market price of the Common Stock, including by way of one or
more reset(s) to a fixed price (each of the formulations for such variable price
being herein referred to as, the "Variable Price"), the Company shall provide
written notice thereof via facsimile and overnight courier to the holder of this
Warrant (the "Variable Notice") on the date of issuance of such Convertible
Securities or Options. From and after the date the Company issues any such
Convertible Securities or Options with a Variable Price, but only for so long as
such Convertible Securities or Options are outstanding, the holder shall have
the right, but not the obligation, in its sole discretion to substitute the
Variable Price for the Warrant Exercise Price upon exercise of this Warrant by
designating in the Exercise Notice delivered upon exercise of this Warrant that
solely for purposes of such exercise the holder is relying on the Variable Price
rather than the Warrant Exercise Price then in effect. The holder's election to
rely on a Variable Price for a particular exercise of this Warrant shall not
obligate the holder to rely on a Variable Price for any future exercises of this
Warrant.
d. EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Warrant Exercise Price under Sections 8(a) and 8(b),
the following shall be applicable:
(i) CALCULATION OF CONSIDERATION RECEIVED. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, then, solely for the purposes
of this Section 8, the Options will be deemed to have been issued for a
consideration of $0.01. If any Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the gross amount received
by the Company therefor. If any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the Closing Sale Price of such securities on the date of receipt of such
securities. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, 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 entity 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 by the Company and the holders
of Warrants representing at least 60% of the shares of Common Stock obtainable
upon exercise of all Warrants issued on the Original Issuance Date then
outstanding. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the "Valuation Event"),
the fair value of such consideration will be determined within five (5) Business
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the holders of the
Warrants representing at least 60% of the shares of Common Stock obtainable upon
exercise of all Warrants issued on the Original Issuance Date then outstanding.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.
(ii) RECORD DATE. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be. If after the occurrence of such record date the transaction or event for
which such record date was set is abandoned or terminated, then any adjustments
resulting from this Section 8(d)(ii) as it relates to such terminated or
abandoned transaction or event shall be reversed as if such record date had
never occurred.
e. ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES UPON SUBDIVISION OR
COMBINATION OF COMMON STOCK. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(e) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
f. CERTAIN EVENTS. If any event occurs of the type contemplated by the
provisions of this Section 8 in a private transaction (the primary purpose of
which is to raise equity capital) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features other than
pursuant to an Excluded Issuance), then the Company's Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number of
shares of Common Stock obtainable upon exercise of this Warrant so as to protect
the rights of the holders of the Warrants; provided that no such adjustment will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section 8.
g. NOTICES.
(i) Promptly following any adjustment of the Warrant Exercise Price, the Company
will give written notice thereof to the holder of this Warrant, setting forth in
reasonable detail, and certifying, the calculation of such adjustment. The
Company (at the Company's expense), if there shall be a disagreement among the
Company and holders of Warrants representing at least 60% of the shares of
Common Stock obtainable upon exercise of all Warrants issued on the Original
Issuance Date then outstanding, shall retain independent public accountants of
recognized national standing selected by the Board of Directors of the Company
to make any computation required in connection with adjustments under this
Warrant, and a certificate signed by such firm absent manifest error shall be
conclusive evidence of the correctness of such adjustment, which shall be
binding on the holder and the Company.
(ii) The Company will give written notice to the holder of this Warrant at least
ten (10) Business Days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation, provided that the Company need not in any
case provide such notice prior to the time such information is made known to the
public.
(iii) The Company will also give written notice to the holder of this Warrant at
least ten (10) Business Days prior to the date on which any Organic Change, any
transaction or series of transactions in which more than 50% of the voting
securities of the Company are transferred to another Person, or any dissolution
or liquidation will take place, provided that the Company need not in any case
provide such notice prior to the time such information is made known to the
public.
h. ADJUSTMENT. No adjustment in the Warrant Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least $.01 in
such price; provided, however, that any adjustments which by reason of this
sentence are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder.
Section 9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of
an indemnification undertaking or other form of security reasonably acceptable
to the Company (or in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed. Notwithstanding the foregoing, if this Warrant is lost
by, stolen from or destroyed by the original holder hereof, the affidavit of
such original holder setting forth the circumstances of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required by the Company as a
condition to the execution and delivery by the Company of a new Warrant to such
original holder other than such original holder's unsecured written agreement to
indemnify the Company solely for losses actually incurred by the Company as a
direct consequence of the loss, theft or destruction of the Warrant.
Section 10. NOTICE. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. If notice is to be sent to the
Company, the holder shall use its reasonable best efforts to provide additional
copies to the individuals listed below; provided, however, that the failure of
such holder to send such additional copies shall in no way limit the
effectiveness of any notice sent to the Company to the attention of Chief
Executive Officer as provided for below. The addresses and facsimile numbers for
such communications shall be:
If to the Company:
Hemispherx Biopharma, Inc.
One Penn Center
1617 JFK Boulevard, Suite 660
Philadelphia, PA 19103
Telephone:
Facsimile:
Attention: Chief Executive Officer
With a copy to:
Ransom W. Etheridge, Esq.
2610 Potters Road
Suite 200
Virginia Beach, VA 23452
Telephone: 757-486-0599
Facsimile: 757-486-0792
If to the Transfer Agent:
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Registration Rights Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 11. AMENDMENTS. This Warrant and any term hereof may be amended,
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such
amendment, change, waiver, discharge or termination is sought and shall be
binding on such party's or holder's assignees and transferees; provided,
however, that any such amendment, change, waiver, discharge or termination that
adversely impacts the holders of any of the Warrants other than this Warrant may
be made only if the Company has obtained the written consent of the holders of
Warrants representing at least 60% of the shares of Common Stock issuable upon
exercise of all of the Warrants issued on the Original Issuance Date then
outstanding; provided, further, that no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock issuable upon
exercise of any Warrants without the written consent of the holder of such
Warrant. No waivers of any term, condition or provision of this Warrant in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such term, condition or provision.
Section 12. DATE. The date of this Warrant is May 14, 2004 (the "Warrant Date").
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7(c) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
Section 13. LIMITATION ON NUMBER OF WARRANT SHARES. The Company shall not be
obligated to issue Warrant Shares upon exercise of this Warrant to the extent
that the issuance of such shares of Common Stock would cause the Company to
exceed that number of shares of Common Stock which the Company may issue upon
exercise of this Warrant (the "Exchange Cap") without breaching the Company's
obligations under the rules or regulations of the Principal Market, except that
such limitation shall not apply in the event that the Company obtains the
approval of its stockholders as required by the Principal Market (or any
successor rule or regulation) for issuances of Common Stock in excess of such
amount. Until such approval is obtained, the holder of this Warrant shall not be
issued, upon exercise of this Warrant, Warrant Shares in an amount, which if
added to the aggregate number of shares of common stock previously issued to the
holder of this Warrant (and all predecessor holders) as of the date of such
exercise would exceed such holder's Cap Allocation Amount (as such term is
defined in the Convertible Debentures). If at any time when the holder delivers
an Exercise Notice pursuant to Section 2 hereof the Company shall be prohibited
pursuant to the provisions of this Section 13 from issuing any Warrant Shares,
then the Company shall pay in immediately available funds to the holder of this
Warrant within two (2) Business Days of the date of delivery of such Exercise
Notice, an amount in cash equal to the product of (X) the number of shares of
Common Stock which could not be issued by virtue of the limitations contained in
this Section 13 multiplied by (Y) the excess of (1) the average of the Closing
Sale Prices of the Common Stock on each of the five (5) trading days ending on
the third trading day immediately preceding the date such prohibition arises
over (2) the Warrant Exercise Price then in effect; provided, however, that for
purposes of such calculation in no event shall such excess exceed 19.9% of the
Warrant Exercise Price then in effect. The number of shares issuable upon
exercise of this Warrant shall be reduced for each share for which the Company
makes a cash payment pursuant to the preceding sentence.
Section 14. Judicial Proceedings. Any legal action, suit or proceeding brought
against the Company with respect to this Warrant may be brought in any federal
court of the Southern District of New York or any state court located in New
York County, State of New York, and by execution and delivery of this Warrant,
the Company hereby irrevocably and unconditionally waives any claim (by way of
motion, as a defense or otherwise) of improper venue, that it is not subject
personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 10, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section. The Company irrevocably submits to the exclusive jurisdiction of the
aforementioned courts in such action, suit or proceeding.
Section 15. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. The corporate laws of the
State of New York shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by as of the 14th day of May, 2004.
HEMISPHERX BIOPHARMA, INC.
By:
-------------------------------
Name:
-------------------------------
Title:
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EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS WARRANT HEMISPHERX
BIOPHARMA, INC.
The undersigned holder hereby exercises the right to purchase ______________ of
the shares of Common Stock ("Warrant Shares") of HEMISPHERX BIOPHARMA, INC., a
Delaware corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price.
The Holder intends that payment of the Warrant
Exercise Price shall be made as:
______ "Cash Exercise" with respect to ________ Warrant Shares; and/or
______ "Cashless Exercise" with respect to
______ Warrant Shares (to the extent
permitted by the terms of the Warrant).
2. Variable Price. Is the Variable Price being relied on pursuant to
Section 8(c) of the
Warrant? (check one) YES ____ No ____
3. Payment of Warrant Exercise Price.
In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the
sum of $___________________ to the Company in
accordance with the terms of the Warrant.
4. Delivery of Warrant Shares. The holder of this warrant has
sold or will sell the shares of common stock issuable pursuant to this Notice
pursuant to a registration statement or an exemption from registration under the
Securities Act of 1933, as amended.
5. Private Placement Representations.
The holder of this Warrant confirms the continuing
validity of, and reaffirms as of the date hereof,
its representations and warranties set forth in Section 6 of
the Warrant.
Date: _______________ __, ____
_________________________
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Name of Registered Holder Tax ID of Registered Holder
(if applicable)
By:_______________________________
Name:_____________________________
Title:______________________________
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and
hereby directs Continental Stock Transfer & Trust Company to issue the above
indicated number of shares of Common Stock.
HEMISPHERX BIOPHARMA, INC.
By:
---------------------------
Name:
Title:
EXHIBIT B TO WARRANT
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned does hereby assign and
transfer to ________________, Federal Identification No. __________, a warrant
to purchase ____________ shares of the capital stock of HEMISPHERX BIOPHARMA ,
INC., a Delaware corporation, represented by warrant certificate no. _____,
standing in the name of the undersigned on the books of said corporation. The
undersigned does hereby irrevocably constitute and appoint ______________,
attorney to transfer the warrants of said corporation, with full power of
substitution in the premises.
Dated: _________, 200_
1201:
By:
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Its:
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