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Exhibit 4.2
EXHIBIT D
WARRANT TO PURCHASE
COMMON STOCK, PAR VALUE $.01 PER SHARE
OF
HALSEY DRUG CO., INC.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR UNDER
ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE
HOLDER OF SUCH WARRANT REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH WARRANT
AND/OR COMMON STOCK MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.
This certifies that, for value received, _______________ or
registered assigns ("Warrantholder"), is entitled to purchase from HALSEY DRUG
CO., INC. (the "Company"), subject to the provisions of this Warrant, at any
time during the Exercise Period (as hereinafter defined) _____ Shares of the
Company's Common Stock, par value $.01 per share ("Warrant Shares"). The
purchase price payable upon the exercise of this Warrant shall be $____ per
Warrant Share. The purchase price and the number of Warrant Shares which the
Warrantholder is entitled to purchase are subject to adjustment upon the
occurrence of the contingencies set forth in this Warrant, and as adjusted from
time to time, such purchase price is hereinafter referred to as the "Warrant
Price."
For purposes of this Warrant, the term "Exercise Period" means
the period commencing on the date of issuance of this Warrant and ending on the
seventh anniversary of such date.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole or in part
but not for a fractional share. Upon delivery of this Warrant at the offices of
the Company or at such other address as the Company may designate by notice in
writing to the registered holder hereof with the Subscription Form annexed
hereto duly executed, accompanied by payment of the Warrant Price for the number
of Warrant Shares purchased (in cash, by certified, cashier's or other check
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acceptable to the Company, by Common Stock or other securities of the Company
having a Market Value (as hereinafter defined) equal to the aggregate Warrant
Price for the Warrant Shares to be purchased, or any combination of the
foregoing), the registered holder of this Warrant shall be entitled to receive a
certificate or certificates for the Warrant Shares so purchased. Such
certificate or certificates shall be promptly delivered to the Warrantholder.
Upon any partial exercise of this Warrant, the Company shall execute and deliver
a new Warrant of like tenor for the balance of the Warrant Shares purchasable
hereunder.
(b) In lieu of exercising this Warrant pursuant to
Section 1(a), the holder may elect to receive shares of Common Stock equal to
the value of this Warrant determined in the manner described below (or any
portion thereof remaining unexercised) upon delivery of this Warrant at the
offices of the Company or at such other address as the Company may designate by
notice in writing to the registered holder hereof with the Notice of Cashless
Exercise Form annexed hereto duly executed. In such event the Company shall
issue to the holder a number of shares of the Company's Common Stock computed
using the following formula:
X = Y (A-B)
_______
A
Where X = the number of shares of Common Stock to be issued to the holder.
Y = the number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = the Market Value of the Company's Common Stock on the
business day immediately preceding the day on which the Notice
of Cashless Exercise is received by the Company.
B = Warrant Price (as adjusted to the date of such calculation).
(c) The Warrant Shares deliverable hereunder shall,
upon issuance, be fully paid and non-assessable and the Company agrees that at
all times during the term of this Warrant it shall cause to be reserved for
issuance such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(d) For purposes of Section 1(b) of this Warrant, the
Market Value of a share of Common Stock on any date shall be equal to (A) the
closing sale price per share as published by a national securities exchange on
which shares of Common Stock are traded (an "Exchange") on such date or, if
there is no sale of Common Stock on such date, the average of the bid and asked
prices on such Exchange at the close of trading on such date or, (B) if shares
of Common Stock are not listed on an Exchange on such date, the closing price
per share as published on the National Association of Securities Dealers
Automatic Quotation System ("NASDAQ") National Market System if the shares are
quoted on such system on such date, or (C) the average of the bid and asked
prices in the over-the-counter market at the close of trading on such date if
the shares are not traded on an Exchange or listed on the NASDAQ National Market
System, or (D) if the security is not traded on an Exchange or in the
over-the-counter
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market, the fair market value of a share of Common Stock on such date as
determined in good faith by the Board of Directors. If the holder disagrees with
the determination of the Market Value of any securities of the Common Stock
determined by the Board of Directors under Section 1(d)(i)(D) the Market Value
shall be determined by an independent appraiser acceptable to the Company and
the holder. If they cannot agree on such an appraiser, then each of the Company
and the holder shall select an independent appraiser, such two appraisers shall
select a third independent appraiser and Market Value shall be the median of the
appraisals made by such appraisers). If there is one appraiser, the cost of the
appraisal shall be shared equally between the Company and the holder. If there
are three appraisers, each of the Company and the holder shall pay for its own
appraiser and shall share equally the cost of the third appraiser.
2. Transfer or Assignment of Warrant.
(a) Any assignment or transfer of this Warrant shall
be made by surrender of this Warrant at the offices of the Company or at such
other address as the Company may designate in writing to the registered holder
hereof with the Assignment Form annexed hereto duly executed and accompanied by
payment of any requisite transfer taxes, and the Company shall, without charge,
execute and deliver a new Warrant of like tenor in the name of the assignee for
the portion so assigned in case of only a partial assignment, with a new Warrant
of like tenor to the assignor for the balance of the Warrant Shares purchasable.
(b) Prior to any assignment or transfer of this
Warrant, the holder thereof shall deliver an opinion of counsel to the Company
to the effect that the proposed transfer may be effected without registration
under the Securities Act of 1933, as amended (the "Securities Act"). Each
Warrant issued upon or in connection with such transfer shall bear the
restrictive legend set forth on the front of this Warrant unless, in the opinion
of the Company's counsel, such legend is no longer required to insure compliance
with the Securities Act.
3. Adjustments to Warrant Price and Warrant Shares --
Anti-Dilution Provisions. In order to prevent dilution of the exercise right
granted hereunder, the Warrant Price shall be subject to adjustment from time to
time in accordance with this Section 3. Upon each adjustment of the Warrant
Price pursuant to this Section 3, the holder shall thereafter be entitled to
acquire upon exercise of this Warrant, at the Applicable Warrant Price (as
hereinafter defined), the number of shares of Common Stock obtainable by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares of Common Stock acquirable immediately prior to such
adjustment and dividing the product thereof by the Applicable Warrant Price
resulting from such adjustment.
The Warrant Price in effect at the time of the exercise of
this Warrant shall be subject to adjustment from time to time as follows:
(a) In the event that the Company shall at any time: (i)
declare or pay to the holders of the Common Stock a dividend payable in any kind
of shares of capital stock of the Company; or (ii) change or divide or otherwise
reclassify its Common Stock into the same or a different number of shares with
or without par value, or in shares of any class or classes; or (iii) transfer
its property as an entirety or substantially as an entirety to any other company
or entity; or (iv) make any distribution of its assets to holders of its Common
Stock as a liquidation or partial liquidation dividend or by way of return of
capital; then, upon the subsequent exercise
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of this Warrant, the holder thereof shall receive, in addition to or in
substitution for the shares of Common Stock to which it would otherwise be
entitled upon such exercise, such additional shares of stock or scrip of the
Company, or such reclassified shares of stock of the Company, or such shares of
the securities or property of the company resulting from transfer, or such
assets of the Company, which it would have been entitled to receive had it
exercised these rights prior to the happening of any of the foregoing events.
(b) If at any time after the date of issuance hereof the
Company shall grant or issue any shares of Common Stock, or grant or issue any
rights or options for the purchase of, or stock or other securities convertible
into, Common Stock (such convertible stock or securities being herein
collectively referred to as "Convertible Securities") other than:
(i) shares issued in a transaction described in subsection
3(c); or
(ii) shares issued, subdivided or combined in transactions
described in subsection 3(a) if and to the extent that the number of shares of
Common Stock receivable upon exercise of this Warrant shall have been previously
adjusted pursuant to subsection 3(a) as a result of such issuance, subdivision
or combination of such securities;
for a consideration per share which is less than the Fair Market Value (as
hereinafter defined) of the Common Stock, then the Warrant Price in effect
immediately prior to such issuance or sale (the "Applicable Warrant Price")
shall, and thereafter upon each issuance or sale for a consideration per share
which is less than the Fair Market Value of the Common Stock, the Applicable
Warrant Price shall, simultaneously with such issuance or sale, be adjusted, so
that such Applicable Warrant Price shall equal a price determined by multiplying
the Applicable Warrant Price by a fraction, the numerator of which shall be:
(A) the sum of (x) the total number of shares of Common Stock
outstanding when the Applicable Warrant Price became
effective, plus (y) the number of shares of Common Stock which
the aggregate consideration received, as determined in
accordance with subsection 3(d) for the issuance or sale of
such additional Common Stock or Convertible Securities deemed
to be an issuance of Common Stock as provided in subsection
3(e), would purchase (including any consideration received by
the Company upon the issuance of any shares of Common Stock
since the date the Applicable Warrant Price became effective
not previously included in any computation resulting in an
adjustment pursuant to this subsection 3(b)) at the Fair
Market Value of the Common Stock; and the denominator of which
shall be
(B) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subsection 3(e)
hereof) immediately after the issuance or sale of such
additional shares.
For purposes of this Section 3, "Fair Market Value" shall mean
the average of the closing price of the Common Stock for each of the twenty (20)
consecutive trading days
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prior to such issuance or sale on an Exchange or if shares of Common Stock are
not listed on an Exchange during such period, the closing price per share as
reported by NASDAQ National Market System if the shares are quoted on such
system during such period, or the average of the bid and asked prices of the
Common Stock in the over-the-counter market at the close of trading during such
period if the shares are not traded on an Exchange or listed on the NASDAQ
National Market System, or if the Common Stock is not traded on an Exchange or
in the over-the-counter market, the fair market value of a share of Common Stock
during such period as determined in good faith by the Board of Directors.
If, however, the Applicable Warrant Price thus obtained would result in the
issuance of a lesser number of shares upon conversion than would be issued at
the initial Warrant Price, the Applicable Warrant Price shall be such initial
Warrant Price.
Upon each adjustment of the Warrant Price pursuant to this
subsection 3(b), the total number of shares of Common Stock for which this
Warrant shall be exercisable shall be such number of shares (calculated to the
nearest tenth) purchasable at the Applicable Warrant Price multiplied by a
fraction, the numerator of which shall be the Warrant Price in effect
immediately prior to such adjustment and the denominator of which shall be the
exercise price in effect immediately after such adjustment.
(c) Anything in this Section 3 to the contrary
notwithstanding, no adjustment in the Warrant Price shall be made in connection
with:
(i) the grant, issuance or exercise of any Convertible
Securities pursuant to the Company's qualified or
non-qualified Employee Stock Option Plans or any other bona
fide employee benefit plan or incentive arrangement, adopted
or approved by the Company's Board of Directors and approved
by the Company's shareholders, as may be amended from time to
time, or under any other bona fide employee benefit plan
hereafter adopted by the Company's Board of Directors; or
(ii) the grant, issuance or exercise of any Convertible
Securities in connection with the hire or retention of any
officer, director or key employee of the Company, provided
such grant is approved by the Company's Board of Directors; or
(iii) the issuance of any shares of Common Stock pursuant to
the grant or exercise of Convertible Securities outstanding as
of the date hereof (exclusive of any subsequent amendments
thereto).
(d) For the purpose of subsection 3(b), the following
provisions shall also be applied:
(i) In case of the issuance or sale of additional shares of
Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be
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the amount of cash received by the Company for such shares,
before deducting therefrom any commissions, compensation or
other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with, the issuance
or sale of such shares.
(ii) In the case of the issuance of Convertible Securities,
the consideration received by the Company therefor shall be
deemed to be the amount of cash, if any, received by the
Company for the issuance of such rights or options, plus the
minimum amounts of cash and fair value of other consideration,
if any, payable to the Company upon the exercise of such
rights or options or payable to the Company upon conversion of
such Convertible Securities.
(iii) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in
part, other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as reasonably
determined in good faith by the Board of Directors of the
Company (irrespective of accounting treatment thereof);
provided, however, that if such consideration consists of the
cancellation of debt issued by the Company, the consideration
shall be deemed to be the amount the Company received upon
issuance of such debt (gross proceeds) plus accrued interest
and, in the case of original issue discount or zero coupon
indebtedness, accrued value to the date of such cancellation,
but not including any premium or discount at which the debt
may then be trading or which might otherwise be appropriate
for such class of debt.
(iv) In case of the issuance of additional shares of Common
Stock upon the conversion or exchange of any obligations
(other than Convertible Securities), the amount of the
consideration received by the Company for such Common Stock
shall be deemed to be the consideration received by the
Company for such obligations or shares so converted or
exchanged, before deducting from such consideration so
received by the Company any expenses or commissions or
compensation incurred or paid by the Company for any
underwriting of, or otherwise in connection with, the issuance
or sale of such obligations or shares, plus any consideration
received by the Company in connection with such conversion or
exchange other than a payment in adjustment of interest and
dividends. If obligations or shares of the same class or
series of a class as the obligations or shares so converted or
exchanged have been originally issued for different amounts of
consideration, then the amount of consideration received by
the Company upon the original issuance of each of the
obligations or shares so converted or exchange shall be deemed
to be the average amount of the consideration received by the
Company upon the original issuance of all such obligations or
shares. The amount of consideration received by the Company
upon the original issuance of the obligations or shares so
converted or exchanged and the amount of the consideration, if
any, other than such obligations or shares, received by the
Company upon such conversion or exchange shall be determined
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in the same manner as provided in paragraphs (i) and (ii)
above with respect to the consideration received by the
Company in case of the issuance of additional shares of Common
Stock or Convertible Securities.
(v) In the case of the issuance of additional shares of Common
Stock as a dividend, the aggregate number of shares of Common
Stock issued in payment of such dividend shall be deemed to
have been issued at the close of business on the record date
fixed for the determination of stockholders entitled to such
dividend and shall be deemed to have been issued without
consideration; provided, however, that if the Company, after
fixing such record date, shall legally abandon its plan to so
issue Common Stock as a dividend, no adjustment of the
Applicable Conversion Price shall be required by reason of the
fixing of such record date.
(e) For purposes of the adjustment provided for in subsection
3(b) above, if at any time the Company shall issue any Convertible Securities,
the Company shall be deemed to have issued at the time of the issuance of such
Convertible Securities the maximum number of shares of Common Stock issuable
upon conversion of the total amount of such Convertible Securities.
(f) On the expiration, cancellation or redemption of any
Convertible Securities, the Warrant Price then in effect hereunder shall
forthwith be readjusted to such Warrant Price as would have been obtained (a)
had the adjustments made upon the issuance or sale of such expired, canceled or
redeemed Convertible Securities been made upon the basis of the issuance of only
the number of shares of Common Stock theretofore actually delivered upon the
exercise or conversion of such Convertible Securities (and the total
consideration received therefor) and (b) had all subsequent adjustments been
made on only the basis of the Warrant Price as readjusted under this subsection
3(f) for all transactions (which would have affected such adjusted Warrant
Price) made after the issuance or sale of such Convertible Securities.
(g) Anything in this Section 3 to the contrary
notwithstanding, no adjustment in the Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Warrant Price; provided, however, that any adjustments which by reason of this
subsection 3(g) are not required to be made shall be carried forward and taken
into account in making subsequent adjustments. All calculations under this
Section 3 shall be made to the nearest cent.
(h) If, at any time while this Warrant is outstanding, the
Company shall pay any dividend payable in cash or in Common Stock, shall offer
to the holders of its Common Stock for subscription or purchase by them any
shares of stock of any class or any other rights, shall enter into an agreement
to merge or consolidate with another corporation, shall propose any capital
reorganization or reclassification of the capital stock of the Company,
including any subdivision or combination of its outstanding shares of Common
Stock or there shall be contemplated a voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall cause notice thereof
to be mailed to the registered holder of this Warrant at
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its address appearing on the registration books of the Company, at least thirty
(30) days prior to the record date as of which holders of Common Stock shall
participate in such dividend, distribution or subscription or other rights or at
least thirty (30) days prior to the effective date of the merger, consolidation,
reorganization, reclassification or dissolution. Upon any adjustment of any
Warrant Price, then and in each such case the Company shall promptly deliver a
notice to the registered holder of this Warrant, which notice shall state the
Warrant Price resulting from such adjustment, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
(i) If the Company is a party to a merger or other transaction
which reclassifies or changes its outstanding Common Stock, upon consummation of
such transaction this Warrant shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of this
Warrant would have owned immediately after such transaction if the holder had
converted this Warrant at the Warrant Price in effect immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the person obligated to issue securities or deliver cash or other
assets upon exercise of this Warrant shall execute and deliver to the holder a
supplemental Warrant so providing and further providing for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided in
this Section 3. The successor company shall mail to the holder a notice
describing the supplemental Warrant.
If securities deliverable upon exercise of this Warrant, as
provided above, are themselves convertible into or exercisable for the
securities of an affiliate of a corporation formed, surviving or otherwise
affected by the merger or other transaction, that issuer shall join in the
supplemental Warrant which shall so provide. If this subsection 3(i) applies,
subsection 3(a) does not apply.
4. Charges, Taxes and Expenses. The issuance of certificates
for Warrant Shares upon any exercise of this Warrant shall be made without
charge to the holder of this Warrant for any tax or other expense in respect to
the issuance of such certificates, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued only in the name of the
holder of this Warrant.
5. Miscellaneous.
(a) The terms of this Warrant shall be binding upon
and shall inure to the benefit of any successors or assigns of the Company and
of the holder or holders hereof and of the shares of Common Stock issued or
issuable upon the exercise hereof.
(b) No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed to be a stockholder of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder of this Warrant, as such, any rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action, receive notice of meetings, receive dividends or subscription
rights, or otherwise.
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(c) Receipt of this Warrant by the holder hereof
shall constitute acceptance of an agreement to the foregoing terms and
conditions.
(d) The Warrant and the performance of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of New York wherein it was negotiated and executed and the parties
hereunder consent and agree that the State and Federal Courts which sit in the
State of New York and the County of New York shall have exclusive jurisdiction
with respect to all controversies and disputes arising hereunder.
(e) The shares issuable upon exercise of this Warrant
are entitled to the benefits of the registration rights provisions of the
Debenture and Warrant Purchase Agreement dated the date hereof among the Company
and various other parties (the "Purchase Agreement").
(f) This Warrant is subject to certain other
agreements contained in the Purchase Agreement, a copy of which is on file with
the Secretary of the Company. Shares issued upon exercise of this Warrant shall
contain a legend substantially to the same effect as the legend set forth on the
first page of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer and its corporate seal to be affixed
hereto.
Dated as of March 10, 1998
HALSEY DRUG CO., INC.
BY: /s/ Michael K. Reicher
-------------------------------
Name: Michael K. Reicher
Title: President & CEO
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SUBSCRIPTION FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXERCISE THE WARRANT)
TO: HALSEY DRUG CO., INC.
The undersigned hereby exercises the right to purchase
_________ shares of Common Stock, par value $.01 per share, covered by the
attached Warrant in accordance with the terms and conditions thereof, and
herewith makes payment of the Warrant Price for such shares in full.
__________________________________________
SIGNATURE
__________________________________________
ADDRESS
__________________________________________
DATED:________________
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NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
[ Date ]
Halsey Drug Co., Inc. Aggregate Price of $______________
a New York corporation of Warrant
1827 Pacific Street Aggregate Price Being
Brooklyn, New York 11233 Exercised: $______________
Attention:_________________
Warrant Price
(per share): $______________
Market Value (per
share): $______________
Number of Shares of
Common Stock under
this Warrant: _______________
Number of Shares of
Common Stock to be
Issued Under this
Notice: _______________
CASHLESS EXERCISE
Gentlemen:
The undersigned, the registered holder of the Warrant to
Purchase Common Stock delivered herewith ("Warrant"), hereby irrevocably
exercises such Warrant for, and purchases thereunder, shares of the Common Stock
of HALSEY DRUG CO., INC., a New York corporation, as provided below. Capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
given in the Warrant. The portion of the Aggregate Price (as hereinafter
defined) to be applied toward the purchase of Common Stock pursuant to this
Notice of Exercise is $__________, thereby leaving a remainder Aggregate Price
(if any) equal to $__________. Such exercise shall be pursuant to the net issue
exercise provisions of Section 1(b) of the Warrant; therefore, the holder makes
no payment with this Notice of Exercise. The number of shares to be issued
pursuant to this exercise shall be determined by reference to the formula in
Section 1(b) of the Warrant which requires the use of the Market Value (as
defined in Section 1(d) of the Warrant) of the Company's Common Stock on the
business day immediately preceding the day on which this Notice is received by
the Company. To the extent
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the foregoing exercise is for less than the full Aggregate Price of the Warrant,
the remainder of the Warrant representing a number of Shares equal to the
quotient obtained by dividing the remainder of the Aggregate Price by the
Warrant Price (and otherwise of like form, tenor and effect) may be exercised
under Section 1(a) of the Warrant. For purposes of this Notice the term
"Aggregate Price" means the product obtained by multiplying the number of shares
of Common Stock for which the Warrant is exercisable times the Warrant Price.
________________________________________
SIGNATURE
DATE:_________________ ________________________________________
ADDRESS
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ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO TRANSFER THE WARRANT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the right to purchase shares of Common Stock of HALSEY DRUG CO.,
INC., evidenced by the within Warrant, and does hereby irrevocably constitute
and appoint
Attorney to transfer the said Warrant on the books of the
Company, with full power of substitution.
________________________________________
SIGNATURE
________________________________________
ADDRESS
DATED:______________________
IN THE PRESENCE OF:
____________________________
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