Exhibit 10.3
VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON THE EARLIER OF (A) MAY 1,
1998, (B) THE EARLY EXPIRATION DATE (AS HEREINAFTER DEFINED) OR (C) THE
FINAL REDEMPTION DATE (AS HEREINAFTER DEFINED).
NEITHER THIS WARRANT NOR THE WARRANT SHARES (AS HEREINAFTER DEFINED) HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE WARRANT SHARES MAY BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF EFFECTIVE
REGISTRATION STATEMENTS UNDER FEDERAL AND STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO PHARMACEUTICAL RESOURCES, INC. THAT THE
TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN
EXCHANGE FOR THIS WARRANT. THE WARRANT SHARES ARE ALSO SUBJECT TO THE
LIMITATIONS ON TRANSFER PURSUANT TO A STOCK PURCHASE AGREEMENT DATED MARCH
25, 1995, BETWEEN PHARMACEUTICAL RESOURCES, INC. AND THE HOLDER HEREOF (A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY).
PHARMACEUTICAL RESOURCES, INC.
WARRANT TO PURCHASE COMMON STOCK
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MAY 1, 1995
FOR VALUE RECEIVED, PHARMACEUTICAL RESOURCES, INC., a New Jersey
corporation (the "Company"), hereby certifies that CLAL PHARMACEUTICAL
INDUSTRIES LTD., a corporation formed under the laws of the State of Israel (the
"Holder"), together with its permitted assigns, is entitled, subject to the
provisions of this Warrant, to purchase from the Company up to NINE HUNDRED AND
THIRTY SIX THOUSAND, TWO HUNDRED AND EIGHTY TWO (936,282) shares of common
stock, par value $.01 per share, of the Company ("Common Shares") at a price
(the "Exercise Price") of (i) Ten Dollars ($10.00) per share during the period
commencing on the date hereof and expiring at 5:00 P.M., New York City time, on
the first anniversary of the date hereof (the "First Period") or (ii) Eleven
Dollars ($11.00) per share during the period commencing on the day after the
first anniversary of the date hereof and expiring at 5:00 P.M., New York City
time, on the third anniversary of the date hereof (the "Second Period"). This
Warrant is being
executed and delivered by the Company in connection with a Stock Purchase
Agreement dated March 25, 1995, between the Company and the Holder (the "Stock
Purchase Agreement").
SECTION 1. Exercise of Warrant. Subject to the provisions hereof,
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this Warrant may be exercised in whole or in part at any time, or from time to
time, during the period commencing on the date hereof and expiring at 5:00 p.m.,
New York City time, on the first to occur of (a) the third anniversary of the
date hereof, (b) the Early Expiration Date or (c) the Final Redemption Date, by
presentation and surrender of this Warrant to the Company at its principal
office, with the Warrant Exercise Form attached hereto duly executed and
accompanied by payment (either in cash or by United States certified or official
bank check payable to the order of the Company) of the Exercise Price for the
number of shares specified in such Form. Upon receipt thereof, the Company
shall, as soon as practicable but in any case within five business days, cause
to be delivered to the Holder one or more certificates representing the
aggregate number of fully paid and nonassessable shares of Common Stock issuable
upon exercise as specified in the Form. If this Warrant should be exercised or
redeemed in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder. All
such Warrants shall be dated the date of this Warrant. The shares issuable upon
exercise of this Warrant, as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Shares". The Warrant Shares and the Exercise
Price may be adjusted from time to time as hereinafter set forth.
SECTION 2. Reservation of Shares. The Company will reserve for
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issuance and delivery upon exercise of this Warrant all authorized but unissued
Common Shares or other shares of capital stock of the Company (and other
securities and property) from time to time receivable upon exercise of this
Warrant.
SECTION 3. Fractional Shares. The Company shall not be required to
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issue certificates representing fractions of shares, and it shall not be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the Company and the Holder that all fractional interests shall be
eliminated by rounding up or down to the closest whole number.
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SECTION 4. Restrictions on Transfer; Registration.
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4.1 Limited Transferability. This Warrant may not be sold,
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transferred, pledged or otherwise disposed of (collectively, "Transferred") by
the Holder, except to any successor firm or corporation of the Holder and shall
be so transferable only upon the books of the Company. The Company may treat
the registered holder of this Warrant as it appears on the Company's books at
any time as the Holder for all purposes.
4.2 Compliance with Stock Purchase Agreement. No Warrant Shares may
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be transferred except in compliance with Section 11.1 of the Stock Purchase
Agreement.
4.3 Legend. Each certificate for the Warrant Shares shall be
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endorsed with the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
EFFECTIVE REGISTRATION STATEMENTS UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO
LIMITATIONS ON TRANSFER PURSUANT TO A STOCK PURCHASE AGREEMENT DATED MARCH
25, 1995, BETWEEN THE COMPANY AND THE HOLDER HEREOF (A COPY OF WHICH IS ON
FILE AT THE OFFICES OF THE COMPANY)."
4.4 Registration. The Warrant Shares shall have the benefit of a
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Registration Rights Agreement, dated the date of this Warrant, between the
Company and the Holder.
4.5 Listing. The Company shall not be obligated to deliver any
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Warrant Shares unless and until such Warrant Shares shall have been listed on
each securities exchange or other self-regulatory body on which the Common
Shares may then be listed or until there shall have been qualification under or
compliance with applicable Federal or state laws. The Company shall use
reasonable efforts to obtain such listing, qualification and compliance.
SECTION 5. Rights of the Holder. The Holder shall not, by virtue
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hereof, be entitled to any rights of a shareholder of the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in
this Warrant.
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SECTION 6. Anti-Dilution Provisions.
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6.1. Adjustments for Stock Dividends; Combinations, Etc. In case the
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Company shall do any of the following (each, an "Event"):
(a) declare a dividend or other distribution on its Common Shares
payable in Common Shares of the Company;
(b) effect a subdivision of its outstanding Common Shares into a
greater number of Common Shares (by reclassification, stock split or
otherwise than by payment of a dividend in Common Shares);
(c) effect a combination of its outstanding Common Shares into a
lesser number of Common Shares (by reclassification, reverse split or
otherwise);
(d) issue by reclassification, exchange or substitution of its Common
Shares any shares of capital stock of the Company; or
(e) effect any other transaction having a similar effect,
then the Exercise Price in effect at the time of the record date for such Event
shall be adjusted to a price determined by multiplying such Exercise Price by a
fraction, the numerator of which shall be the number of Common Shares
outstanding immediately prior to such Event and the denominator of which shall
be the number of Common Shares outstanding immediately after such Event. Each
such adjustment of the Exercise Price shall be calculated to the nearest cent.
No such adjustment shall be made in an amount less than One Cent ($.01), but any
such amount shall be carried forward and shall be given effect in connection
with the next subsequent adjustment. Such adjustment shall be made successively
whenever any Event shall occur.
6.2 Adjustment in the Number of Warrant Shares. Whenever the
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Exercise Price shall be adjusted pursuant to Section 6.1 hereof, the number of
Warrant Shares which the Holder may purchase upon exercise of the Warrant shall
be adjusted, to the nearest full share, by multiplying such number of Warrant
Shares immediately prior to such adjustment by a fraction, the numerator of
which shall be the Exercise Price immediately prior to such adjustment and the
denominator of which shall be the Exercise Price immediately thereafter.
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6.3 Adjustment for Consolidation or Merger. In case of any
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consolidation or merger to which the Company shall be a party, other than a
consolidation or merger in which the Company shall be the surviving or
continuing corporation, or in case of any sale or conveyance to another entity
of all or substantially all of the property of the Company, or in the case of
any statutory exchange of securities with another entity (including any exchange
effected in connection with a merger of any other corporation with the Company),
the Holder shall have the right thereafter to convert this Warrant into the kind
and amount of securities, cash or other property which it would have owned or
have been entitled to receive immediately after such consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such transaction and, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 6 with respect to the rights and interests thereafter of
the Holder to the end that the provisions set forth in this Section 6 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant. Notice of any such
consolidation, merger, statutory exchange, sale or conveyance, and of the
provisions proposed to be adjusted, shall be mailed to the Holder not less than
thirty days prior to such event.
SECTION 7. Redemption.
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7.1 Optional Redemption. The Company may, at any time after December
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1, 1995, and from time to time, elect to redeem all or any portion of this
Warrant at a redemption price of One Cent ($.01) per share (the "Redemption
Price") in the event that the average of the closing sale prices per share of
the Common Shares on The New York Stock Exchange for any forty-five consecutive
trading days shall equal or exceed the Target Price (as hereinafter defined).
For purposes hereof, the "Target Price" shall be Seventeen Dollars ($17.00) per
share until the first anniversary of the date hereof and thereafter shall be
Eighteen Dollars ($18.00) per share. The Target Price shall be subject to
adjustment in the manner set forth in Section 6.1 if any of the events set forth
therein shall occur. Following any redemption pursuant to this Section 7.1, a
further forty-five consecutive day trading period in which the closing sale
prices per share of the Common Shares on the New York Stock Exchange shall equal
or exceed the Target Price shall apply to any further right to redemption by the
Company.
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7.2 Redemption After Sale of Shares. The Company may elect to redeem
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all or a portion of this Warrant at the Redemption Price at any time after the
Holder shall hold less than 8% of the issued and outstanding Common Shares.
7.3 Redemption Notice. If the Company shall elect to redeem this
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Warrant or any portion thereof pursuant to Sections 7.1 or 7.2 hereof, notice of
redemption shall be given to the Holder not less than thirty days prior to the
date fixed by the Company for redemption (the "Redemption Date"). Such notice
shall specify the portion of the Warrant to be redeemed, the reason for the
redemption, the Redemption Date and the Redemption Price. Such notice shall
also state that payment of such Redemption Price will be made at the principal
office of the Company, upon presentation and surrender of this Warrant within
thirty days following the Redemption Date and that the right to exercise this
Warrant (to the extent redeemed) shall terminate at 5:00 P.M., New York City
time, on the Redemption Date. "Final Redemption Date" shall mean the Redemption
Date fixed by the Company for redemption of the remaining portion of this
Warrant.
SECTION 8. Early Expiration Date. Notwithstanding anything to the
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contrary contained herein, this Warrant shall expire on the second anniversary
of the date hereof and shall cease to be exercisable, in whole or in part, after
such date, if the Company's net income after tax, as set forth on the Company's
year-end audited financial statements and as adjusted pursuant to this Section
8, for its fiscal year ended September 28, 1996, shall exceed $5,000,000 (the
"Early Expiration Date"). The Company's net income after tax, for purposes of
this Section 8, shall be recomputed to (a) exclude the amount of any
extraordinary items of income or loss determined in accordance with generally
accepted accounting principles in the United States, and (b) subtract the
amount, if any, by which $6,500,000 exceeds the amount of the Company's research
and development expenses, as shown on its year-end audited financial statements
for its 1996 fiscal year (exclusive of any amounts included in such research and
development expenses attributable to the Company's investment in the joint
venture formed pursuant to that certain Joint Venture Agreement, dated as of the
date hereof between the Company and the Holder).
SECTION 9. Increase in Exercise Price. If the requisite number of
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shareholders of the Company shall approve the Proposal (as such term is defined
in the Stock Purchase Agreement) then, as of the date of such approval, the
Exercise Price shall be automatically increased to Eleven Dollars ($11.00) per
share during the First Period
6
and Twelve Dollars ($12.00) per share during the Second Period.
SECTION 10. Reduction in Warrant Shares. If the Holder shall, at any
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time and from time to time after the date hereof, purchase or acquire, in open
market transactions, any number of Securities (as hereinafter defined) in
accordance with Section 11.2(b) of the Stock Purchase Agreement, the number of
Warrant Shares issuable upon exercise of this Warrant shall, as of the date of
such acquisition, be reduced in the manner specified in said Section 11.2(b) of
the Stock Purchase Agreement. For the purposes hereof, "Securities" shall mean
and include Common Shares, and any rights, options, warrants or other securities
of the Company exercisable or exchangeable for, or convertible into Common
Shares.
SECTION 11. Fully Paid Shares; Taxes. The Company agrees that the
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Common Shares represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant in accordance with the terms hereof
shall, at the time of such delivery, be validly issued, fully paid and
nonassessable, free and clear of all liens, pledges, options, claims or other
encumbrances. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp, original issue or similar
taxes (but not including any income taxes) which may be payable in respect of
the issue of any Warrant Shares or certificates therefor.
SECTION 12. Lost, Stolen or Destroyed Warrants. In the event that
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the Holder shall notify the Company that this Warrant has been lost, stolen or
destroyed and either (a) provides a letter, in form satisfactory to the Company,
to the effect that it shall indemnify the Company from any loss incurred by the
Company in connection therewith, and/or (b) provides an indemnity bond in such
amount as shall be reasonably required by the Company, the Company having the
option of electing either (a) or (b) or both, the Company may, in its sole
discretion, accept such letter and/or indemnity bond in lieu of the surrender of
this Warrant as required by Section 1 hereof.
SECTION 13. Notices. All notices hereunder shall be in writing and
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shall be given: (a) if to the Company, at One Ram Ridge Road, Spring Valley, New
York 10977 (attention: Kenneth I. Sawyer), fax number: (914) 425-5097, or such
other address or fax number as the Company has designated in writing to the
Holder, or (b) if to the Holder, at Clal House, 5 Druyanov Street, Tel Aviv
63143, Israel (attention: Zeev Zahavi), fax number: (011-972-3) 293633, with a
copy to Proskauer Rose Goetz & Mendelsohn
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LLP, 1585 Broadway, New York, New York 10036 (attention: Jeffrey A. Horwitz,
Esq.), fax number: (212) 969-2900, or such other address or fax number as the
Holder shall have designated in writing to the Company. Any notice shall be
deemed to have been given if personally delivered or sent by express commercial
courier or delivery service or by telegram, telefax, telex or facsimile
transmission. Any notice given in any other manner shall be deemed given when
actually received.
SECTION 14. Amendments; Waiver. This Warrant may not be amended or
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terminated, and no provision hereof may be waived, except pursuant to a written
instrument executed by the Company and the Holder.
SECTION 15. Headings. The headings of the Sections of this Warrant
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have been inserted for convenience of reference only and shall not be deemed to
be a part of this Warrant.
SECTION 16. Applicable Law. This Warrant is issued under, and shall
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be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed wholly within.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its duly authorized officer, on May 1,
1995.
PHARMACEUTICAL RESOURCES, INC.
By /s/Kenneth I. Sawyer
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Kenneth I. Sawyer
President
Attest:
/s/Robert I. Edinger
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Robert I. Edinger
Secretary
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PHARMACEUTICAL RESOURCES, INC.
WARRANT EXERCISE FORM
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The undersigned hereby irrevocably elects to exercise the within
Warrant dated _____________, 1995, and expiring on ______________, 1998, to the
extent of purchasing ___________ shares of common stock of Pharmaceutical
Resources, Inc. The undersigned hereby makes a payment of $__________ in
payment therefor.
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Name of Holder
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Signature of Holder
or Authorized Representative
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Name and Title of Authorized
Representative
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Address of Holder
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Date