EXHIBIT 10.3
EXECUTION FORM
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT IF SO REQUIRED BY THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
DIOMED HOLDINGS, INC.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ (the "Holder"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date of approval of the listing of the Warrant
Shares (as defined below) by the Trading Market (the "Initial Exercise Date")
and on or prior to the close of business on earlier of (i) the five year
anniversary of the Initial Exercise Date and (ii) such earlier date as the
warrant shall no longer be exercisable pursuant to the terms hereof (in either
case, the "Termination Date"), but not thereafter, to subscribe for and purchase
from Diomed Holdings, Inc., a Delaware corporation (the "Company"), up to ______
shares (the "Warrant Shares") of Common Stock, par value $0.001 per share, of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $2.50, subject to
adjustment hereunder.
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in that certain Securities Purchase Agreement (the "Purchase
Agreement"), dated September 30, 2005, by and among the Company and the
purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise of Warrant. Subject to the provisions hereof,
including, without limitation, the restrictions set forth in Section 2(d),
exercise of the purchase rights represented by this Warrant may be made,
in whole or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the Company of a
duly executed facsimile copy of the Notice of Exercise Form annexed hereto
(or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company); provided, that within three
Trading Days of the date said Notice of Exercise is delivered to the
Company, the Holder shall have surrendered this Warrant to the Company and
the Company shall have received (i) payment of the aggregate Exercise
Price of the shares thereby purchased by wire transfer or cashier's check
drawn on a United States bank or (ii) if the Holder is effectuating a
cashless exercise pursuant to Section 2(c), a written notice of an
election to effect a cashless exercise for the Warrant Shares specified in
the Notice of Exercise Form duly executed by the Holder.
(b) Exercise Price. The Exercise Price of each share of Common Stock
under this Warrant shall be $2.50, subject to adjustment hereunder.
(c) Cashless Exercise. This Warrant may also be exercised at by
means of a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date
of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.
Where:
"VWAP" means, for any security as of any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date on the OTC Bulletin Board; (c)
if the Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets" published
by the National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the holders of the Preferred Stock and
reasonably acceptable to the Corporation, where "Trading Day" means a day on
which the Common Stock is traded on a Trading Market, and "Trading Market" means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange or the Nasdaq National Market.
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(d) Restrictions on Holder's Ownership. Unless the Holder delivers to the
Company irrevocable written notice prior to the date of issuance hereof or
sixty-one (61) days prior to the effective date of such notice that this Section
2(d) shall not apply to such Holder, in no event shall the Holder have the right
to exercise any portion of this Warrant, pursuant to Section 2(a) or otherwise,
to the extent that after giving effect to such issuance after exercise, the
Holder (together with the Holder's affiliates), as set forth on the applicable
Notice of Exercise, would beneficially own in excess of [4.99%][9.99%][NOTE:
INSERT APPROPRIATE PERCENTAGE BASED ON WHICH HOLDER IS RECEIVING THE WARRANT.]
of the total number of shares of Common Stock outstanding immediately after
giving effect to such issuance. For purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act, it being acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section 13(d) of the
Exchange Act and the Holder is solely responsible for any schedules required to
be filed in accordance therewith. To the extent that the limitation contained in
this Section 2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities of the Company owned by the Holder)
and of which a portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities of the Company owned by such Holder) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as
reflected in (x) the Company's most recent Form 10-QSB or Form 10-KSB, as the
case may be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of the Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.
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(e) Mechanics of Exercise.
(i) Authorization of Warrant Shares; Listing. The Company covenants
that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously with such issue). The Company
covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant (without giving effect
to the restrictions in Section 2(d)). The Company further covenants that
its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company will
take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed. The Company shall promptly
secure the listing or quotation of the shares of Common Stock issuable
upon exercise of this Warrant upon each national securities exchange or
automated or electronic quotation system, if any, upon which shares of
Common Stock are then listed or quoted or become listed or quoted (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
or quoted, such listing or quotation of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company
shall so list or apply for quotation on each national securities exchange
or automated or electronic quotation system, as the case may be, and shall
maintain such listing or quotation of, any other shares of capital stock
of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed or quoted on such national
securities exchange or automated or electronic quotation system. The
Company shall, on or before the date of issuance of any Warrant Shares,
take such actions as the Company shall reasonably determine are necessary
to qualify the Warrant Shares for, or obtain exemption for the Warrant
Shares for, sale to the holder of this Warrant upon the exercise hereof
under applicable securities or "blue sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the
holder of this Warrant prior to such date; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this provision, (ii) subject
itself to general taxation in any such jurisdiction or (iii) file a
general consent to service of process in any such jurisdiction.
(ii) Delivery of Certificates Upon Exercise. The Company shall
instruct its transfer agent to deliver to the Holder certificates for
shares purchased hereunder within two Trading Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this Warrant and
payment of the aggregate Exercise Price (unless a cashless exercise) as
set forth above ("Warrant Share Delivery Date"). This Warrant shall be
deemed to have been exercised as of the close of business on the date the
Notice of Exercise form and the payment of the Exercise Price or notice of
cashless exercise, as applicable, is received by the Company or, if such
date is not a business day, on the next succeeding business day, and the
Warrant Shares shall be deemed to have been issued, and the Holder or any
other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of such
date.
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(iii) Delivery of New Warrants Upon Exercise. If this Warrant shall
have been exercised in part, the Company shall, as soon as practicable
after the transfer agent's delivery of the certificate or certificates
representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
(iv) Exercise Default. If, at any time, a holder of this Warrant
submits this Warrant, a Notice of Exercise and payment to the Company of
the Exercise Price for each of the Warrant Shares specified in the Notice
of Exercise (including pursuant to a cashless exercise), and the Company
fails for any reason to deliver, on or prior to the fourth business day
following the Warrant Share Delivery Date for such exercise, the number of
shares of Common Stock to which the holder is entitled upon such exercise
(an "Exercise Default"), then the Company shall pay to the holder payments
("Exercise Default Payments") for an Exercise Default in the amount of (i)
(N/365), multiplied by (ii) the amount by which the Market Price of the
Common Stock on the date the Notice of Exercise giving rise to the
Exercise Default is transmitted in accordance with the terms hereof (the
"Exercise Default Date") exceeds the Exercise Price in respect of such
Warrant Shares, multiplied by (iii) the number of shares of Common Stock
the Company failed to so deliver in such Exercise Default, multiplied by
(iv) R, where N equals the number of days from the Exercise Default Date
to the date that the Company effects the full exercise of this Warrant
which gave rise to the Exercise Default and R equals the lower of 0.18
(eighteen percent) and the highest interest rate per annum permitted by
applicable law, expressed as a decimal. The accrued Exercise Default
Payment for each calendar month shall be paid in cash and shall be made to
the holder by the fifth day of the month following the month in which it
has accrued. Nothing herein shall limit the holder's right to pursue
actual damages for the Company's failure to maintain a sufficient number
of authorized shares of Common Stock as required pursuant to the terms
hereof or to otherwise issue shares of Common Stock upon exercise of this
Warrant in accordance with the terms hereof, and the holder shall have the
right to pursue all remedies available at law or in equity (including a
decree of specific performance and/or injunctive relief).
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(v) No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.
(vi) Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
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(a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
(D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company or (E) takes any similar action having the effect
of increasing or decreasing the number of shares of Common Stock outstanding
immediately prior to the taking effect of such action, then in each case the
Exercise Price shall be multiplied by a fraction: (i) the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Distributions. If, at any time this Warrant is outstanding, the
Company declares or makes any distribution of its assets (or rights to acquire
its assets) pro rata to the record holders of any class of Common Stock, whether
as a partial liquidating dividend, by way of return of capital or otherwise,
(including any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder shall be entitled, upon any
exercise of this Warrant after the date of record for determining stockholders
entitled to such Distribution (or if no such record is taken, the date on which
such Distribution is declared or made), to receive the amount of such assets
which would have been payable to the Holder with respect to the Warrant Shares
issuable upon such exercise (without giving effect to the restrictions contained
in Section 2(d)) had the Holder been the holder of such Warrant Shares on the
record date for the determination of stockholders entitled to such Distribution
(or if no such record is taken, the date on which such Distribution is declared
or made).
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(c) Convertible Securities and Purchase Rights. If, at any time while this
Warrant is outstanding, the Company issues pro rata to the record holders of any
class of Common Stock any securities or other instruments which are convertible
into or exercisable or exchangeable for Common Stock ("Convertible Securities")
or options, warrants or other rights to purchase or subscribe for Common Stock
or Convertible Securities ("Purchase Rights"), whether or not such Convertible
Securities or Purchase Rights are immediately convertible, exercisable or
exchangeable, then the Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to
receive such Convertible Securities or Purchase Rights (or if no such record is
taken, the date on which such Convertible Securities or Purchase Rights are
issued), to receive the aggregate number of Convertible Securities or Purchase
Rights which the Holder would have received with respect to the Warrant Shares
issuable upon such exercise (without giving effect to the limitations contained
in Section 2(d)) had the Holder been the holder of such Warrant Shares on the
record date for the determination of stockholders entitled to receive such
Convertible Securities or Purchase Rights (or if no such record is taken, the
date on which such Convertible Securities or Purchase Rights were issued). If
the right to exercise or convert any such Convertible Securities or Purchase
Rights would expire in accordance with their terms prior to the exercise of this
Warrant, then the terms of such Convertible Securities or Purchase Rights shall
provide that such exercise or convertibility right shall remain in effect until
30 days after the date the Holder receives such Convertible Securities or
Purchase Rights pursuant to the exercise hereof.
(d) Subsequent Equity Sales.
(i) If at any time while this Warrant is issued and outstanding,
other than in an Exempt Issuance, the Company shall offer, sell, grant any
option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce or be deemed to
have made any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents (as defined
below) entitling any Person to acquire shares of Common Stock at an
effective price per share less than the then Exercise Price (such lower
price, with respect to each class of securities being issued, the "Base
Share Price" of such securities and each such issuance a "Dilutive
Issuance"), as adjusted hereunder, then the Exercise Price shall be
reduced as follows:
(A) prior to the time when the Company obtains Stockholder Approval,
the Exercise Price shall be reduced to equal the greater of (1) the Base
Share Price and (2) $2.12, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement (such amount set forth in this subclause (2), the "Warrant Floor
Price"); or
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(B) after the time when the Company obtains Stockholder Approval,
the Exercise Price shall be reduced to an amount that is equal to the Base
Share Price; provided, if the Base Share Price is less than the Warrant
Floor Price, then the Exercise Price shall be adjusted by (x) reducing the
Exercise Price to the Warrant Floor Price and (y) further reducing the
Exercise Price to the rate determined by the following calculation:
((FULLY DILUTED SHARES OUTSTANDING BEFORE X ADJUSTED EXERCISE PRICE)
+ TOTAL CONSIDERATION)
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FULLY DILUTED SHARES OUTSTANDING AFTER
Where:
"Fully Diluted Shares Outstanding Before" shall mean the total number of shares
of Common Stock outstanding immediately prior to the consummation of such
Dilutive Issuance, assuming the issuance of all shares of Common Stock
underlying Common Stock Equivalents then outstanding;
"Common Stock Equivalents" shall mean any securities of the Company or its
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any Purchase Rights or Convertible
Securities, including without limitation the Preferred Stock and the Warrants;
"Adjusted Exercise Price" shall mean the lesser of the Warrant Floor Price and
the Exercise Price in effect immediately prior to the Dilutive Issuance;
"Total Consideration" shall mean the sum of all consideration received by the
Company in the Dilutive Issuance, calculated pursuant to Section 3(d)(ii); and
"Fully Diluted Shares Outstanding After" shall mean the total number of shares
of Common Stock outstanding immediately after the consummation of such Dilutive
Issuance, assuming the issuance of all shares of Common Stock underlying Common
Stock Equivalents then outstanding.
In each instance of an adjustment pursuant to the foregoing clauses (A) and (B),
such adjustment shall be made whenever Common Stock or Common Stock Equivalents
are issued in a Dilutive Issuance. The Company shall notify the Holder in
writing, no later than five (5) Trading Days following the consummation of a
Dilutive Issuance, indicating therein the applicable issuance price and other
pricing terms. For the avoidance of doubt, in no event shall the Exercise Price
after giving effect to any Dilutive Issuance be greater than the Exercise Price
in effect prior to such Dilutive Issuance, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur in connection with the Dilutive
Issuance
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(ii) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under clause (i) of this
Section 3(d), the following will be applicable:
(A) Issuance of Purchase Rights. If the Company issues or
sells any Purchase Rights, whether or not immediately exercisable,
and the price per share for which Common Stock is issuable upon the
exercise of such Purchase Rights (and the price of any conversion of
Convertible Securities, if applicable) is less than the Exercise
Price in effect on the date of issuance or sale of such Purchase
Rights, then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Purchase Rights (assuming
full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such
Purchase Rights, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For purposes of
the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Purchase Rights" shall be
determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale
of all such Purchase Rights, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
exercise of all such Purchase Rights, plus, in the case of
Convertible Securities issuable upon the exercise of such Purchase
Rights, the minimum aggregate amount of additional consideration
payable upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in
clause (ii)(B) of this Section 3(d)) at the time such Convertible
Securities first become convertible, exercisable or exchangeable, by
(y) the maximum total number of shares of Common Stock issuable upon
the exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable). No
further adjustment to the Exercise Price shall be made upon the
actual issuance of such Common Stock upon the exercise of such
Purchase Rights or upon the conversion, exercise or exchange of
Convertible Securities issuable upon exercise of such Purchase
Rights.
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(B) Issuance of Convertible Securities. If the Company issues
or sells any Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the price per share
for which Common Stock is issuable upon such conversion, exercise or
exchange is less than the Exercise Price in effect on the date of
issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion,
exercise or exchange of all such Convertible Securities shall, as of
the date of the issuance or sale of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. If the Convertible Securities so
issued or sold do not have a fluctuating conversion or exercise
price or exchange ratio, then for the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon such conversion, exercise or exchange" shall be determined by
dividing (x) the total amount, if any, received or receivable by the
Company as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion, exercise or exchange thereof (determined in accordance
with the calculation method set forth in this clause (ii)(B) of this
Section 3(d)) at the time such Convertible Securities first become
convertible, exercisable or exchangeable, by (y) the maximum total
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities. If the
Convertible Securities so issued or sold have a fluctuating
conversion or exercise price or exchange ratio (a "Variable Rate
Convertible Security"), then for purposes of the next preceding
sentence, the "price per share for which Common Stock is issuable
upon such conversion, exercise or exchange" shall be deemed to be
the lowest price per share which would be applicable (assuming all
holding period and other conditions to any discounts contained in
such Variable Rate Convertible Security have been satisfied) if the
conversion price of such Variable Rate Convertible Security on the
date of issuance or sale thereof was seventy-five percent (75%) of
the actual conversion price on such date (the "Assumed Variable
Market Price"), and, further, if the conversion price of such
Variable Rate Convertible Security at any time or times thereafter
is less than or equal to the Assumed Variable Market Price last used
for making any adjustment under this Section 3(d) with respect to
any Variable Rate Convertible Security, the Exercise Price in effect
at such time shall be readjusted to equal the Exercise Price which
would have resulted if the Assumed Variable Market Price at the time
of issuance of the Variable Rate Convertible Security had been
seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence. No further adjustment to the
Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible
Securities.
(C) Change in Option Price or Conversion Rate. If there is a
change at any time in (x) the amount of additional consideration
payable to the Company upon the exercise of any Purchase Rights; (y)
the amount of additional consideration, if any, payable to the
Company upon the conversion, exercise or exchange of any Convertible
Securities; or (z) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed
to protect against dilution), the Exercise Price in effect at the
time of such change shall be readjusted to the Exercise Price which
would have been in effect at such time had such Purchase Rights or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion, exercise or exchange
rate, as the case may be, at the time initially issued or sold.
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(D) Calculation of Consideration Received. If any Common
Stock, Purchase Rights or Convertible Securities are issued or sold
for cash, the consideration received therefor will be the amount
received by the Company therefor (in the case of an underwritten
public offering, after deduction of all underwriting discounts or
allowances) in connection with such issuance, grant or sale. In case
any Common Stock, Purchase Rights or Convertible Securities are
issued or sold for a consideration part or all of which shall be
other than cash, including in the case of a strategic or similar
arrangement in which the other entity will provide services to the
Company, purchase services from the Company or otherwise provide
intangible consideration to the Company, the amount of the
consideration other than cash received by the Company (including the
net present value of the consideration expected by the Company for
the provided or purchased services) shall be the fair market value
of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Purchase Rights or Convertible
Securities are issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Purchase Rights
or Convertible Securities, as the case may be. Notwithstanding
anything else herein to the contrary, if Common Stock, Purchase
Rights or Convertible Securities are issued or sold in conjunction
with each other as part of a single transaction or in a series of
related transactions, the Holder may elect to determine the amount
of consideration deemed to be received by the Company therefor by
deducting the fair value of any type of securities (the "Disregarded
Securities") issued or sold in such transaction or series of
transactions. If the Holder makes an election pursuant to the
immediately preceding sentence, no adjustment to the Exercise Price
shall be made pursuant to this Section 3(d) for the issuance of the
Disregarded Securities or upon any conversion, exercise or exchange
thereof. The Company shall calculate, using standard commercial
valuation methods appropriate for valuing such assets, the fair
market value of any consideration other than cash or securities;
provided, however, that if the Holder does not agree to such fair
market value calculation within three business days after receipt
thereof from the Company, then such fair market value shall be
determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company
and reasonably acceptable to the Holder, with the costs of such
appraisal to be borne by the Company.
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(e) Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock outstanding as
of a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) outstanding.
(f) Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 3, the number of shares of
Common Stock issuable upon exercise of this Warrant at each such Exercise Price
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant at such Exercise Price immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
(g) Notice to Holders.
(i) Adjustment to Exercise Price. Whenever the Exercise Price
is adjusted pursuant to this Section 3, the Company shall promptly
mail to each Holder notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the
case of a Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the case of
an MFN Transaction (as defined in the Purchase Agreement).
(ii) Notice to Allow Exercise by the Holder. If (A) the
Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall
cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least ten
business days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder is entitled to exercise this Warrant during the
ten business day period commencing the date of such notice to the
effective date of the event triggering such notice.
12
(h) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects a Change of Control (as defined below in
this Section 3(h)), (B) there shall occur any liquidation, dissolution or
winding up of the Company (other than a transaction constituting a Change of
Control), (C) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions (other than a transaction
constituting a Change of Control), (D) the Company shall merge or consolidate
with or into, or engage in any other business combination with, any other person
or entity, in any case, which results in either (x) the holders of the voting
securities of the Company immediately prior to such transaction holding or
having the right to direct the voting of fifty percent (50%) or less of the
total outstanding voting securities of the Company or such other surviving or
acquiring person or entity immediately following such transaction or (y) the
members of the board of directors or other governing body of the Company
comprising fifty percent (50%) or less of the members of the board of directors
or other governing body of the Company or such other surviving or acquiring
person or entity immediately following such transaction, (other than a
transaction constituting a Change of Control), (E) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property (other than a transaction constituting a
Change of Control), or (F) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property (any such case, a "Fundamental Transaction"), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise absent such
Fundamental Transaction, upon exercise of this Warrant, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and the such shares of stock, securities and/or
other property as would have been issued or payable in such Fundamental
Transaction with respect to or in exchange for the number of Warrant Shares
which would have been issuable upon exercise had such Fundamental Transaction
not taken place (without giving effect to the limitations on ownership contained
13
in Section 2(d)) (the "Alternate Consideration"), and, in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
Holder) shall be made with respect to the rights and interests of the Holder to
the end that the economic value of this Warrant is in no way diminished by such
Fundamental Transaction and that the provisions hereof (including, without
limitation, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is not the Company, an immediate
adjustment of the Exercise Price and Warrant Shares so that the Exercise Price
and Warrant Shares immediately after the Fundamental Transaction reflects the
same relative value as compared to the value of the surviving entity's common
stock that existed between the Exercise Price and the Warrant Shares and the
value of the Company's Common Stock immediately prior to such Fundamental
Transaction) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
exercise thereof. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(h) and ensuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary set forth in this Section 3(h), in the
event of a transaction constituting a Change of Control, if the Company is
unable, after using its best efforts, to cause the successor to the Company or
surviving entity in such Change of Control to issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the Holder's right to
exercise such warrant into Alternate Consideration, then the Company shall pay
the Holder in cash (the "Change of Control Consideration") an amount equal to
the intrinsic value of the Warrant, as determined by the mutual agreement of the
Company and the Holder. The Company shall tender the Change of Control
Consideration to the Holder at the same time consideration is delivered to the
Company's stockholders pursuant to the Change of Control. For purposes of this
Warrant, "Change of Control" shall mean the occurrence of either of the
following events:
(i) the Company shall sell, convey or dispose of all or
substantially all of its assets (the presentation of any such
transaction for stockholder approval being conclusive evidence that
such transaction involves the sale of all or substantially all of
the assets of the Company); or
(ii) merge or consolidate with or into, or engage in any other
business combination with, any other person or entity, in any case,
which results in either (x) the holders of the voting securities of
the Company immediately prior to such transaction holding or having
the right to direct the voting of fifty percent (50%) or less of the
total outstanding voting securities of the Company or such other
surviving or acquiring person or entity immediately following such
transaction or (y) the members of the board of directors or other
governing body of the Company comprising fifty percent (50%) of less
of the members of the board of directors or other governing body of
the Company or such other surviving or acquiring person or entity
immediately following such transaction.
14
(i) Exempt Issuance. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid
or issued under this Section 3 in respect of an Exempt Issuance.
(j) Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors,
provided, that the Exercise Price as so reduced is not less than the Warrant
Floor Price unless Stockholder Approval has been obtained.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities
laws and the conditions set forth in Sections 4(d) and 5(a) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.
(b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
15
(d) Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the Holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
(a) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
(b) No Rights or Liabilities as a Stockholder Until Exercise. This Warrant
does not entitle the Holder to any voting rights or other rights as a
stockholder of the Company prior to the exercise hereof. No provision of this
Warrant, in the absence of affirmative action by the holder hereof to purchase
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
(d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
16
(e) Protection of Holder's Rights. Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (i) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (iii) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.
(f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
(g) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
(h) Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of the Holder shall operate as a
waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(i) Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
17
(j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(k) Remedies. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(l) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of the Holder. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall
be enforceable by any such Holder or holder of Warrant Shares.
(m) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(n) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
[SIGNATURE PAGE FOLLOWS]
18
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: September 30, 2005
DIOMED HOLDINGS, INC.
By:
---------------------------------------
Name: James A. Wylie, Jr.
Title: Chief Executive Officer
19
NOTICE OF EXERCISE
TO: Diomed Holdings, Inc.
(1)The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2)Payment shall take the form of (check applicable box):
|_| lawful money of the United States; or
|_| the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3)Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
The Warrant Shares shall be delivered to the following:
----------------------------------------
----------------------------------------
----------------------------------------
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities
Act of 1933, as amended.
(5) Limitations on Ownership. The undersigned hereby certifies that after
giving effect to the exercise of this Warrant hereby and the issuance of the
Warrant Shares hereunder, the undersigned will not be in violation of the
limitations on ownership described in Section 2(d) of this Warrant.
[PURCHASER]
By:
---------------------------------------
Name:
Title:
Dated:
---------------------------------------
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
whose address is
- --------------------------------------------------------------
- -------------------------------------------------------------------------------.
- --------------------------------------------------------------------------------
Dated:
-----------------,---------------
Holder's Signature:
-------------------------------------------
Holder's Address:
-------------------------------------------
-------------------------------------------
Signature Guaranteed:
----------------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.