Attached files
file | filename |
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8-K - FORM 8-K - VERITEQ | c56149e8vk.htm |
EX-1.1 - EX-1.1 - VERITEQ | c56149exv1w1.htm |
EX-5.1 - EX-5.1 - VERITEQ | c56149exv5w1.htm |
EX-99.1 - EX-99.1 - VERITEQ | c56149exv99w1.htm |
EX-10.1 - EX-10.1 - VERITEQ | c56149exv10w1.htm |
EXHIBIT
10.2
[FORM OF WARRANT]
DIGITAL ANGEL CORPORATION
Warrant To Purchase Common Stock
Warrant No.:
Date of Issuance: February , 2010 (Issuance Date)
Date of Issuance: February , 2010 (Issuance Date)
Digital Angel Corporation, a Delaware corporation (the Company), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
[IROQUOIS MASTER FUND LTD.], [OTHER BUYERS], the registered holder hereof or its permitted assigns
(the Holder), is entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the Warrant), at any time or times on or after the Issuance Date but not
after 11:59 p.m., New York time, on the Expiration Date (as defined below),
[ ]1 (subject to adjustment as provided herein) fully paid and
nonassessable shares of Common Stock (as defined below) (the Warrant Shares). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16.
This Warrant is one of the Warrants to Purchase Common Stock (the SPA Warrants) issued pursuant
to Section 1 of that certain Securities Purchase Agreement, dated as of February 4, 2010, by and
among the Company and the investors (the Buyers) referred to therein (the Securities Purchase
Agreement).
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day on or after the Issuance Date, in whole or in part, by delivery (whether via
facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the
Exercise Notice), of the Holders election to exercise this Warrant. Within one (1) Trading Day
following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company
of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the
number of Warrant Shares as to which this Warrant was so exercised (the Aggregate Exercise Price)
in cash or via wire transfer of immediately available funds if the Holder did not notify the
Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant
in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as cancellation of the original
of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining
Warrant Shares shall have the same effect as cancellation of the original of this Warrant after
delivery of the Warrant Shares in
1 | 40% warrant coverage. |
accordance with the terms hereof. On or before the first (1st) Trading Day
following the date on which the Company has received an Exercise Notice, the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder and
the Companys transfer agent (the Transfer Agent). On or before the third (3rd)
Trading Day following the date on which the Company has received such Exercise Notice, the Company
shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (DTC)
Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate
number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the
Holders or its designees balance account with DTC through its Deposit/ Withdrawal at Custodian
system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the Holder or, at the Holders instruction pursuant to the
Exercise Notice, the Holders agent or designee, in each case, sent by reputable overnight courier
to the address as specified in the applicable Exercise Notice, a certificate, registered in the
Companys share register in the name of the Holder or its designee (as indicated in the applicable
Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant
to such exercise. Upon (1) delivery of an Exercise Notice and (2) receipt by the Company of the
applicable Aggregate Exercise Price if Cashless Exercise was not specified in such Exercise Notice,
the Holder shall be deemed for all corporate law purposes to have become the holder of record of
the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date
such Warrant Shares are credited to the Holders DTC account or the date of delivery of the
certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of Warrant Shares
being acquired upon an exercise, then, at the request of the Holder, the Company shall as soon as
practicable and in no event later than three (3) Business Days after any exercise and at its own
expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued
shall be rounded up to the nearest whole number. The Company shall pay any and all issuance and
transfer taxes which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, Exercise Price means $0.50,
subject to adjustment as provided herein.
(c) Companys Failure to Timely Deliver Securities. If the Company shall fail, for any
reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the
applicable Exercise Notice and, receipt by the Company of the applicable Aggregate Exercise Price
if Cashless Exercise was not specified in such Exercise Notice, a certificate for the number of
shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on
the Companys share register or to credit the Holders balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holders exercise of this Warrant
(as the case may be), then, in addition to all other remedies available to the Holder, the Company
shall pay in cash to the Holder on each day after such third (3rd)
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Trading Day that the issuance of such shares of Common Stock is not timely effected an amount
equal to 2% of the product of (A) the aggregate number of shares of Common Stock not issued to the
Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the
Common Stock on the Trading Day immediately preceding the last possible date on which the Company
could have issued such shares of Common Stock to the Holder without violating Section 1(a). In
addition to the foregoing, if within three (3) Trading Days after the Companys receipt of the
applicable Exercise Notice, the Company shall fail to issue and deliver a certificate to the Holder
and register such shares of Common Stock on the Companys share register or credit the Holders
balance account with DTC for the number of shares of Common Stock to which the Holder is entitled
upon the Holders exercise hereunder (as the case may be), and if on or after such third
(3rd) Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the Company, then, in
addition to all other remedies available to the Holder, the Company shall, within three (3)
Business Days after the Holders request and in the Holders discretion, either (i) pay cash to the
Holder in an amount equal to the Holders total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the Buy-In Price), at which point the Companys
obligation to deliver such certificate or credit the Holders balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled upon the Holders exercise
hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holders balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holders exercise hereunder (as the
case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock times (B) the Closing Sale
Price of the Common Stock on the Trading Day immediately preceding the date of the applicable
Exercise Notice.
(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary
(other than Section 1(f) below), if at the time of exercise hereof the Registration Statement (as
defined in the Securities Purchase Agreement) is not effective (or the prospectus contained therein
is not available for use) for the issuance by the Company to the Holder of all of the Warrant
Shares, then the Holder may, in its sole discretion, exercise this Warrant in whole or in part and,
in lieu of making the cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise
the Net Number of shares of Common Stock determined according to the following formula (a
Cashless Exercise):
Net
Number = (A x B) - (A x C)
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant is then being
exercised.
3
B= as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if such Exercise
Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day
that is not a Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of regular trading hours (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of
the time of the Holders execution of the applicable Exercise Notice if such
Exercise Notice is executed during regular trading hours on a Trading Day and is
delivered within two (2) hours thereafter pursuant to Section 1(a) hereof and (iii)
the Closing Sale Price of the Common Stock on the date of the applicable Exercise
Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice
is both executed and delivered pursuant to Section 1(a) hereof after the close of
regular trading hours on such Trading Day.
C= the Exercise Price then in effect for the applicable Warrant Shares at the time
of such exercise.
(e) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms
hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 13.
(f) Limitations on Exercises. Notwithstanding anything to the contrary contained in
this Warrant, this Warrant shall not be exercisable by the Holder hereof to the extent (but only to
the extent) that the Holder or any of its affiliates would beneficially own in excess of 4.9% (the
Maximum Percentage) of the Common Stock. To the extent the above limitation applies, the
determination of whether this Warrant shall be exercisable (vis-à-vis other convertible,
exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which
such securities shall be exercisable (as among all such securities owned by the Holder) shall,
subject to such Maximum Percentage limitation, be determined on the basis of the first submission
to the Company for conversion, exercise or exchange (as the case may be). No prior inability to
exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination of exercisability. For
the purposes of this paragraph, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage ownership) shall be
determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase
Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the terms of this
paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a successor Holder of this
Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the
Company may not waive this paragraph without the consent of holders of a majority of its Common
Stock. For any reason at any time, upon the written or oral request of the Holder, the Company
shall within one (1) Business Day
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confirm orally and in writing to the Holder the number of shares of Common Stock then
outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this Warrant or securities
issued pursuant to the Securities Purchase Agreement.
(g) Insufficient Authorized Shares. The Company shall at all times keep reserved for
issuance under this Warrant a number of shares of Common Stock as shall be necessary to satisfy the
Companys obligation to issue shares of Common Stock hereunder (without regard to any limitation
otherwise contained herein with respect to the number of shares of Common Stock that may be
acquirable upon exercise of this Warrant). If, notwithstanding the foregoing, and not in limitation
thereof, at any time while any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the SPA Warrants at least a number of shares of Common Stock
equal to the number of shares of Common Stock as shall from time to time be necessary to effect the
exercise of all of the SPA Warrants then outstanding (the Required Reserve Amount) (an
Authorized Share Failure), then the Company shall immediately take such actions as are reasonably
necessary to increase the Companys authorized shares of Common Stock to an amount sufficient to
allow the Company to reserve the Required Reserve Amount for all the SPA Warrants then outstanding.
Without limiting the generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its
stockholders for the approval of an increase in the number of authorized shares of Common Stock. In
connection with such meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the stockholders that
they approve such proposal.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number
of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 2.
(a) Stock Dividends and Splits. If the Company, at any time on or after the date of
the Securities Purchase Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock
into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise)
one or more classes of its then outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph
shall become effective immediately after the effective date of such subdivision or combination. If
any event requiring an adjustment
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under this paragraph occurs during the period that an Exercise Price is calculated hereunder,
then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after
the date of the Securities Purchase Agreement, the Company issues or sells, or in accordance with
this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance
or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding
any Excluded Securities (as defined in the Securities Purchase Agreement) issued or sold or deemed
to have been issued or sold) for a consideration per share (the New Issuance Price) less than a
price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale (such Exercise Price then in effect is referred to as the Applicable Price) (the
foregoing a Dilutive Issuance), then, immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance Price. For purposes of
determining the adjusted Exercise Price under this Section 2(b), the following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 2(b)(i), the lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such Options or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of any such
Option shall be equal to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to any one share of Common Stock upon the granting
or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option. Except as contemplated
below, no further adjustment of the Exercise Price shall be made upon the actual issuance of
such shares of Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise
or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii),
the lowest price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. Except as contemplated below, no further
adjustment of the Exercise Price shall be made upon the
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actual issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustment of this Warrant has been or is to be
made pursuant to other provisions of this Section 2(b), except as contemplated below, no
further adjustment of the Exercise Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise
price provided for in any Options, the additional consideration, if any, payable upon the
issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which
any Convertible Securities are convertible into or exercisable or exchangeable for shares of
Common Stock increases or decreases at any time, the Exercise Price in effect at the time of
such increase or decrease shall be adjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased conversion rate,
as the case may be, at the time initially granted, issued or sold. For purposes of this
Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as
of the date of issuance of this Warrant are increased or decreased in the manner described in
the immediately preceding sentence, then such Option or Convertible Security and the shares
of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to
this Section 2(b) shall be made if such adjustment would result in an increase of the
Exercise Price then in effect.
(iv) Calculation of Consideration Received. If any Option or Convertible
Security is issued in connection with the issuance or sale or deemed issuance or sale of any
other securities of the Company, together comprising one integrated transaction, (x) such
Option or Convertible Security (as applicable) will be deemed to have been issued for
consideration equal to the Black Scholes Consideration Value thereof and (y) the other
securities issued or sold or deemed to have been issued or sold in such integrated
transaction shall be deemed to have been issued for consideration equal to the difference of
(I) the aggregate consideration received by the Company minus (II) the Black Scholes
Consideration Value of each such Option or Convertible Security (as applicable). If any
shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be deemed to be
the net amount of consideration received by the Company therefor. If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of publicly traded securities, in
which case the amount of consideration received by the Company for such securities will be
the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days
immediately preceding the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets and business
of the non-surviving entity as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair
7
value of any consideration other than cash or publicly traded securities will be
determined jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring valuation (the
Valuation Event), the fair value of such consideration will be determined within five (5)
Trading Days after the tenth (10th) day following such Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the Holder. The
determination of such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the Company.
(v) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of subscription
or purchase (as the case may be).
(vi) Floor Price. No adjustment pursuant to this Section 2 shall cause the
Exercise Price to be less than $0.48 (as adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction occurring after the date of the
Securities Purchase Agreement) (the Floor Price). Notwithstanding the foregoing, nothing
contained in this Section 2(b)(vi) shall apply after Shareholder Approval (as defined in the
Securities Purchase Agreement) is obtained.
(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price
pursuant to paragraphs (a) or (b) of this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that
after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of
Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to
such adjustment (without regard to any limitations on exercise contained herein).
(d) Other Events. In the event that the Company (or any Subsidiary) shall take any
action to which the provisions hereof are not strictly applicable, or, if applicable, would not
operate to protect the Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then the Companys board of directors shall in good faith determine and implement
an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so
as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section
2(d) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise
determined pursuant to this Section 2, provided further that if the Holder does not accept such
adjustments as appropriately protecting its interests hereunder against such dilution, then the
Companys board of directors and the Holder shall agree, in good faith, upon an independent
investment bank of nationally recognized standing to make such appropriate
8
adjustments, whose determination shall be final and binding and whose fees and expenses shall
be borne by the Company.
(e) Calculations. All calculations under this Section 2 shall be made by rounding to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares
of Common Stock outstanding at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be considered an issue or sale
of Common Stock.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2
above, if the Company shall declare or make any dividend or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a Distribution), at any time after the
issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in
such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, to the extent that the
Holders right to participate in any such Distributions would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to
such extent (or the beneficial ownership of any such shares of Common Stock as a result of such
Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the
benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage; provided further, such Distribution shall be held in abeyance for
the benefit of the Holder until such time as the Holder exercises this Warrant (whether in whole or
in part), and subject to the foregoing proviso, upon each exercise of this Warrant the Company
shall make such Distribution to the Holder with respect to each Warrant Share for which this
Warrant is so exercised until such time as this Warrant has been exercised in full).
4. | PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS. |
(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of shares of Common Stock (the Purchase Rights), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Maximum Percentage) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date
as of which the record holders of shares of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights (provided, however, to the extent
9
that the Holders right to participate in any such Purchase Right would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result
of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).
(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of
the Company under this Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the Holder prior to
such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant, including, without limitation, which is exercisable for a
corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the
exercise price hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such adjustments to the number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this Warrant immediately
prior to the consummation of such Fundamental Transaction). Upon the consummation of each
Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that
from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant
and the other Transaction Documents referring to the Company shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon exercise of this Warrant at any time after the consummation of the applicable
Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets
or other property (except such items still issuable under Sections 3 and 4(a) above, which shall
continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the
applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent)
(if any) of the Successor Entity (including its Parent Entity) which the Holder would have been
entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant
been exercised immediately prior to the applicable Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this
Warrant. In addition to and not in substitution for any other rights hereunder, prior to the
consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock
are entitled to receive securities or other assets with respect to or in exchange for shares of
Common Stock (a Corporate Event), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after
the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Common Stock (or other
10
securities, cash, assets or other property (except such items still issuable under Sections 3
and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of
the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets
or any other property whatsoever (including warrants or other purchase or subscription rights)
which the Holder would have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of this Warrant).
Provision made pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Holder.
(c) Black Scholes Value. Notwithstanding the foregoing and the provisions of Section
4(b) above, in the event of a Fundamental Transaction, if the Holder has not exercised this Warrant
in full prior to the announcement (in the case of a Fundamental Transaction under clause (iii)(Y)
of the definition thereof) or consummation (as applicable) of a Fundamental Transaction, at the
request of the Holder delivered on or before the fifteenth (15th) day after the
announcement or consummation (as applicable) of such Fundamental Transaction, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of
such request by paying to the Holder cash (via wire transfer of immediately available funds) in an
amount equal to the Black Scholes Value of the unexercised portion of this Warrant that remained on
the date immediately prior to the announcement of such Fundamental Transaction or the date of the
consummation of such Fundamental Transaction (as applicable). If the Holder has not exercised its
right under the immediately preceding sentence by the fifteenth (15th) day after the
announcement or consummation (as applicable) of such Fundamental Transaction, then the Company or
the Successor Entity (as the case may be) shall have the right to purchase this Warrant from the
Holder by paying to the Holder in cash (via wire transfer of immediately available funds) in an
amount equal to the Black Scholes Value of the unexercised portion of this Warrant (taking into
account any exercises contemplated by clause (3) below prior to the date the entire purchase price
is received by the Holder) valued as of the date of the announcement or consummation (as
applicable) of such Fundamental Transaction, provided that (1) the Company or the Successor Entity
(as the case may be) must deliver a written notice to the Holder within ten (10) days following
such fifteenth (15th) day exercising its right to so purchase this Warrant, (2) the date
on which such purchase shall occur shall be two (2) days after the date such written notice is
delivered to the Holder and the purchase price therefor shall be paid to the Holder on such date
and (3) the Holder shall continue to have the right to exercise this Warrant until the entire
purchase price is so received.
(d) Application. The provisions of this Section 4 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant
(and any such subsequent warrants) were fully exercisable and without regard to any limitations on
the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital stock registered under
the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by
amendment of its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
11
reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to protect the rights of
the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase
the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
are outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA
Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on
exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to
vote or receive dividends or be deemed the holder of share capital of the Company for any purpose,
nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its
capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any
right to vote, give or withhold consent to any corporate action (whether any reorganization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise)
or as a stockholder of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with
copies of the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder
may request, representing the right to purchase the number of Warrant Shares being transferred by
the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant (as to which a written certification and the indemnification contemplated below shall
suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary and reasonable form and, in the case of
12
mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and
deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of
such surrender; provided, however, no warrants for fractional shares of Common Stock shall be
given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when
added to the number of shares of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is
the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 8(f) of the Securities
Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of such action and the
reason therefor. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of
Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such
adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property to holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be made known to the
public prior to or in conjunction with such notice being provided to the Holder and (iii) at least
five (5) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that
any notice provided hereunder constitutes, or contains, material, non-public information regarding
the Company or any of its subsidiaries, the Company shall simultaneously file such notice with the
SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8-K. It
is expressly understood and agreed that the time of execution specified by the Holder in each
Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant (other than Sections 1(f), 2(b)(vi) or 9) may be amended and the Company may take
13
any action herein prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder. The Holder shall be entitled,
at its option, to the benefit of any amendment of any other similar warrant issued under the
Securities Purchase Agreement. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
10. SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that
would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining provisions of this Warrant so long as
this Warrant as so modified continues to express, without material change, the original intentions
of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
11. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any Person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the
Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented to in
writing by the Holder.
13. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise
Price, the Closing Sale Price, the Bid Price or fair market value or the arithmetic calculation of
the Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall
submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile
(i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute
to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after the Holder learned of the circumstances giving rise to such dispute (including,
without limitation, as to whether any issuance or sale or deemed issuance or sale was an issuance
or sale or deemed issuance or sale of Excluded Securities). If the Holder and the Company are
unable to agree upon such determination or calculation (as the case may be) of the Exercise Price,
the Closing Sale Price, the Bid Price or fair market value or the number of Warrant Shares (as the
case may be) within three (3) Business Days of such disputed determination or arithmetic
14
calculation being submitted to the Company or the Holder (as the case may be), then the Company
shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the
Exercise Price, the Closing Sale Price, the Bid Price or fair market value (as the case may be) to
an independent, reputable investment bank selected by the Company and approved by the Holder or (b)
the disputed arithmetic calculation of the Warrant Shares to the Companys independent, outside
accountant. The Company shall cause at its expense the investment bank or the accountant (as the
case may be) to perform the determinations or calculations (as the case may be) and notify the
Company and the Holder of the results no later than ten (10) Business Days from the time it
receives such disputed determinations or calculations (as the case may be). Such investment banks
or accountants determination or calculation (as the case may be) shall be binding upon all parties
absent demonstrable error.
14. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all other remedies
available under this Warrant and the other Transaction Documents, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual damages for any failure by the Company to comply with the
terms of this Warrant. The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set forth or provided
for herein with respect to payments, exercises and the like (and the computation thereof) shall be
the amounts to be received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other security being
required. The Company shall provide all information and documentation to the Holder that is
requested by the Holder to enable the Holder to confirm the Companys compliance with the terms and
conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The
issuance of shares and certificates for shares as contemplated hereby upon the exercise of this
Warrant shall be made without charge to the Holder or such shares for any issuance tax or other
costs in respect thereof, provided that the Company shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance and delivery of any certificate in a
name other than the Holder or its agent on its behalf.
15. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without
the consent of the Company. Notwithstanding the foregoing, the Holder shall provide the Company
with written notice of any sale, transfer or assignment (as the case may be) of this Warrant within
fifteen (15) days following such sale, transfer or assignment (as the case may be) and such notice
shall identify the name, address and contact details of a contact person of the transferee or
assignee hereof and the number of warrants so sold, transferred or assigned (as the case may be).
16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the
following meanings:
15
(a) Bid Price means, for any security as of the particular time of determination, the bid
price for such security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities exchange or trading
market for such security, the bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg as of such time of
determination, or if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg
as of such time of determination, or, if no bid price is reported for such security by Bloomberg as
of such time of determination, the average of the bid prices of any market makers for such security
as reported in the pink sheets by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.)
as of such time of determination. If the Bid Price cannot be calculated for a security as of the
particular time of determination on any of the foregoing bases, the Bid Price of such security as
of such time of determination shall be the fair market value as mutually determined by the Company
and the Holder. If the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period.
(b) Black Scholes Consideration Value means the value of the applicable Option or
Convertible Security (as the case may be) based on the Black Scholes Option Pricing Model obtained
from the OV function on Bloomberg determined as of the close of business on the Trading Day
immediately preceding the public announcement of the execution of definitive documents with respect
to the issuance of such Option or Convertible Security (as the case may be) and reflecting (i) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining
term of such Option or Convertible Security (as the case may be) as of the date of issuance of such
Option or Convertible Security (as the case may be) and (ii) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the
Trading Day immediately following the date of issuance of such Option or Convertible Security (as
the case may be).
(c) Black Scholes Value means the value of this Warrant based on the Black Scholes Option
Pricing Model obtained from the OV function on Bloomberg determined as of the day of announcement
(in the case of a Fundamental Transaction under clause (iii)(Y) of the definition thereof) or
consummation (as applicable) of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal
to the remaining term of this Warrant as of the date of the Holders request pursuant to Section
4(c), (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction and, if applicable, (iii) the underlying
price per share used in such calculation shall be the sum of the price per share being offered in
cash, if any, plus the value of any non-cash consideration, if any, being offered in the applicable
Fundamental Transaction.
(d) Bloomberg means Bloomberg, L.P.
16
(e) Business Day means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
(f) Closing Sale Price means, for any security as of any date, the last closing trade price
for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing trade price, then
the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market
for such security, the last trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the
foregoing does not apply, the last trade price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade
price is reported for such security by Bloomberg, the average of the ask prices of any market
makers for such security as reported in the pink sheets by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Sale Price of such security on such date
shall be the fair market value as mutually determined by the Company and the Holder. If the Company
and the Holder are unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.
(g) Common Stock means (i) the Companys shares of common stock, $0.01 par value per share,
and (ii) any capital stock into which such common stock shall have been changed or any share
capital resulting from a reclassification of such common stock.
(h) Convertible Securities means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common Stock.
(i) Eligible Market means The New York Stock Exchange, the NYSE Amex, the Nasdaq Global
Select Market, the Nasdaq Global Market or the Principal Market.
(j) Expiration Date means the date that is the seventh (7th) anniversary of the
Issuance Date or, if such date falls on a day other than a Business Day or on which trading does
not take place on the Principal Market (a Holiday), the next date that is not a Holiday.
(k) Fundamental Transaction means that (i) the Company or any of its significant
subsidiaries (as that term is defined under Regulation S-X promulgated by the SEC) shall, directly
or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether
or not the Company or any of its significant subsidiaries is the surviving corporation or other
entity) another Person (excluding a merger or consolidation of a wholly-owned significant
subsidiary of the Company into the Company or another wholly-owned Subsidiary only if such merger or
consolidation of such wholly-owned significant subsidiary and the Company or such wholly-owned
Subsidiary (as applicable) does not involve any other Person), or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of its
17
respective properties or assets to another Person (other than (x) a sale of all or
substantially all of the assets owned by Signature Industries Limited as of the date of the
Securities Purchase Agreement and (y) a sale-leaseback transaction entered into solely by Digital
Angel Holdings, LLC (DAG) with an unaffiliated Person solely with respect to the South Saint
Paul, Minnesota real property owned by DAG as of the date of the Securities Purchase Agreement or a
sale by DAG to an unaffiliated Person solely of such real property), or (ii) the Company or any of
its Subsidiaries shall, directly or indirectly, in one or more related transactions, (I) allow
another Person to make a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of
Voting Stock of the Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (II)
consummate a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another
Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock
of the Company (not including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other Persons making or
party to, such stock or share purchase agreement or other business combination), or (iii) the
Company shall, directly or indirectly, in one or more related transactions, (X) reorganize,
recapitalize or reclassify the Common Stock or (Y) effect or consummate a stock combination,
reverse stock split or other similar transaction involving the Common Stock (or the Company
publicly announces board approval, or its intention to seek shareholder approval, with respect to
any stock combination, reverse stock split or other similar transaction involving the Common Stock)
or (iv) any person or group (as these terms are used for purposes of Sections 13(d) and 14(d)
of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the
beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the
Company.
(l) Options means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.
(m) Parent Entity of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market (or the OTC Bulletin Board if the Companys
principal trading market is then the OTC
Bulletin Board), or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(n) Person means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.
(o) Principal Market means the Nasdaq Capital Market.
(p) Successor Entity means the Person (or, if so elected by the Holder, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if
18
so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(q) Trading Day means any day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is then traded,
provided that Trading Day shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise
designated as a Trading Day in writing by the Holder.
(r) Voting Stock of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general power
to appoint, at least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).
(s) VWAP means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or securities market on which
such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its Volume at Price
function or, if the foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for such security during
the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security
by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the pink sheets by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If VWAP cannot be calculated for such
security on such date on any of the foregoing bases, the VWAP of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then such dispute shall
be resolved in accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.
[signature page follows]
19
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.
DIGITAL ANGEL CORPORATION | ||||||
By: | ||||||
Name: | ||||||
Title: |
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
WARRANT TO PURCHASE COMMON STOCK
DIGITAL ANGEL CORPORATION
The undersigned holder hereby exercises the right to purchase
of the shares
of Common Stock (Warrant Shares) of Digital Angel Corporation, a Delaware corporation (the
Company), evidenced by Warrant to Purchase Common Stock No. (the Warrant). Capitalized
terms used herein and not otherwise defined shall have the respective meanings set forth in the
Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price
shall be made as:
a Cash Exercise with respect to
Warrant
Shares; and/or
a Cashless Exercise with respect to
Warrant
Shares.
In the event that the Holder has elected a Cashless Exercise with respect to some or all of
the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i)
this Exercise Notice was executed by the Holder at [a.m.][p.m.] on the date set forth
below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice
was $ .
2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise
with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall
pay the Aggregate Exercise Price in the sum of $ to the Company in accordance
with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee
or agent as specified below, Warrant Shares in accordance with the terms of the Warrant.
Delivery shall be made to Holder, or for its benefit, to the following address:
Date: ,
By: |
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Name: | ||||
Title: |
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs to
issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated , 20 , from the Company and acknowledged and agreed to by
.
DIGITAL ANGEL CORPORATION | ||||||
By: | ||||||
Name: |