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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. ACCORDINGLY, THIS WARRANT
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT (i) AN OPINION OF
COUNSEL SATISFACTORY TO ISSUER THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION MAY
LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
ORPHAN MEDICAL, INC.
WARRANT
TO PURCHASE
SHARES OF
SERIES D NON-VOTING PREFERRED STOCK
For value received, UBS Capital II LLC, its successors or assigns
("Holder"), is entitled to purchase from Orphan Medical, Inc., a Minnesota
corporation (the "Company"), up to 282,353 fully paid and nonassessable shares
of the Company's Series D Non-Voting Preferred Stock, $0.01 par value per share
(the "Series D Preferred Stock"), or such greater or lesser number of Series D
Preferred Stock as may be determined by application of the anti-dilution
provisions of this Warrant, at the warrant exercise price set forth in Section 2
hereof.
This Warrant is subject to the following terms and conditions:
1. Exercise. The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, by written election, in the form set forth
below, by the surrender of this Warrant (properly endorsed if required) at the
principal office of the Company, by payment to it by cash, certified check or
bank draft of the Warrant Exercise Price (as defined in Section 2 hereof) for
the shares of Series D Preferred Stock to be purchased and by delivery of the
Warrant Exercise form attached hereto or similar documents acceptable to the
Company demonstrating that the sale of the shares to be purchased is exempt from
registration under the Securities Act of 1933, as amended, and any state
securities law.
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The Series D Preferred Stock purchased hereunder shall be deemed to
be issued as of the close of business on the date on which this Warrant has been
exercised by payment to the Company of the Warrant Exercise Price. Certificates
for the shares of stock so purchased, bearing an appropriate restrictive legend,
shall be delivered to the Holder within 15 days after the rights represented by
this Warrant shall have been so exercised, and, unless this Warrant has expired,
a new warrant representing the number of shares, if any, with respect to which
this Warrant has not been exercised shall also be delivered to the Holder hereof
within such time. No fractional shares shall be issued upon the exercise of this
Warrant. This Warrant shall be exercised in accordance with the provisions of
Sections 9(b) and 9(c) hereof.
2. Warrant Exercise Price. The per share exercise price for the shares
represented by this Warrant (the Warrant Exercise Price") shall be $4.25, as
adjusted pursuant to Section 5 hereof.
3. Expiration Date. The rights represented by this Warrant may be
exercised by holder at any time or from time to time after July 23, 2002 or upon
the liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, whichever is earlier, and prior to August 2, 2006. The Company has
the right to require the Holder to exercise this Warrant, in whole or in part,
any time after July 23, 2002 in the event the last sale price of Company's
common stock is equal to or greater than $13 per share for the ten (10)
consecutive trading days immediately preceding the date the Company gives the
Holder notice of the Company's election to require the exercise of all or a part
of this Warrant (the "Notice Date"). The portion of this Warrant required by the
Company to be exercised will expire on the 30th day following the Notice Date
unless exercised by the Holder on or before such 30th day.
4. Shares. All shares that may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be duly authorized and issued,
fully paid and nonassessable shares. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times
have authorized and reserved for the purpose of issue or transfer upon exercise
of the subscription rights evidenced by this Warrant a sufficient number of
shares of its Series D Preferred Stock and shares of common stock in the case of
a Transfer Conversion (as that term is defined in Section 7(b) hereof), to
provide for the exercise of the rights represented by this Warrant.
5. Adjustment. The Warrant Exercise Price for the Series D Preferred Stock
issuable upon exercise of this Warrant or issuable upon a Transfer Conversion,
shall be subject to adjustment from time to time as hereinafter provided in this
Section 5:
(a) If the Company at any time divides the outstanding shares of its
common stock into a greater number of shares (whether pursuant to a stock
split, stock dividend or otherwise), and conversely, if the outstanding
shares of its common stock are combined into a smaller number of shares,
the Warrant Exercise Price for the Series D Preferred Stock in
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effect immediately prior to such division or combination of the Company's
common stock shall be proportionately adjusted to reflect the reduction or
increase in the value of each such common share.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with
another corporation, the sale of all or substantially all of its assets to
another corporation or a Change of Control shall be effected in such a way
that holders of the Company's common stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for such common
stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Holder shall have the right, at its
option, to (i) purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the shares of the
Series D Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby, such shares of Series D Preferred Stock or other securities as
would have been issued or delivered to the Holder if Holder had exercised
this Warrant and had received such shares of Series D Preferred Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or sale; or (ii) purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant and in lieu of the shares
of the Series D Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby, such assets as would have been issued or delivered to the Holder
if Holder had exercised this Warrant and had received such shares of
Series D Preferred Stock immediately prior to such reorganization,
reclassification, consolidation, merger or sale; or (iii) purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant, a warrant to purchase shares of stock or other securities as
would have been issued or delivered to the Holder if Holder had exercised
this Warrant and had received shares of Series D Preferred Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or sale. With respect to (i), (ii) and (iii) above, in the case of
a Change of Control (as defined herein), the Holder shall receive, at its
option, the securities, assets or warrants described above as if it had
not only exercised this Warrant, but had also participated in the
transaction that resulted in the Change of Control. In the event such a
Change of Control resulted from a tender offer or the issuance of
additional securities by the Company, the Holder shall receive from the
Company, at its option, an amount equal to the excess of the aggregate
offer price over the aggregate Warrant Exercise Price, as the case may be.
For purposes of the preceding sentence, the term "aggregate offer price"
means the amount that would be paid to the Holder in connection with the
Change of Control if the Holder had exercised this Warrant for shares of
Series D Preferred Stock. For purposes of this Warrant, the term "Change
of Control" means any sale or issuance or series of related sales or
issuances of the Company's voting securities (or securities convertible
into or exchangeable for voting securities) which results in any person or
group of affiliated persons (i) owning more than 50% of the Company's
voting securities
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outstanding at the time of such sale or issuances, or (ii) having the
ability to elect a majority of the Company's Board of Directors.
The Company shall not effect any such consolidation, merger or
sale unless prior to the consummation thereof the successor corporation
(if other than the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written instrument
executed and mailed to the Holder at the last address of the Holder
appearing on the books of the Company the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the Holder may be entitled to purchase. Further
adjustment to the Warrant Exercise Price shall be made for successive
recapitalizations, reclassifications, consolidations, mergers, sale of
assets or Changes of Control as shall be appropriate under the
circumstances.
(c) If and whenever the Company shall (1) issue or sell any shares
of its common stock for a consideration per share less than the Warrant
Exercise Price in effect immediately prior to the time of such issuance or
sale, (2) issue or sell any warrants, options or other rights to acquire
shares of its common stock at a purchase price less than the Warrant
Purchase Price in effect immediately prior to the time of such issuance or
sale, (3) amend the terms of any existing warrants, options or other
rights to acquire shares of common stock, or otherwise adjust the purchase
price for shares of common stock issuable upon the exercise of such
warrants, options or other rights to acquire shares of common stock, such
that the purchase price for such shares of common stock is less than the
Warrant Exercise Price in effect immediately prior to the time of such
amendment or adjustment, or (4) issue or sell any other securities that
are convertible into shares of its common stock for a purchase or exchange
price less than the Warrant Exercise Price in effect immediately prior to
the time of such issuance or sale (except for Permitted Issuances (as that
term is defined in Article I Section 8 of the Company's Certificate of
Designation for Series B Convertible Preferred Stock)), then, upon such
issuance or sale, the Warrant Exercise Price shall be reduced to the price
at which such shares of common stock are being issued or sold by the
Company or the price at which such other securities are exercisable or
convertible into shares of the Company's common stock. For purposes of
this Warrant, the term "consideration per share" for which common stock is
issued or issuable shall mean (1) with respect to the issuance, grant or
sale of options or warrants to purchase shares of common stock, an amount
determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting or sale of
such options or warrants, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such options
and warrants, plus in the case of such options which relate to convertible
securities, the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the issuance or sale of such
convertible securities and the conversion or exchange thereof, by (ii) the
total maximum number of shares of common stock issuable upon the exercise
of such options and warrants or upon the conversion or exchange of all
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such convertible securities issuable upon the exercise of such options,
and (2) with respect to the issuance, grant or sale of common stock of the
Company or securities directly or indirectly exercisable or convertible
into shares of common stock, an amount determined by dividing (i) the
total amount received or receivable by the Corporation as consideration
for the issue or sale of such convertible securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of common stock issuable upon the conversion or
exchange of all such convertible securities.
(d) If the Company takes any other action, or if any other event
occurs, which does not come within the scope of the provisions of Section
5(a), 5(b) or 5(c), but which should result in an adjustment in the
Warrant Exercise Price and/or the number of shares subject to this Warrant
in order to fairly protect the purchase rights of the Holder, an
appropriate adjustment in such purchase rights shall be made by the
Company.
(e) Upon each adjustment of the Warrant Exercise Price, the Holder
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares of Series D Preferred
Stock obtained by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Series D
Preferred Stock purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.
(f) Upon any adjustment of the Warrant Exercise Price, the Company
shall give written notice thereof to the Holder stating the Warrant
Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares of Series D Preferred Stock
purchasable at such price upon the exercise of this Warrant, setting forth
in reasonable detail the method of calculation and the facts upon which
such calculation is based.
6. Rights as Shareholder. This Warrant shall not entitle the Holder to any
voting rights or other rights except as provided in the Stock Purchase Agreement
dated as of August 2, 1999, by and between the Company and UBS Capital II LLC
(the "Stock Purchase Agreement").
7. Transfer.
(a) This Warrant and all rights hereunder are transferable, in whole
or in part, at the principal office of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. The bearer of this Warrant, when endorsed, may be
treated by the Company and all other persons dealing with this Warrant as
the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof
on the books of the Company,
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any notice to the contrary notwithstanding; but until such transfer on
such books, the Company may treat the registered owner hereof as the owner
for all purposes.
(b) In the event this Warrant and all rights hereunder are
transferred, in whole or in part, to a Permitted Investor, any rights to
purchase shares of Series D Preferred Stock pursuant to the exercise of
this Warrant, or any transferred portion thereof will automatically be
converted into a right to purchase shares of the Company's common stock (a
"Transfer Conversion"). The conversion rate applicable to a Transfer
Conversion shall be one share of common stock for each share of Series D
Preferred Stock.
(c) For purposes of Section 7(b), the following definitions apply:
(i) "Permitted Investor" means a Person that is not (a) the
Beneficial Owner, directly or indirectly, of ten percent (10%) or
more of the Company's outstanding stock or other securities entitled
to vote, or has or shares the power to dispose of, or direct the
disposition of, such stock or securities, (b) a Person that directly
or indirectly controls, is controlled by, or is under common control
with, the Company (an "Affiliate"), or (c) any corporation or
organization of which the Company is an officer or partner, is the
Beneficial Owner, directly or indirectly, of ten percent (10%) or
more of the Company's outstanding stock or other securities entitled
to vote (an "Associate").
(A) A Person shall not be considered a Beneficial Owner
for purposes of Section 7(c)(i) if such Person was not a
Beneficial Owner of ten percent (10%) or more of the Company's
outstanding stock or other securities entitled to vote, or has
or shares the power to dispose of, or direct the disposition
of, such stock or securities immediately prior to a repurchase
of shares, recapitalization of the Company or similar action
and became a Beneficial Owner as defined in Section 7(c)(ii)
solely as a result of such share repurchase, recapitalization
or similar action unless, (i) the repurchase,
recapitalization, conversion, or similar action was proposed
by or on behalf of, or pursuant to, any agreement,
arrangement, relationship, understanding, or otherwise
(whether or not in writing) with, the Person or is an
Affiliate or Associate of the Person, or (ii) the Person
thereafter acquires a beneficial ownership, directly or
indirectly, of the Company's outstanding shares entitled to
vote and, immediately after such acquisition, is the
Beneficial Owner, directly or indirectly, of ten percent (10%)
or more of the Company's outstanding stock or other shares
entitled to vote.
(ii) "Beneficial Owner" means a Person who, directly or
indirectly through any written or oral agreement, arrangement,
relationship, understanding, or
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otherwise, has or shares the power to vote, or direct the voting of,
shares or securities of the Company entitled to vote, or has or
shares the power to dispose of, or direct the disposition of, such
shares of securities; provided, that a Person shall not be deemed
the beneficial owner of shares or securities of the Company (a)
tendered pursuant to a tender offer or exchange offer made by the
Person or any of such Person's Affiliates or Associates until the
tendered shares or securities are accepted for purchase or exchange,
(b) if such beneficial ownership arises solely from a revocable
proxy given in response to a proxy solicitation required to be made
and made in accordance with the applicable rules and regulations
under the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), and is not then reportable under the
Securities Exchange Act, or, if the Company is not subject to the
Securities Exchange Act, would have been required to be made and
would not have been reportable even if the Company had been subject
to the Securities and Exchange Act.
(iii) "Affiliate" shall have the meaning assigned to that term
in Section 7(c)(i) hereof.
(iv) "Associate" shall have the meaning assigned to that term
in Section 7(c)(i) hereof.
(v) "Person" means any individual, partnership, limited
liability company, association, corporation, estate, trust or other
entity.
(d) In the event this Warrant and all rights hereunder, are
re-acquired, in whole or in part, by Investor (as defined in the Stock
Purchase Agreement") prior to July 23, 2002, the shares of common stock
into which the shares of Series D Preferred Stock were converted upon a
Transfer Conversion shall automatically be converted into shares of Series
D Preferred Stock at a conversion rate of one share of Series D Preferred
Stock for each share of common stock.
8. Notices. All demands and notices to be given hereunder shall be
delivered or sent by first class mail, postage prepaid; in the case of the
Company, addressed to its corporate headquarters, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, until a new address shall have been substituted by
like notice; and in the case of Holder, addressed to Holder at the address
written below, until a new address shall have been substituted by like notice,
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9. Additional Right to Convert Warrant.
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time after
it is exercisable, but prior to its expiration, into shares of Series D
Preferred Stock as provided for in this Section 9. Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Warrant Exercise Price) that number
of shares of Company's Series D Preferred Stock, as the case may be, equal
to the result obtained by multiplying (i) the number of shares with
respect to which the Warrant is being exercised by (ii) the quotient
obtained by dividing (x) the value of the Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate
Warrant Exercise Price for the warrant shares in effect immediately prior
to the exercise of the Conversion Right from the aggregate fair market
value for the warrant shares immediately prior to the exercise of the
Conversion Right) by (y) the aggregate fair market value for the warrant
shares immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time
or from time to time, prior to its expiration, on any business day by
delivering written notice to the Company (the "Conversion Notice") at the
offices of the Company exercising the Conversion Right and specifying (i)
the total number of shares with respect to which the Warrant is being
exercised and (ii) a place and date not less than one or more than 20
business days from the date of the Conversion Notice for the closing of
such purchase.
(c) At any closing under Section 9(b) hereof, (i) Holder will
surrender the Warrant and (ii) the Company will deliver to Holder a
certificate or certificates for the number of shares of the Company's
Series D Preferred Stock (or common stock, as the case may be under
Section 7(b) hereof) issuable upon such conversion, together with cash, in
lieu of any fraction of a share, and (iii) the Company will deliver to
Holder a new warrant representing the number of shares, if any, with
respect to which the Warrant shall not have been exercised.
(d) Fair market value for a warrant share as of a particular date
(the "Determination Date") shall mean:
(i) The average of the closing bid or last sale prices of the
Company's common stock, respectively, reported for the ten (10)
business days immediately preceding the Determination Date if the
Company's common stock is reported on the New York Stock Exchange
Composite Tape, or, if the Company's common stock is not listed or
admitted to trading on such exchange, on the principal national
securities
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exchange on which the Company's common stock is listed or admitted
to trading, or if the common stock is not listed or admitted to
trading on any national securities exchange, on the NASDAQ National
Market System.
(ii) If the Company's common stock is not admitted for
quotation on the NASDAQ National Market System, then the average of
the high bid and low asked prices reported for the ten (10) business
days immediately preceding the Determination Date as recorded by the
National Association of Securities Dealers, Inc. through NASDAQ, or
if the National Association of Securities Dealers, Inc. through
NASDAQ shall not have reported any bid and asked prices for the
Company's common stock for the ten (10) day period immediately
preceding the Determination Date, the average of the bid and asked
prices for such ten (10) day period as furnished by any New York
Stock Exchange member firm selected from time to time by the Company
for such purpose.
(iii) If no bid and asked prices can be obtained from any firm
identified in Section 9(d)(ii), then the value of one share of the
Company's common stock on such date as determined by the mutual
agreement of the Company and the holders of the right to purchase a
majority of the shares issuable under this Warrant, or, if no such
agreement can be reached within 30 days from such date, then as
determined by an independent appraiser mutually acceptable to the
parties.
(e) Holder of this Warrant shall have the right to pay for all or
any portion of the Series C Warrant Exercise Price or Series D Warrant
Exercise Price for shares of Series C Preferred Stock or Series D
Preferred Stock purchased hereunder by cancellation of all or any part of
the Company's obligation to Holder under the terms of that certain
Promissory Note dated as of August 2, 1999, in the face amount of
$2,050,000.
(f) Holder of this Warrant shall have the right, at any time on or
after the date of this Warrant, to receive securities, assets or cash in
the event of a liquidation, dissolution or winding up of the Company (each
such event a "Liquidity Event"). The amount of such securities, assets or
cash Holder shall be entitled to receive under this Section 9(f) shall be
an amount equal to the difference between the Series D Warrant Exercise
Price and the amount of consideration Holder would have received if Holder
had exercised this Warrant for shares of Series D Preferred Stock.
[REMAINING PORTION OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
delivered by a duly authorized officer.
Dated: August 2, 1999
ORPHAN MEDICAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ Bullion
-----------------------
▇▇▇▇ ▇▇▇▇▇▇ Bullion
Chief Executive Officer
[Name and Address of Holder]
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WARRANT EXERCISE
(To be signed only upon exercise of this warrant)
The undersigned, the Holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder, __________ shares of Series D Preferred Stock of Orphan
Medical, Inc., to which such warrant relates and herewith makes payment of
$__________ therefor in cash, certified check or bank draft and requests that
the certificates for such shares be issued in the name of, and be delivered to
____________________, whose address is set forth below the signature of the
undersigned.
Dated:_____________________
Signature
If shares are to be issued other than to Holder:
Social Security or other Tax Identification No.
Please print present name and address
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WARRANT ASSIGNMENT
(To be signed only upon transfer of this warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________ the right represented by the foregoing Warrant to purchase
the shares of Series D Preferred Stock of Orphan Medical, Inc. and appoints
____________________ attorney to transfer such right on the books of Orphan
Medical, Inc. with full power of substitution in the premises.
Dated:_____________________
Signature
Social Security or other Tax Identification No.
_______________________________________________
Please print present name and complete address
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