SERIES A/B/C] COMMON STOCK PURCHASE WARRANT
EXHIBIT
4.2
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
[SERIES
A/B/C] COMMON STOCK PURCHASE WARRANT
No:
1-___
To
Purchase __________ Shares of Common Stock of
DOBI
MEDICAL INTERNATIONAL, INC.
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ (the “Holder”),
is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof
(the
“Initial
Exercise Date”)
and on
or prior to the close of business on ____1
(the
“Termination
Date”)
but
not thereafter, to subscribe for and purchase from DOBI Medical International,
Inc., a Delaware corporation (the “Company”),
up to
______ shares (the “Warrant
Shares”)
of
Common Stock, par value $.0001 per share, of the Company (the “Common
Stock”).
The
purchase price of one share of Common Stock under this Warrant shall be equal
to
the Exercise Price, as defined in Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”),
dated
as of April 28, 2006, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
1The
three
year anniversary of the Initial Exercise Date as to the Series A and Series
B
Warrants and the earlier of (i) the later of (x) December 31, 2006 or (y)
the
one month anniversary of the Effective Date of the Registration Statement
covering the resale of all shares underlying this Warrant or (ii) the 13
month
anniversary of the Initial Exercise Date as to the Series C
Warrants.
a) Exercise
of Warrant.
Exercise of the purchase rights represented by this Warrant may be made,
in
whole or in part, at any time or times on or after the Initial Exercise Date
and
on or before the Termination Date by delivery to the Company of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing
to the
registered Holder at the address of such Holder appearing on the books of
the
Company); and, within 3 Trading Days of the date said Notice of Exercise
is
delivered to the Company, the Company shall have received payment of the
aggregate Exercise Price of the shares thereby purchased by wire transfer
or
cashier’s check drawn on a United States bank. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender
this
Warrant to the Company until the Holder has purchased all of the Warrant
Shares
available hereunder and the Warrant has been exercised in full, in which
case,
the Holder shall surrender this Warrant to the Company for cancellation within
3
Trading Days of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases of a portion
of the total number of Warrant Shares available hereunder shall have the
effect
of lowering the outstanding number of Warrant Shares purchasable hereunder
in an
amount equal to the applicable number of Warrant Shares purchased. The Holder
and the Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise Form within 2 Business Days of receipt
of
such notice. In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest
error.
The Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following the
purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than
the
amount stated on the face hereof.
b) Exercise
Price.
The
exercise price per share of the Common Stock under this Warrant shall be
$____2,
subject
to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise.
If at
any time after one year from the date of issuance of this Warrant there is
no
effective Registration Statement registering, or no current prospectus available
for, the resale of the Warrant Shares by the Holder, then this Warrant may
also
be exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A)
= the
VWAP on the Trading Day immediately preceding the date of such
election;
(B)
= the
Exercise Price of this Warrant, as adjusted; and
(X)
= the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.
2
d) Exercise
Limitations.
| i. |
Holder’s
Restrictions.
The Company shall not effect any exercise of this Warrant, and a
Holder
shall not have the right to exercise any portion of this Warrant,
pursuant
to Section 2(c) or otherwise, to the extent that after giving effect
to
such issuance after exercise as set forth on the applicable Notice
of
Exercise, such Holder (together with such Holder’s Affiliates, and any
other person or entity acting as a group together with such Holder
or any
of such Holder’s Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence,
the
number of shares of Common Stock beneficially owned by such Holder
and its
Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such determination
is
being made, but shall exclude the number of shares of Common Stock
which
would be issuable upon (A) exercise of the remaining, nonexercised
portion
of this Warrant beneficially owned by such Holder or any of its Affiliates
and (B) exercise or conversion of the unexercised or nonconverted
portion
of any other securities of the Company (including, without limitation,
any
other Debentures or Warrants) subject to a limitation on conversion
or
exercise analogous to the limitation contained herein beneficially
owned
by such Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(d)(i), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the
Exchange Act and the rules and regulations promulgated thereunder,
it
being acknowledged by a Holder that the Company is not representing
to
such Holder that such calculation is in compliance with Section 13(d)
of
the Exchange Act and such Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that
the
limitation contained in this Section 2(d) applies, the determination
of
whether this Warrant is exercisable (in relation to other securities
owned
by such Holder together with any Affiliates) and of which a portion
of
this Warrant is exercisable shall be in the sole discretion of a
Holder,
and the submission of a Notice of Exercise shall be deemed to be
each
Holder’s determination of whether this Warrant is exercisable (in relation
to other securities owned by such Holder together with any Affiliates)
and
of which portion of this Warrant is exercisable, in each case subject
to
such aggregate percentage limitation, and the Company shall have
no
obligation to verify or confirm the accuracy of such determination.
In
addition, a determination as to any group status as contemplated
above
shall be determined in accordance with Section 13(d) of the Exchange
Act
and the rules and regulations
|
3
promulgated
thereunder. For purposes of this Section 2(d), in determining the number
of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company shall
within two Trading Days confirm orally and in writing to such Holder the
number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect
to
the conversion or exercise of securities of the Company, including this Warrant,
by such Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. [The “Beneficial
Ownership Limitation”
shall
be 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant.][The “Beneficial
Ownership Limitation”
shall
be 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Beneficial Ownership Limitation provisions
of this
Section 2(d) may be waived by such Holder, at the election of such Holder,
upon
not less than 61 days’ prior notice to the Company to change the Beneficial
Ownership Limitation to 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of
Common
Stock upon exercise of this Warrant, and the provisions of this Section 2(d)
shall continue to apply. Upon such a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% limitation to such 9.99% limitation,
the
Beneficial Ownership Limitation may not be further waived by such Holder.]
The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(d)(i)
to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect
to such limitation. The limitations contained in this paragraph shall apply
to a
successor holder of this Warrant.
| ii. |
Issuable
Maximum.
Notwithstanding anything herein to the contrary, prior to the date
the
Charter Amendment is effective, the Company has reserved an aggregate
of
225,000,000 shares of Common Stock for issuance (A) in connection
with any
Debentures issued pursuant to the Purchase Agreement and (B) in connection
with any Warrants issued pursuant to the Purchase Agreement (such
number
of shares, the “Issuable
Maximum”).
Prior to the date the Charter Amendment is effective, each Holder
shall be
entitled to a portion of the Issuable Maximum equal to the quotient
obtained by dividing (x) the aggregate principal amount of the
|
4
Debenture(s)
issued and sold to such Holder on the Original Issue Date by (y) the aggregate
principal amount of all Debentures issued and sold by the Company on the
First
Closing. If any Holder shall no longer hold the Debenture(s) and Warrants,
then
such Holder’s remaining portion of the Issuable Maximum, if any, shall be
allocated pro-rata among the remaining Holders. If, on any date this Warrant
is
exercised, (1) the applicable Exercise Price and number of shares issuable
is
such that the shares issuable under this Warrant on such date, together with
the
aggregate number of shares of Common Stock that have been issued upon prior
conversion or exercise of the Debentures and Warrants, as applicable, would
exceed the Issuable Maximum and (2) the Charter Amendment is not effective,
then
the Company shall issue to the Holder requesting an exercise a number of
shares
of Common Stock equal to such Holder’s pro-rata portion (which shall be
calculated pursuant to the terms hereof) of the Issuable Maximum and, with
respect to the remainder of the aggregate Warrants then held by such Holder
for
which an exercise in accordance with the terms hereof would result in an
issuance of shares of Common Stock in excess of such Holder’s pro-rata portion
(which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum
(the “Excess
Warrants”),
the
Holder shall be prohibited from exercising such Excess Warrants and the Company
shall promptly notify the Holder of the reason therefor. This Warrant shall
thereafter be unexercisable to such extent until and unless the Charter
Amendment is subsequently approved, but this Warrant shall otherwise remain
in
full force and effect. The Holder shall be entitled, in its sole discretion,
to
allocate its pro-rata portion of the Issuable Maximum among Debentures and
Warrants held by it.]
e) Mechanics
of Exercise.
i. Authorization
of Warrant Shares.
The
Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of
the
purchase rights represented by this Warrant, be duly authorized, validly
issued,
fully paid and nonassessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in respect
of
any transfer occurring contemporaneously with such issue).
ii. Delivery
of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“DWAC”)
system
if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise
within
3 Trading Days from the delivery to the Company of the Notice of Exercise
Form,
surrender of this Warrant (if required) and payment of the aggregate Exercise
Price as set forth above (“Warrant
Share Delivery Date”).
This
Warrant shall be deemed to have been exercised on the date the Exercise Price
is
received by the Company. The Warrant Shares shall be deemed to have been
issued,
and Holder or any other person so designated to be named therein shall be
deemed
to have become a holder of record of such shares for all purposes, as of
the
date the Warrant has been exercised by payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be
paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance
of
such shares, have been paid.
5
iii. Delivery
of New Warrants Upon Exercise.
If this
Warrant shall have been exercised in part, the Company shall, at the request
of
a Holder and upon surrender of this Warrant certificate, at the time of delivery
of the certificate or certificates representing Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all
other
respects be identical with this Warrant.
iv. Rescission
Rights.
If the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will
have
the right to rescind such exercise.
v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the
Warrant
Share Delivery Date, and if after such date the Holder is required by its
broker
to purchase (in an open market transaction or otherwise) shares of Common
Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which
the Holder anticipated receiving upon such exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to
deliver to the Holder in connection with the exercise at issue times (B)
the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of
the Warrant and equivalent number of Warrant Shares for which such exercise
was
not honored or deliver to the Holder the number of shares of Common Stock
that
would have been issued had the Company timely complied with its exercise
and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request
of the
Company, evidence of the amount of such loss. Nothing herein shall limit
a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance
and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as
required pursuant to the terms hereof.
6
vi. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued
upon
the exercise of this Warrant. As to any fraction of a share which Holder
would
otherwise be entitled to purchase upon such exercise, the Company shall at
its
election, either pay a cash adjustment in respect of such final fraction
in an
amount equal to such fraction multiplied by the Exercise Price or round up
to
the next whole share.
vii. Charges,
Taxes and Expenses.
Issuance of certificates for Warrant Shares shall be made without charge
to the
Holder for any issue or transfer tax or other incidental expense in respect
of
the issuance of such certificate, all of which taxes and expenses shall be
paid
by the Company, and such certificates shall be issued in the name of the
Holder
or in such name or names as may be directed by the Holder; provided,
however,
that in
the event certificates for Warrant Shares are to be issued in a name other
than
the name of the Holder, this Warrant when surrendered for exercise shall
be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
viii. Closing
of Books.
The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
7
f) [as
to
Series A and Series C Warrants only] [Call Provision.
Subject
to the provisions of Section 2(d) and this Section 2(f), if, after the ______
3
(i) the
VWAP for each of 20 consecutive Trading Days (the “Measurement
Period”,
which
20 Trading Day period shall not have commenced until after ______4)
exceeds
______5
(subject
to adjustment for forward and reverse stock splits, recapitalizations, stock
dividends and the like after the Initial Exercise Date) (the “Threshold
Price”),
(ii)
the average daily trading volume for such Threshold Period, which Threshold
Period shall have commenced only after such Effective Date and the date the
Charter Amendment is effective, exceeds 600,000 shares of Common Stock per
Trading Day (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial Exercise
Date)
and (iii) the Holder is not in possession of any information that constitutes,
or might constitute, material non-public information, then the Company may,
within one Trading Day of the end of such period, call for cancellation of
all
or any portion of this Warrant for which a Notice of Exercise has not yet
been
delivered (such right, a “Call”).
To
exercise this right, the Company must deliver to the Holder an irrevocable
written notice (a “Call
Notice”),
indicating therein the portion of unexercised portion of this Warrant to
which
such notice applies. If the conditions set forth below for such Call are
satisfied from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant subject
to
such Call Notice for which a Notice of Exercise shall not have been received
by
the Call Date will be cancelled at 6:30 p.m. (New York City time) on the
twentieth Trading Day after the date the Call Notice is received by the Holder
(such date and time, the “Call
Date”).
Any
unexercised portion of this Warrant to which the Call Notice does not pertain
will be unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notices of Exercise with respect
to
Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m.
(New
York City time) on the Call Date. The parties agree that any Notice of Exercise
delivered following a Call Notice which calls less than all the Warrants
shall
first reduce to zero the number of Warrant Shares subject to such Call Notice
prior to reducing the remaining Warrant Shares available for purchase under
this
Warrant. For example, if (x) this Warrant then permits the Holder to acquire
100
Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z)
prior
to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice
of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
right
under this Warrant to acquire 25 Warrant Shares will be automatically cancelled,
(2) the Company, in the time and manner required under this Warrant, will
have
issued and delivered to the Holder 50 Warrant Shares in respect of the exercises
following receipt of the Call Notice, and (3) the Holder may, until the
Termination Date, exercise this Warrant for 25 Warrant Shares (subject to
adjustment as herein provided and subject to subsequent Call Notices). Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent
Call Notices for any portion of this Warrant for which the Holder shall not
have
delivered a Notice of Exercise. Notwithstanding anything to the contrary
set
forth in this Warrant, the Company may not deliver a Call Notice or require
the
cancellation of this Warrant (and any such Call Notice will be void), unless,
from the beginning of the 20th consecutive Trading Day used to determine
whether
the Common Stock has achieved the Threshold Price through the Call Date,
(i) the
Company shall have honored in accordance with the terms of this Warrant all
Notices of Exercise delivered by 6:30 p.m. (New York City time) on the Call
Date, (ii) the Registration Statement shall be effective as to all Warrant
Shares and the prospectus thereunder available for use by the Holder for
the
resale of all such Warrant Shares and (iii) the Common Stock shall be listed
or
quoted for trading on the Trading Market, and (iv) there is a sufficient
number
of authorized shares of Common Stock for issuance of all Securities under
the
Transaction Documents, and (v) the issuance of the shares shall not cause
a
breach of any provision of 2(d) herein. The Company’s right to Call the Warrant
shall be exercised ratably among the Holders based on each Holder’s initial
purchase of Warrants.
4the
Effective Date of the Registration Statement covering the resale of all shares
underlying this Warrant and the date the Charter Amendment is effective as
to
Series A Warrants and the one month anniversary of the Effective Date of
the
Registration Statement covering the resale of all shares underlying this
Warrant
and the date the Charter Amendment is effective as to the Series C
Warrants.
5$0.50
as
to Series A Warrants and $0.20 as to Series C Warrants.
8
Section
3. Certain Adjustments.
a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable
in
shares of Common Stock (which, for avoidance of doubt, shall not include
any
shares of Common Stock issued by the Company upon exercise of this Warrant
or
regularly scheduled dividends pursuant to the terms of the Company’s Series A
Convertible Preferred Stock which preferred stock shall not be amended after
the
date hereof to increase the dividend rate or number of shares of such
securities), (B) subdivides outstanding shares of Common Stock into a larger
number of shares, (C) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (D)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before
such
event and of which the denominator shall be the number of shares of Common
Stock
outstanding immediately after such event and the number of shares issuable
upon
exercise of this Warrant shall be proportionately adjusted. Any adjustment
made
pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time [as to Series
B
Warrants only “after such time that the Series A Warrants originally issued to
such Holder are no longer outstanding”] [as to Series A and Series C Warrants
“while this Warrant is outstanding”], shall sell or grant any option to purchase
or sell or grant any right to reprice its securities, or otherwise dispose
of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than
the
then Exercise Price (such lower price, the “Base
Share Price”
and
such issuances collectively, a “Dilutive
Issuance”)
(if
the holder of the Common Stock or Common Stock Equivalents so issued shall
at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with
such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Exercise Price, such issuance shall be deemed
to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to equal
the Base Share Price and the number of Warrant Shares issuable hereunder
shall
be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in the Exercise Price, shall be equal to
the
aggregate Exercise Price prior to such adjustment. Such adjustment shall
be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustments shall be made, paid or issued
under this Section 3(b) in respect of an Exempt Issuance. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this
section, indicating therein the applicable issuance price, or applicable
reset
price, exchange price, conversion price and other pricing terms (such notice
the
“Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share
Price
regardless of whether the Holder accurately refers to the Base Share Price
in
the Notice of Exercise.
9
c) Subsequent
Rights Offerings.
If the
Company, at any time while the Warrant is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to Holders)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the VWAP at the record date mentioned below, then the
Exercise Price shall be multiplied by a fraction, of which the denominator
shall
be the number of shares of the Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of additional shares of Common
Stock
offered for subscription or purchase, and of which the numerator shall be
the
number of shares of the Common Stock outstanding on the date of issuance
of such
rights or warrants plus the number of shares which the aggregate offering
price
of the total number of shares so offered (assuming receipt by the Company
in
full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately
after
the record date for the determination of stockholders entitled to receive
such
rights, options or warrants.
d) Pro
Rata Distributions.
If the
Company, at any time prior to the Termination Date, shall distribute to all
holders of Common Stock (and not to Holders of the Warrants) evidences of
its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which
shall be subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately
prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value
at such record date of the portion of such assets or evidence of indebtedness
so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
10
e) Fundamental
Transaction.
If, at
any time while this Warrant is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by
the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the
Common
Stock or any compulsory share exchange pursuant to which the Common Stock
is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then,
upon any subsequent exercise of this Warrant, the Holder shall have the right
to
receive, for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the
option of the Holder, (a) upon exercise of this Warrant, the number of shares
of
Common Stock of the successor or acquiring corporation or of the Company,
if it
is the surviving corporation, and any additional consideration (the
“Alternate
Consideration”)
receivable upon or as a result of such reorganization, reclassification,
merger,
consolidation or disposition of assets by a Holder of the number of shares
of
Common Stock for which this Warrant is exercisable immediately prior to such
event or (b) if the Company is acquired in an all cash transaction, cash
equal
to the value of this Warrant as determined in accordance with the Black-Scholes
option pricing formula. For purposes of any such exercise, the determination
of
the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in
respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components
of
the Alternate Consideration. If holders of Common Stock are given any choice
as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor
or
surviving entity to comply with the provisions of this Section 3(e) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental
Transaction.
11
f) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
3,
the number of shares of Common Stock deemed to be issued and outstanding
as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company.
h) Notice
to Holders.
i. Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to each Holder a notice setting
forth
the Exercise Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment. If the Company issues a variable rate
security, despite the prohibition thereon in the Purchase Agreement, the
Company
shall be deemed to have issued Common Stock or Common Stock Equivalents at
the
lowest possible conversion or exercise price at which such securities may
be
converted or exercised in the case of a Variable Rate Transaction (as defined
in
the Purchase Agreement).
ii. Notice
to Allow Exercise by ▇▇▇▇▇▇.
If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of
any
rights; (D) the approval of any stockholders of the Company shall be required
in
connection with any reclassification of the Common Stock, any consolidation
or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case,
the
Company shall cause to be mailed to the Holder at its last address as it
shall
appear upon the Warrant Register of the Company, at least 20 calendar days
prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of
such
dividend, distribution, redemption, rights or warrants, or if a record is
not to
be taken, the date as of which the holders of the Common Stock of record
to be
entitled to such dividend, distributions, redemption, rights or warrants
are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective
or
close, and the date as of which it is expected that holders of the Common
Stock
of record shall be entitled to exchange their shares of the Common Stock
for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
20-day period commencing on the date of such notice to the effective date
of the
event triggering such notice.
12
Section
4. Transfer
of Warrant.
a) Transferability.
Subject
to compliance with any applicable securities laws and the conditions set
forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated
agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and
funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.
b) New
Warrants.
This
Warrant may be divided or combined with other Warrants upon presentation
hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
c) Warrant
Register.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in
the name of the record Holder hereof from time to time. The Company may deem
and
treat the registered Holder of this Warrant as the absolute owner hereof
for the
purpose of any exercise hereof or any distribution to the Holder, and for
all
other purposes, absent actual notice to the contrary.
d) Transfer
Restrictions.
If,
at the
time
of
the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be registered pursuant to an effective
registration
statement under the Securities Act
and
under
applicable state securities or blue sky laws, the Company may require, as
a
condition of allowing such transfer (i) that the Holder or transferee of
this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel
(which opinion shall be in form, substance and scope customary for opinions
of
counsel in comparable transactions) to the effect that such transfer may
be made
without
registration under
the
Securities Act and under applicable state securities or blue sky laws, (ii)
that
the holder or transferee execute and deliver to the Company an investment
letter
in form and substance acceptable to the Company and (iii) that the transferee
be
an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.
13
Section
5. Miscellaneous.
a) No
Rights as Shareholder Until Exercise.
This
Warrant does not entitle the Holder to any voting rights or other rights
as a
shareholder of the Company prior to the exercise hereof as set forth in Section
2(e)(ii).
b) Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to
it
(which, in the case of the Warrant, shall not include the posting of any
bond),
and upon surrender and cancellation of such Warrant or stock certificate,
if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant
or
stock certificate.
c) Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
d) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number
of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants that
its
issuance of this Warrant shall constitute full authority to its officers
who are
charged with the duty of executing stock certificates to execute and issue
the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be listed.
14
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms
of this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against
impairment. Without limiting the generality of the foregoing, the Company
will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable
the Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
e) Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of
the
Purchase Agreement.
f) Restrictions.
The
Holder acknowledges that the Warrant Shares acquired upon the exercise of
this
Warrant, if not registered, will have restrictions upon resale imposed by
state
and federal securities laws.
g) Nonwaiver
and Expenses.
No
course of dealing or any delay or failure to exercise any right hereunder
on the
part of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results
in
any material damages to the Holder, the Company shall pay to Holder such
amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto
or
in otherwise enforcing any of its rights, powers or remedies
hereunder.
15
h) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
i) Limitation
of Liability.
No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein of the
rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
j) Remedies.
Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would
be
adequate.
k) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all
Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or
holder of Warrant Shares.
l) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
********************
16
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
|
DOBI
MEDICAL INTERNATIONAL, INC.
|
||
| |
|
|
| Date: April ___, 2006 | By: | |
|
Name: |
||
| Title | ||
17
NOTICE
OF EXERCISE
TO: DOBI
MEDICAL INTERNATIONAL, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
[
] in
lawful money of the United States; or
[
] [if
permitted] the cancellation of such number of Warrant Shares as is necessary,
in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).
(3) Please
issue a certificate or certificates representing said Warrant Shares in the
name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number or
by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor.
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
_____________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_______________________________________
Name
of
Authorized Signatory:
_________________________________________________________
Title
of
Authorized Signatory:
__________________________________________________________
Date:
______________________________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and
all
rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
______________________________
Signature
Guaranteed: ___________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.