EXHIBIT 10.6
AGREEMENT REGARDING SATISFACTION OF ARBITRATION AWARD
This Agreement Regarding Satisfaction of Arbitration Award (the
"Agreement") is made this 19th day of November, 2003 by and between ▇.▇.▇.
Pharmaceutical Corp. (the "Company") and Capital Research Group, Inc.
("CRG"). ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇▇) is a party to this Agreement
for purposes of Sections 5 and 6 only.
RECITALS:
A. Pursuant to that certain Arbitration Award issued April 30, 2003
regarding American Arbitration Association Case No. 32 181 00509 02, CRG was
awarded the principal sum of $577,700 plus prejudgment interest calculated at
the rate of .0002466 or $142.46, per diem form July 24, 2002 through December
31, 2002 and the per diem rate of .0001644, or $94.97 from January 1, 2003 until
the award is paid (the "Award").
B. The Company and CRG acknowledge that the Award is an obligation of the
Company.
C. Upon the terms and subject to the conditions of this Agreement, CRG and
the Company have agreed that the Company shall not pay to CRG the Award and
shall otherwise be released from its obligations arising under the Award.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. RECITALS. The above stated RECITALS are true and correct and are
incorporated by reference into this Agreement.
2. SHARE ISSUANCE. No later than four days after the Effective Date, as
that term is defined herein, (the "Delivery Date"), the Company
shall:
(a) issue to CRG 1,159,363 shares of the Company's Common Stock;
(b) issue to CRG 2,000,000 shares of the Company's Common Stock,
provided, however, and only with respect to the 2,000,000 shares
referred to in this Section 2(b):
(i) If the closing "Bid" price of the Company's common stock (as
reflected on the OTCBB) on the date immediately prior to the
Delivery Date (the "Prior Closing Bid Price") is less than
18 cents ($0.18) per share, the Company shall deliver
additional shares or cash, at the Company's option, such
that the total value of the shares and cash delivered (the
value shall be equal to the sum of the Prior Closing Bid
Price and the number of shares issued) is equivalent to
$360,000; and
(ii) If the Prior Closing Bid Price exceeds 18 cents ($0.18), the
number of shares shall be reduced by a factor of 50,000
shares for each $0.01 the Prior Closing Bid Price exceeds 18
cents ($0.18).
(c) The shares of common stock which are to be delivered to CRG pursuant
to this Section 2 are sometimes referred to in this Agreement as the
"Shares".
3. WARRANT ISSUANCE.
(a) On the date hereof, the Company shall issue to CRG or its designees an "A"
Warrant and a "B" Warrant (collectively, the "Warrants") in substantially the
form attached as Exhibits A and B. The Company will notify CRG in writing within
48 hours of the time that the Company issues, or commits to issue, any shares of
common stock, options, warrants or securities convertible into shares of common
stock.
(b) The Shares and the shares delivered pursuant to the exercise of the Warrants
(the "Warrant Shares") shall be delivered to CRG or its designee via DWAC or DTC
transfer to:
Wexford Clearing Services Corporation
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
DTC# 0030
Code: 40
For further credit to:
Capital Research Group Inc.
Account # LC3 952551 76
The shares will be deemed delivered the next business day after the
Company has instructed its transfer agent to DWAC the shares to Wexford Clearing
Services Corporation. The Company will notify CRG by telephone (▇▇▇-▇▇▇-▇▇▇▇) no
later than two hours after the Company has instructed its transfer agent to DWAC
the shares to Wexford Clearing Services Corporation.
4. REGISTRATION
(a) The Company acknowledges that it filed a Registration Statement on Form
SB-2 (File #333-109868) with the U.S. Securities and Exchange Commission (the
"SEC") on October 22, 2003, and the Company was informed by the SEC that it
would not review the Registration Statement and the SEC would consider the
Company's request for acceleration of the effectiveness of the Registration
Statement. The Company shall file an amendment to the Registration Statement
(the "Amendment") which Amendment shall include the registration under the
Securities Act of 1933 (the "1933 Act") of the resale of the Shares and the
Warrant Shares. The Company will use its best efforts to cause the Registration
Statement, as amended, to be declared effective no later than December 4, 2003
(the "Scheduled Effective Date").
(b) In the event the Registration Statement is not declared
effective by the Scheduled Effective Date and sales of the Shares or the Warrant
Shares cannot be made pursuant to the Registration Statement (whether because of
a failure to keep the Registration Statement effective, failure to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, failure to register sufficient shares of Common Stock or otherwise)
then at CRG's option, CRG may unilaterally terminate this Agreement, whereupon
CRG's and ▇▇▇▇▇▇▇▇▇▇'▇ obligations and agreements (including, but not limited to
those agreements arising under Section 6 hereof) under this Agreement shall be
terminated and CRG may pursue its remedies under the Award, including but not
limited to reducing the Award to a court ordered judgment (the "Unilateral
Termination");
(c) The Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until one year after the date (the "Effective
Date") the SEC declares the Registration Statement effective or the date on
which CRG shall have sold all the Shares and Warrant Shares covered by the
Registration Statement (the "Registration Period"), whichever occurs first. The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
the Shares and the Warrant Shares of the Company covered by such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 4(c)) by reason of the Company's filing a report on Form 10-KSB,
Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), the Company shall incorporate such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
The Company shall furnish to CRG, without charge, (i) at least one
(1) copy of the Registration Statement as declared effective by the SEC and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as CRG may reasonably request) and (iii) such other documents
as CRG may reasonably request from time to time in order to facilitate the
disposition of the Shares and the Warrant Shares.
(d) The Company shall use its best efforts to (i) register and qualify the
resale of the Shares and the Warrant Shares under such other securities or "blue
sky" laws of New York, (ii) prepare and file in New York, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Shares and the Warrant Shares for sale in such
jurisdictions.
(f) With respect to the Shares and the Warrant Shares which are
included in the Registration Statement:
To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend CRG and its directors, officers, partners,
employees, agents, representatives of, and each person, if any, who controls CRG
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, reasonable attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "Claims") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities laws of
New York are offered ("Blue Sky Filing"), or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act or the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation there under relating to the offer or sale of the
Shares or Warrant Shares pursuant to the Registration Statement (the matters in
the foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse CRG and each such controlling person promptly as such
expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 4(f): (x) shall not apply to a Claim by a CRG arising out of or based
upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by CRG expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of CRG to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company; and (z) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of CRG and shall survive the transfer of the Shares and the
Warrant Shares by CRG.
5. No Short Selling. CRG and ▇▇▇▇▇▇▇▇▇▇ represent and warrant that between
the date of this Agreement and the Delivery Date, neither CRG nor ▇▇▇▇▇▇▇▇▇▇
shall, directly or indirectly, engage in any short sales (as defined in any
applicable SEC rules or rules of the National Association of Securities Dealers)
or in any hedging transactions with respect to the Common Stock of the Company,
nor will CRG or ▇▇▇▇▇▇▇▇▇▇ direct any third party, or encourage or suggest to
any third party, to engage in any short sales or hedging transactions.
6. MUTUAL RELEASE.
(a) Except for the obligations of CRG and ▇▇▇▇▇▇▇▇▇▇ contained in this
Agreement, the Company does hereby release, cancel, forgive and forever
discharge CRG and ▇▇▇▇▇▇▇▇▇▇, and each of their predecessors, parent
corporations, holding companies, subsidiaries, affiliates, divisions, heirs,
successors and assigns, and all of their agents, representatives, attorneys,
directors and employees from all actions, claims, demands, damages, obligations,
liabilities, controversies and executions, of any kind or nature whatsoever,
whether known or unknown, whether suspected or not, which have arisen, or may
have arisen, or shall arise by reason of the Award or the matters arising from
or out of the Award.
(b) Except for the obligations of the Company contained in this Agreement and
except in the event of the Unilateral Termination, CRG and ▇▇▇▇▇▇▇▇▇▇ do hereby
release, cancel, forgive and forever discharge the Company and each of its
predecessors, parent corporations, holding companies, subsidiaries, affiliates,
divisions, heirs, successors and assigns, and all of their agents,
representatives, attorneys, officers, directors and employees, from all actions,
claims, demands, damages, obligations, liabilities, controversies and
executions, of any kind or nature whatsoever, whether known or unknown, whether
suspected or not, which have arisen, or may have arisen, or shall arise by
reason of the reason of the Award or the matters arising from or out of the
Award (the "CRG ▇▇▇▇▇▇▇▇▇▇ Release"). Notwithstanding anything contained herein
to the contrary, the CRG ▇▇▇▇▇▇▇▇▇▇ Release shall not apply and shall have no
force or effect from the date of the Unilateral Termination.
7. MISCELLANEOUS.
(a) Entire Agreement. This Agreement contains the entire Agreement
and understanding between the parties, and supersedes all prior agreements,
understandings and proposals.
(b) Amendment. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
(c) Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
(d) Descriptive Headings. Descriptive headings contained herein are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
(e) Counterparts. This Agreement may be executed in any numbers of
counterparts and by the separate parties hereto in separate counterparts, each
of which shall be deemed to be one and the same instrument.
(f) Notices. All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be in writing and shall be deemed to have been duly given, when delivered by
hand or three (3) days after deposited in the United States mail, by registered
or certified mail, return receipt requested, postage prepaid, as follows:
If to the Company: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇.▇. Pharmaceutical Corp. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
West, Commercial ▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
If to CRG or ▇▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Capital Research Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
(g) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Except as provided herein, none of the parties hereto shall assign
any of its rights or obligations hereunder.
(h) Applicable Law. This Agreement shall be governed by, and shall
be construed, interpreted and enforced in accordance with the laws of the State
of Florida.
(i) Expenses. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
(j) Attorneys' Fees. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
(k) Other Documents. The parties hereto shall cooperate in the
effectuation of the transactions contemplated hereby and shall execute any and
all additional documents and shall take such additional actions as shall be
reasonably necessary or appropriate for such purposes.
(l) Venue. The parties hereto agree that any suit brought hereunder
shall be brought only in the Circuit Court for the Eleventh Judicial Circuit in
and for Miami-Dade County, Florida and the United States District Court for the
Southern District of Florida, Miami Division.
(m) Public Disclosure. From and after the date hereof, the Company
shall not issue a press release or any other public announcement with respect to
the transactions contemplated hereby without the prior consent of CRG, which
consent shall not be unreasonably withheld or delayed. It is understood by CRG
that the Company is required under the Securities Exchange Act of 1934 to make
prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
▇.▇.▇. PHARMACEUTICAL CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
CAPITAL RESEARCH GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
For purposes of Sections 5and 6 only:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
EXHIBIT A
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
STOCK PURCHASE WARRANT
▇.▇.▇. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, Capital Research Group,
Inc. (the "Holder"), is entitled, upon the terms and subject to the limitations
on exercise and the conditions hereinafter set forth to subscribe for and
purchase from ▇.▇.▇. Pharmaceutical Corp., a corporation incorporated in the
State of Delaware (the "Company"), up to 1,000,000 shares (the "Warrant Shares")
of Common Stock, par value $0.0001 per share, of the Company (the "Common
Stock"). Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in that certain Agreement Regarding Satisfaction of
Arbitration Award (the "Arbitration Award Agreement"), dated November 19, 2003,
between the Company and the Holder. This Warrant may be exercised at any time
and from time to time, within the period commencing on the date hereof and
ending at 4:00 p.m. EST on the date which is 120 days after the Effective Date
(the "Termination Date") but not thereafter. The purchase price of one share of
Common Stock (the "Exercise Price") under this Warrant shall be $0.22, subject
to adjustment hereunder. The Exercise Price and the number of Warrant Shares for
which the Warrant is exercisable shall be subject to adjustment as provided
herein.
1. Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the Holder in person
or by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
2. Authorization of 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 in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) This Warrant may be exercised by the surrender of this Warrant
and the Notice of Exercise Form annexed hereto duly executed, at the office of
the Company (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 upon payment of the Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn on a
United States bank.
Certificates for Warrant Shares purchased hereunder shall be delivered to
the Holder at an address in the U.S. within four (4) Trading Days after the date
on which this Warrant shall have been exercised as aforesaid or, at the request
of the Holder, issued and delivered to the Depository Trust Company ("DTC")
account on the Holder's behalf via the Deposit Withdrawal Agent Commission
System ("DWAC") within a reasonable time, not exceeding four (4) Trading Days
after such exercise,. This Warrant shall be deemed to have been exercised and
such certificate or certificates 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 and
all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior
to the issuance of such shares, have been paid. If the Company fails to deliver
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to this Section 3(a) by the fourth Trading Day after the date of
exercise, then the Holder will have the right to rescind such exercise. In
addition to any other rights available to the Holder, if the Company fails to
deliver to the Holder a certificate or certificates representing the Warrant
Shares pursuant to an exercise by the fifth Trading Day after the date of
exercise, and if after such fifth 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 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 closing bid price of the
Common Stock close of trading on the fifth Trading Day, 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 a market price on the date of exercise totaled $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. 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. If this
Warrant shall have been exercised in part, the Company shall, 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.
(b) Cashless Exercise. Notwithstanding any provisions herein to the
contrary, if the Per Share Market Value (defined as the closing bid price for a
share of the Company's Common Stock in the over-the-counter market, as reported
by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting prices)
at the close of business on the date immediately prior to the date the Warrant
is exercised, of one share of the Company's Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Company in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:
X= Y- A x (Y)
---
B
Where X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock purchasable upon
exercise of all of the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being
exercised.
A = the Exercise Price.
B = the Per Share Market Value of one share of Common Stock.
4. 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 pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
5. 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.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) 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 7(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) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. 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. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the record
owner of such shares as of the close of business on the later of the date
of such surrender or payment.
9. 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
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.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not
a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (i) pay a
dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant
Shares purchasable upon exercise of this Warrant immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive the kind
and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and
number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing by the number of
Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation
(where the Company is not the surviving corporation or where there is a
change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially
all its property, assets or business to another corporation and, pursuant
to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation ("Other Property"), are to
be received by or distributed to the holders of Common Stock of the
Company, then the Holder shall have the right thereafter to receive, at
their option, (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 Other Property 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) cash equal to the value of this Warrant as determined
in accordance with the Black-Sholes option pricing formula. In case of any
such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other
than the Company) shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Warrant
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant
Shares for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section
12. For purposes of this Section 12, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any
class which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to redemption
and shall also include any evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt
requested, to the Holder notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of
such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such notice, in the absence of manifest error, shall be conclusive
evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property,
assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
15. Registration Provisions. The Company has agreed to register the Warrant
Shares in accordance with Section 4 of the Arbitration Award Agreement.
16. 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 Principal Market upon which the Common
Stock may be listed.
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
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.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
Delaware, without regard to its conflict of law, principles or rules.
(b) 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.
(c) 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 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.
(d) 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 Arbitration Award Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder 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.
(f) 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 the defense in any action for specific performance
that a remedy at law would be adequate.
(g) 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.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) 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.
(j) 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.
********************
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 19, 2003
▇.▇.▇. PHARMACEUTICAL CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
EXHIBIT B
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
STOCK PURCHASE WARRANT
▇.▇.▇. Pharmaceutical Corp.
THIS CERTIFIES that, for value received, Capital Research Group, Inc. (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth to subscribe for and purchase
from ▇.▇.▇. Pharmaceutical Corp., a corporation incorporated in the State of
Delaware (the "Company"), shares (the "Warrant Shares") of Common Stock, par
value $0.0001 per share, of the Company (the "Common Stock"). Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Agreement Regarding Satisfaction of Arbitration Award (the "Arbitration
Award Agreement"), dated November 19, 2003, between the Company and the Holder.
The number of Warrant Shares is equal to that number of shares, if any, of the
Company's Common Stock (other than the Shares or the Warrant Shares) equal to
10% of the aggregate number of shares of the Company's Common Stock issued or
committed to be issued by the Company during the period commencing with the date
of this Agreement and ending on the date which is ninety (90) days after the
Effective Date (the "Additional Shares"). Additional Shares will include,
without limitation, shares underlying any securities which are issued and which
are convertible or exercisable into shares of the Company's Common Stock during
the period commencing with the date of this Agreement and ending on the date
which is ninety (90) days after the Effective Date. However, Additional Shares
will not include (i) any shares registered by means of the Company's
Registration Statement on Form SB-2, SEC File No. 333-109868, and (ii) any
shares issuable upon the conversion or exercise of any convertible security or
warrant which provides the convertible security or warrant may not be converted
or exercised during the period commencing with the date of this Agreement and
ending on the date which is ninety (90) days after the Effective Date. This
Warrant may be exercised at any time and from time to time, on or after the date
hereof but prior to the date which is the later to occur of (x) 120 days after
the Effective Date; or (y) as to particular Additional Shares, thirty (30) days
after the Company notifies the Holder in writing of the issuance by the Company
of such Additional Shares (the "Termination Date") but not thereafter. The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be $0.01, subject to adjustment hereunder. The Exercise Price and
the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein.
1. Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the Holder in person
or by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
2. Authorization of 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 in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) This Warrant may be exercised by the surrender of this Warrant
and the Notice of Exercise Form annexed hereto duly executed, at the office of
the Company (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 upon payment of the Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn on a
United States bank.
Certificates for Warrant Shares purchased hereunder shall be delivered to
the Holder at an address in the U.S. within four (4) Trading Days after the date
on which this Warrant shall have been exercised as aforesaid or, at the request
of the Holder, issued and delivered to the Depository Trust Company ("DTC")
account on the Holder's behalf via the Deposit Withdrawal Agent Commission
System ("DWAC") within a reasonable time, not exceeding four (4) Trading Days
after such exercise,. This Warrant shall be deemed to have been exercised and
such certificate or certificates 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 and
all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior
to the issuance of such shares, have been paid. If the Company fails to deliver
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to this Section 3(a) by the fourth Trading Day after the date of
exercise, then the Holder will have the right to rescind such exercise. In
addition to any other rights available to the Holder, if the Company fails to
deliver to the Holder a certificate or certificates representing the Warrant
Shares pursuant to an exercise by the fifth Trading Day after the date of
exercise, and if after such fifth 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 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 closing bid price of the
Common Stock close of trading on the fifth Trading Day, 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 a market price on the date of exercise totaled $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. 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. If this
Warrant shall have been exercised in part, the Company shall, 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.
(b) Cashless Exercise. Notwithstanding any provisions herein to the
contrary, if the Per Share Market Value (defined as the closing bid price for a
share of the Company's Common Stock in the over-the-counter market, as reported
by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting prices)
at the close of business on the date immediately prior to the date the Warrant
is exercised, of one share of the Company's Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Company in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:
X= Y- A x (Y)
---
B
Where X = the number of shares of Common Stock to be issued to the Holder.
Y = the number of shares of Common Stock purchasable upon
exercise of all of the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being
exercised.
A = the Exercise Price.
B = the Per Share Market Value of one share of Common Stock.
4. 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 pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
5. 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.
6. Closing of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
(b) 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 7(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) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. 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. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the record
owner of such shares as of the close of business on the later of the date
of such surrender or payment.
9. 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
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.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not
a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (i) pay a
dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant
Shares purchasable upon exercise of this Warrant immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive the kind
and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and
number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing by the number of
Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation
(where the Company is not the surviving corporation or where there is a
change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially
all its property, assets or business to another corporation and, pursuant
to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation ("Other Property"), are to
be received by or distributed to the holders of Common Stock of the
Company, then the Holder shall have the right thereafter to receive, at
their option, (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 Other Property 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) cash equal to the value of this Warrant as determined
in accordance with the Black-Sholes option pricing formula. In case of any
such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other
than the Company) shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Warrant
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant
Shares for which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section
12. For purposes of this Section 12, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any
class which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to redemption
and shall also include any evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt
requested, to the Holder notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of
such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such notice, in the absence of manifest error, shall be conclusive
evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property,
assets or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).
15. Registration Provisions. The Company has agreed to register the Warrant
Shares in accordance with Section 4 of the Arbitration Award Agreement.
16. 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 Principal Market upon which the Common
Stock may be listed.
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
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.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws of
Delaware, without regard to its conflict of law, principles or rules.
(b) 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.
(c) 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 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.
(d) 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 Arbitration Award Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder 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.
(f) 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 the defense in any action for specific performance
that a remedy at law would be adequate.
(g) 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.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) 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.
(j) 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.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: November 19, 2003
▇.▇.▇. PHARMACEUTICAL CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President