Exhibit 4.2
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT. THIS WARRANT
AND THE SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”) OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
115,000 SHARES OF THE COMMON STOCK OF
drugstore.com
inc.
Warrant No.
W-7
EFFECTIVE DATE: November 16,
2006
EXPIRATION DATE:
February 14, 2008
This certifies that
L EHMAN B ROTHERS
I
NC
., or its
transferees or assigns (each individually, the “
Holder ”), as transferee of Heidrick &
Struggles, Inc. (the “ Initial Holder ”),
for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, shall be entitled to purchase
from DRUGSTORE
.
COM
,
INC
.
, a Delaware
corporation (the “ Company ”), having its
principal place of business at 411 108
th
Ave
NE, Suite 1400, Bellevue WA 98004 , a maximum of
115,000 fully paid and nonassessable shares of the
Company’s Common Stock (“ Common Stock
”) for cash at a price equal to $2.36 per share (the
“ Exercise Price ”) at any time, or from
time to time, up to and including 5:00 p.m. Pacific time on the
Expiration Date, upon the surrender to the Company at its principal
place of business (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed, a
Form of Subscription in substantially the form attached hereto duly
filled in and signed and, as applicable, upon payment in cash or by
check of the aggregate Exercise Price for the number of shares for
which this Warrant is being exercised determined in accordance with
the provisions hereof, or the surrender of the right to acquire the
number of shares of Common Stock determined in accordance with
Section 1.2. The Exercise Price and the number of shares of
Common Stock purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant.
The Warrant was issued pursuant to
the Agreement between the Company and the Initial Holder dated as
of February 14, 2005 (the “ Agreement
”) and is being transferred from the Initial Holder to the
Holder pursuant to the Warrant Purchase Agreement between the
Initial Holder and the Holder dated as of November 10, 2006
(the “ Purchase Agreement ”). The Holder
of this Warrant is subject to certain restrictions, and entitled to
certain rights as set forth in the Agreement and the Purchase
Agreement. This Warrant is referred to as the
“Warrant(s)” in the Agreement and the Purchase
Agreement.
This Warrant is subject to the
following terms and conditions:
1. E XERCISE ; I SSUANCE OF C ERTIFICATES ; P AYMENT FOR S HARES .
1.1 General.
This Warrant is exercisable at the
option of the holder of record hereof at any time or from time, to
time, up to the Expiration Date for all or any part of the shares
of Common Stock (but not for a fraction of a share), which may be
purchased hereunder. This Warrant may be exercised by the holder of
record hereof by tendering to the Company at its principal office a
completed notice of exercise in the form attached hereto as Exhibit
A (the “ Notice of Exercise ”). The
Company agrees that the shares of Common Stock purchased under this
Warrant shall be and are deemed to be issued to the Holder hereof
as the record owner of such shares as of the close of business on
the date on which this Warrant, properly endorsed, and appropriate
payment for such shares shall have each been delivered to the
Company at its principal place of business. Certificates for the
shares of Common Stock so purchased, together with any other
securities or property to which the Holder is entitled upon such
exercise, shall be delivered to the Holder by the Company at the
Company’s expense within a reasonable time after the rights
represented by this Warrant have been so exercised, and in any
event, within ten (10) business days of such exercise. In case
of a purchase of less than all the shares which may be purchased
under this Warrant, the Company shall cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered
upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations
of Common Stock as may be requested by the Holder hereof and shall
be registered in the name designated by such Holder.
1.2 Net Issue
Exercise. Holder agrees
that it cannot “net issue exercise” this Warrant in
accordance with the provisions of this section, except in
connection with or following an Organic Change (as defined in
Section 3.3 below). Notwithstanding any provisions herein to
the contrary, if the fair market value 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 for cash, the Holder may elect a “Net Issue
Exercise” pursuant to which it will receive shares equal to
the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed
Form of Subscription and notice of such election in which event the
Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
Where X = the number of shares of
Common Stock to be issued to the Holder
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Y = the number
of shares of Common Stock purchasable under the Warrant or, if only
a portion of the Warrant is
being exercised, the portion of the Warrant being exercised (at the
date of such exercise)
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A = the fair
market value of one share of the Company’s Common
Stock
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B = Exercise
Price (as adjusted to the date of such exercise).
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2.
For purposes of the above calculation, the fair
market value of one share of Common Stock shall be determined by
the Company’s Board of Directors in good faith, as of the
date of exercise of the Warrant; provided, however, that where
there is a public market for the Company’s Common Stock, the
fair market value per share shall be the average of the closing
prices of the Company’s Common Stock quoted on the Nasdaq
National Market (or similar system) or on any exchange on which the
Common Stock is listed, whichever is applicable, over the five
(5) trading day period commencing on the trading day
immediately following the day on which the Warrant is
exercised.
2. S HARES TO BE F ULLY P AID ; R ESERVATION OF S HARES . The
Company covenants and agrees that all shares of Common Stock which
may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized, validly issued,
fully paid and nonassessable and free from all preemptive rights of
any shareholder and free of all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and
agrees that, during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be reasonably
necessary to assure that such shares of Common Stock may be issued
as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided,
however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would
result in any adjustment of the Exercise Price (as set forth in
Section 3 hereof) if the total number of shares of Common
Stock issuable (i) upon exercise of the Warrant would exceed
10% of the total number of shares of Common Stock outstanding on
the Effective Date or (ii) after such action upon exercise of
all outstanding warrants, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible
securities and other equity purchase rights then outstanding, would
exceed the total number of shares of Common Stock then authorized
by the Company’s Articles/Certificate of Incorporation (the
“Company Charter”).
3. A DJUSTMENT OF E XERCISE P RICE AND N UMBER OF S HARES . The
Exercise Price and the number of shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of certain events described in Sections
3.1 and 3.2 below. Upon each adjustment of the Exercise Price, the
Holder of this Warrant shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of
shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment,
and dividing the product thereof by the Exercise Price resulting
from such adjustment.
3.1 Subdivision or Combination of
Stock. In case the
Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the
3.
Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely,
in case the outstanding shares of Common Stock of the Company shall
be combined into a smaller number of shares (by reverse stock split
or otherwise), the Exercise Price in effect immediately prior to
such combination shall be proportionately increased.
3.2 Dividends in Common Stock,
Other Stock, Property, Reclassification. If at any time or from time to time the Holders
of Common Stock (or any shares of stock or other securities at the
time receivable upon the exercise of this Warrant) shall have
received or become entitled to receive, without payment
therefor,
(a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible
into or exchangeable for Common Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing
by way of dividend or other distribution,
(b) any cash paid or payable otherwise than as a
cash dividend, or
(c) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff,
split-up, reclassification, combination of shares or similar
corporate rearrangement, (other than shares of Common Stock issued
as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above),
then, and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled
to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities
and property (including cash in the cases referred to in clauses
(b) and (c) above) (collectively, “ Other
Property ”) which such Holder would hold on the date
of such exercise had he been the holder of record of such Common
Stock as of the date on which holders of Common Stock received or
became entitled to receive such Other Property. Notwithstanding the
foregoing, the Company may, in lieu of delivering such Other
Property to the Holder, adjust the Exercise Price of the Warrant or
the number of shares of Common Stock to be delivered upon exercise
of the Warrant as the Board of Directors, in its reasonable
judgment, deems appropriate and equitable, in order to take into
account the value of such Other Property.
3.3 Reorganization,
Consolidation, Merger or Sale. If any recapitalization or reorganization of the
capital stock of the Company other than pursuant to
Section 3.2(c) above, or any consolidation or merger of the
Company with another corporation, or the sale of all or
substantially all of its assets shall be effected in such a
way
