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EXHIBIT 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
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Warrant No. W — 1
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Number
of Shares — 25,000
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Date of Issuance: October 21,
2003
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(subject to adjustment)
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WARRANT TO PURCHASE
COMMON STOCK OF
CUMBERLAND PHARMACEUTICALS, INC.
(Void after October 21, 2013)
THIS WARRANT TO PURCHASE COMMON
STOCK OF CUMBERLAND PHARMACEUTICALS, INC. (the "Warrant") is issued
as of this 21st day of October, 2003, by CUMBERLAND
PHARMACEUTICALS, INC., a Tennessee corporation (the "Company"),
having a place of business at 2525 West End Avenue, Suite 950,
Nashville, Tennessee 37203, to BANK OF AMERICA, N.A., a national
banking association (Bank of America, N.A. and any subsequent
assignee or transferee hereof are hereinafter referred to
collectively as the "Holder").
AGREEMENT:
For and in consideration of the
Holder making available to the Company a revolving credit facility
in the maximum principal amount of Three Million Five Hundred
Thousand and No/100ths Dollars ($3,500,000.00) (the "Loan")
pursuant to the terms of an Amended and Restated Promissory Note of
even date herewith in the aforesaid amount (together with any and
all extensions, modifications, replacements and renewals thereof,
the "Note") and an Amended and Restated Loan Agreement of even date
herewith (as amended, supplemented or otherwise modified from time
to time, the "Loan Agreement"; any capitalized terms used but not
otherwise defined herein shall have the same meanings as in the
Loan Agreement), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company hereby grants to the Holder the right to purchase from the
Company at a per share price equal to $12.00 (the "Exercise
Price"), 25,000 shares of the Company’s common stock, $0 par
value per share (the "Common Stock"), at any time or from time to
time, from October 21, 2003 up to and including 5:00 p.m.
(Central time) on October 21, 2013 (the "Expiration Date"), upon
surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Notice of Exercise attached
hereto as Exhibit A , duly completed and signed and, if
applicable, upon payment in cash or by check acceptable to the
Company of the aggregate Exercise Price for the number of shares
for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Exercise Price and the number of
shares purchasable hereunder are subject to adjustment as provided
in Section 3 of this Warrant.
This Warrant is subject to the
following terms and conditions:
1. Exercise; Issuance of
Certificates; Payment for Shares.
1.1 General. Subject to the terms of Section 1.3 below,
this Warrant is exercisable at the option of the Holder, at any
time or from time to time, from the date of the issuance of this
Warrant up to the Expiration Date, for all or any part of the
shares of Common Stock (but not for a fraction of a share) that may
be purchased hereunder. The Company agrees that the shares of
Common Stock purchased under this Warrant shall be and are deemed
to be issued to the Holder as the record owner of such shares as of
the close of business on the date on which this Warrant shall have
been surrendered to the Company, properly endorsed, the completed,
executed Form of Subscription shall have been delivered and any
required payment made for such shares. 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. In case of a purchase of less
than all of the shares that 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 within a reasonable time. Each stock certificate so
delivered shall be in such denominations of Common Stock as may be
requested by the Holder and shall be registered in the name of such
Holder.
1.2 Net Issue Exercise. 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 to receive
shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) 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:
X = Y (A-B)
A
Where X = the number of shares of
Common Stock to be issued to the Holder
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
canceled (at the date of such calculation)
A = the Fair Market Value of one
share of the Company’s Common Stock (at the date of such
calculation)
B = Exercise Price (as adjusted to
the date of such calculation)
The "Fair Market Value" of a share
of Common Stock as of a particular date shall mean: (a) if
there is an active public market for the Company’s Common
Stock at the time of such exercise, the fair market value per share
shall be the average of the closing prices of the Common Stock of
the Company over the five (5) trading days ending immediately
prior to the applicable date of valuation if traded on a securities
exchange or the Nasdaq National Market; or, if actively
traded over-the-counter, the average of the closing bid prices
over the 30-day period ending immediately prior to the applicable
date of valuation, whichever is applicable; or (b) if there is
no active public market for the Company’s Common Stock at the
time of such exercise, the Fair Market Value shall be the value
thereof as determined in good faith by the board of directors of
the Company (the "Determination"). The board of directors shall
provide to the Holder a written notice of the Determination which
notice shall set forth supporting data in respect of such
calculation (the "Determination Notice"). Holder shall have
10 days following receipt of the Determination Notice within
which to deliver to the Company a written notice of an objection,
if any, to the Determination. The failure by Holder to deliver such
notice within such 10-day period shall constitute the
Holder’s acceptance of the Determination as conclusive. In
the event of the timely delivery by Holder of its objection notice,
the Company and the Holder shall attempt in good faith to arrive at
an agreement with respect to the Fair Market Value of a share of
Common Stock of the Company, which agreement shall be set forth in
writing within 15 days following delivery of such objection
notice by Holder. If the Company and the Holder are unable to reach
an agreement within such 15-day period, the matter shall be
promptly referred for determination to a regionally or nationally
recognized investment banking or valuation firm (the "Valuer")
reasonably acceptable to the Company and the Holder. The Company
and the Holder will cooperate with each other in good faith to
select such Valuer. The Valuer may select the Determination or may
select any other number or value. The Valuer’s selection will
be furnished to the Company and the Holder in writing and be
conclusive and binding upon the parties and shall not be subject to
collateral attack. The fees and expenses of the Valuer shall be
borne by the Company unless the Valuer’s determination of
Fair Market Value per share of the Company’s Common Stock is
within 10% of the Determination, in which case the Valuer’s
fees and expenses shall be borne by the Holder.
Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company’s initial public
offering of Common Stock, the fair market value per share shall be
the per share offering price to the public of the Company’s
initial public offering.
1.3 Vesting. Notwithstanding anything to the contrary
contained herein, the Holder may exercise its right to purchase up
to 12,500 shares of the Common Stock, or any portion thereof, at
any time or from time to time from the date of the issuance of this
Warrant up to the Expiration Date. With respect to the remaining
12,500 shares of Common Stock, the Holder’s right to purchase
all or any portion of such shares shall be deemed to vest hereunder
in the event that, and at such time as, the Company fails to
achieve a Successful CeraLyte ® Launch.
2. Shares to be Fully
Paid; Reservation of Shares. The Company covenants and agrees
that all shares of Common Stock that 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
stockholder and free of all taxes, liens and charges with respect
to the issuance 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 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 exercis
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