THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT OR THE ISSUER HAS RECEIVED AN OPINION OF
HOLDER’S COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE
TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS . THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY
SUCH SECURITIES.
DOR
BIOPHARMA, INC.
Warrant
for the Purchase of Shares of
Common
Stock
No.
CSW-08-01
1,388,889 Shares
Original
Issue Date February 14, 2008
FOR VALUE RECEIVED, DOR
BIOPHARMA, INC., a Delaware corporation (the " Company "),
hereby certifies that Fusion Capital
Fund II, LLC (the
“ Holder ”),
is entitled to purchase from the Company, at any time or from
time to time commencing after the Original Issue Date and
expiring at 5:00 P.M., New York City time, on the fourth
(4nd) anniversary after the Original Issue Date (as such date
may be changed pursuant to Section 2 hereof, the “
Expiration
Date ” being February 14, 2012, one million,
three hundred and eighty-eight thousand, eight hundred and
eighty-nine ( 1,388,889
),
fully paid and non-assessable shares of Common Stock, par
value $.001 per share, of the Company (the “
Warrant
Shares ”) for a per share exercise price equal
to $0.22 per share (the “ Per Share Warrant
Price ”). The Per Share Warrant Price is subject
to adjustment as hereinafter provided. Capitalized terms used
and not otherwise defined in this Warrant shall have the
meanings specified in Section 9, unless the context otherwise
requires.
1.
Exercise of
Warrant .
(a) This
Warrant may be exercised, in whole at any time or in part
from time to time, commencing after the Original Issue Date
and expiring at 5:00 P.M., New York City time, on the
Expiration Date (with the Exercise Notice at the end of this
Warrant duly executed) at the address set forth in Section 10
hereof, together with payment of the Per Share Warrant Price
multiplied by the number of Warrant Shares to which such
exercise relates made by delivery to the Company of one or
more types of Permitted Consideration.
(b)
If
this Warrant is exercised in part, the Company will deliver
to the Holder within ten Trading Days of the date such Holder
delivers to the Company this Warrant and an Exercise Notice,
together with the payment of the aggregate Per Share Warrant
Price for such exercise, a new Warrant covering the Warrant
Shares which have not been exercised. By the
expiration of the third Trading Day following the
Holder’s delivery of a Warrant, together with an
Exercise Notice and the payment of the aggregate Per Share
Warrant Price for such exercise, the Company will (i) issue a
certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which
the Holder shall be entitled and, if this Warrant is
exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay to
the Holder cash in an amount equal to the fair value of such
fractional share (determined by reference to the closing
sales price of the Common Stock on the date of the Exercise
Notice), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in
part, pursuant to the provisions of this
Warrant.
(c) If,
six months after the Original Issue Date, for any reason or
for no reason, if a registration statement is not available
so that the Warrant Shares would be issued to the Holder
without any restrictive transfer legend and be freely
tradable by the Holder upon a non-cashless exercise hereof,
in such case, then the Holder may, at its election exercised
in its sole discretion, exercise this Warrant in whole or in
part and, in lieu of making a cash payment of Permitted
Consideration, elect instead to receive upon such exercise
the “Net Number” of shares of Common Stock
determined according to the following formula:
Net Number = (A x B) –
(A x C)
B
For purposes of the
foregoing formula:
A=the total number of
Warrant Shares with respect
to which this Warrant is
then being exercised.
B=the average of the
closing sales prices for the five
Trading Days immediately
prior to (but not including)
the day that the Holder
delivers the Exercise Notice at issue.
C=the Per Share Warrant
Price;
(d) If,
by the third Trading Day after the date that the Holder
delivers an Exercise Notice, together with the payment of the
aggregate Per Share Warrant Price for such exercise if not
pursuant to Section 1(c) hereof, the Company fails to deliver
the required number of Warrant Shares in the manner required
pursuant to Section 1(b), then the Holder will have the right
to rescind such exercise.
(e) If,
by the third Trading Day after the date that the Holder
delivers an Exercise Notice, together with the payment of the
aggregate Per Share Warrant Price for such exercise if not
pursuant to Section 1(c) hereof, the Company fails to deliver
the required number of Warrant Shares in the manner required
pursuant to Section 1(b), and if after such third Trading Day
and prior to the receipt of such Warrant Shares, 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 by (B) the closing bid price of the Common
Stock at the time of the obligation giving rise to such
purchase obligation 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. The Holder shall
provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In.
(f) Notwithstanding
anything to the contrary contained herein, the number of
shares of Common Stock that may be acquired by the Holder
upon any exercise of this Warrant shall be limited to the
extent necessary to insure that, following such exercise, the
total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other persons
whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock
issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. Each delivery
of an Exercise Notice will constitute a representation by the
Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Notice is permitted
under this paragraph. This provision shall not restrict the
number of shares of Common Stock which a Holder may receive
or beneficially own in order to determine the amount of
securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as
contemplated in Section 3. By written notice to the Company,
the Holder may waive the provisions of this Section but any
such waiver will not be effective until the 61st day after
such notice is delivered to the Company.
(g) Notwithstanding
anything to the contrary contained herein, the number of
shares of Common Stock that may be acquired by the Holder
upon any exercise of this Warrant (or otherwise in respect
hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by
such Holder and its affiliates and any other persons whose
beneficial ownership of Common Stock would be aggregated with
the Holder's for purposes of Section 13(d) of the Exchange
Act, does not exceed 9.999% of the total number of issued and
outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice
will constitute a representation by the Holder that it has
evaluated the limitation set forth in this paragraph and
determined that issuance of the full number of Warrant Shares
requested in such Exercise Notice is permitted under this
paragraph. This provision shall not restrict the
number of shares of Common Stock which a Holder may receive
or beneficially own in order to determine the amount of
securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as
contemplated in Section 3. This restriction may
not be waived.
2.
Company’s
Option to Change Expiration Date .
Notwithstanding anything
herein to the contrary, in the event that (i) the closing
sales price per share of Common Stock is in excess of 300%
of the Per
Share Warrant Price (as may be adjusted pursuant to
Section 3) for twenty (20) Trading Days during any thirty
(30) consecutive Trading Days, (ii) the Warrant Shares are
either registered for resale pursuant to an effective
registration statement naming the Holder as a selling
stockholder thereunder (and the prospectus thereunder is
available for use by the Holder as to all then available
Warrant Shares) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the
Securities Act, as determined by counsel to the Company
pursuant to a written opinion letter addressed and in form
and substance reasonably acceptable to the Holder and the
transfer agent for the Common Stock, during the entire twenty
(20) Trading Day period referenced in (i) above through the
expiration of the Call Date as set forth in the
Company’s notice pursuant to this Section (the
“Call
Condition Period” ), and (iii) the Company shall
have complied in all material respects with its obligations
under this Warrant and under the Purchase Agreement, then,
subject to the conditions set forth in this Section, the
Company may, in its sole discretion, elect to change the
Expiration Date to 5:00 P.M., New York City time on the date
that is thirty (30) days after written notice thereof (a
“Call
Notice” ) is received by the Holder (the
“Call
Date” ) at the address last shown on the records
of the Company for the Holder or given by the Holder to the
Company for the purpose of notice; provided, that the
conditions to giving such notice must be in effect at all
times during the Call Condition Period or any such notice
shall be null and void. The Company and
the Holder agree that, if and to the extent Section
1(f) or (g) of this Warrant would restrict the ability of the
Holder to exercise this Warrant in the event of a delivery of
a Call Notice, then notwithstanding anything to the
contrary set forth in the Call Notice, the Call Notice shall
be deemed automatically amended to apply only to such
portion of this Warrant as may be exercised by the Holder by
the Call Date in accordance with Section 1(f) and (g).
The Holder will promptly (and, in any event, prior to the
Call Date) notify the Company in writing following receipt
of a Call Notice if Section 1(f) or (g) would
restrict its exercise of the Warrant, specifying therein the
number of Warrant Shares so restricted.
3.
Certain
Adjustments . The Per Share Warrant Price
and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set
forth in this Section 3.
(a) If the
Company, at any time while this Warrant is outstanding, (i)
pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Per Share
Warrant Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for
the de
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