exv4w1






Exhibit 4.1




FORM OF WARRANT



THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY IN CONNECTION
WITH SUCH A DISPOSITION PURSUANT TO AN EXEMPTION, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT. THE SECURITIES
REPRESENTED HEREBY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
SUCH SECURITIES.




Warrant No. 1




Warrant




to
Purchase [•] Shares (Subject to Adjustment) of Common Stock of




MiddleBrook Pharmaceuticals, Inc.




          THIS IS TO CERTIFY THAT EGI-MBRK, L.L.C., a Delaware limited liability company
(“EGI”), or its registered assigns, is entitled, at any time prior to the Expiration Date,
to purchase from MiddleBrook Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
[•] shares (subject to adjustment as provided herein) of Common Stock of the Company at a purchase
price of $3.90 per share (the initial “Exercise Price,” subject to adjustment as provided
herein).




          This Warrant was issued in connection with that certain Securities Purchase Agreement, dated
as of July 1, 2008 and as may be amended from time to time, by and between the Company and EGI (the
“Purchase Agreement”), and is subject to the terms and conditions thereof.




1. DEFINITIONS




     As used in this Warrant, the following terms have the respective meanings set forth below:



     “Affiliate” of, or a Person “Affiliated” with, a specified Person means any
other Person directly or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including, with correlative meanings, the
terms



 









 




“controlling,” “controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power (i) to vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person, or (ii) to direct or
cause the direction of the management and policies of that Person, whether through the ownership of
voting securities or by contract or otherwise.




     “Agreed Rate” means the rate of interest announced publicly by JPMorgan Chase, from
time to time, as JPMorgan Chase’s base rate.



     “Appraisal Procedure” means the following procedure to determine the fair market
value, as to any security, for purposes of the definition of Fair Market Value or the fair market
value, as to any other property (in either case as used in this definition, the “Valuation
Amount”). The Valuation Amount shall be determined in good faith jointly by the Company and
the Holder; provided, however, that if such parties are not able to agree on the
Valuation Amount within a reasonable period of time (not to exceed twenty (20) Business Days), the
Valuation Amount shall be determined by an investment banking firm of national reputation, which
firm shall be reasonably acceptable to the Company and the Holder. If the Company and the Holder
are unable to agree upon an acceptable investment banking firm within ten (10) days after the date
either party proposed that one be selected, the investment banking firm will be selected by an
arbitrator located in the state of Delaware, selected by the American Arbitration Association (or
if such organization ceases to exist, the arbitrator shall be chosen by a court of competent
jurisdiction). The arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the Company and the Holder, of not more than six
investment banking firms of national reputation in the United States, of which no more than three
may be named by the Company and no more than three may be named by the Holder. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties regarding which investment
banking firm to choose, but the selection by the arbitrator shall be made in its sole discretion
from the list of six. The Company and the Holder shall submit their respective valuations and
other relevant data to the investment banking firm, and the investment banking firm shall, within
thirty days of its appointment, make its own determination of the Valuation Amount. The
determination of the final Valuation Amount by such investment banking firm shall be final and
binding upon the parties. The fees and expenses of the investment banking firm conducting the
appraisal and of the arbitrator, if any, shall be borne (i) by the Company if such Appraisal
Procedure shall result in a determination that is greater than the Company’s initial determination
and (ii) by the Holder if such Appraisal Procedure shall result in a determination that is less
than or equal to the Company’s initial determination. If required by any such investment banking
firm or arbitrator, the Company shall execute a retainer and engagement letter containing
reasonable terms and conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such investment banking firm
or arbitrator and its officers, directors, partners, employees, agents and Affiliates.



     “Board Observer” shall have the meaning assigned to it in Section 9.3 hereof.



     “Business Day” means any day except Saturday, Sunday and any day that is a federal
legal holiday or a day on which banking institutions in the State of New York are authorized or
required by Law or other governmental action to close.



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     “Common Stock” means the common stock, par value $0.01 per share, of the Company as
constituted on the Original Issue Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or liquidation over any other
class of stock of the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.6 hereof.



     “Company” shall have the meaning assigned to it in the preamble of this Warrant.



     “Company Board” shall have the meaning assigned to it in Section 9.3 hereof.



     “Designated Office” shall have the meaning assigned to it in Section 8 hereof.



     “Dilution Distribution” shall have the meaning assigned to it in Section 10.1 hereof.



     “EGI” shall have the meaning assigned to it in the preamble of this Warrant.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.



     “Exercise Date” shall have the meaning assigned to it in Section 2.1(a) hereof.



     “Exercise Notice” shall have the meaning assigned to it in Section 2.1(a) hereof.



     “Exercise Price” means, in respect of a share of Warrant Stock at any date herein
specified, the initial Exercise Price set forth in the preamble of this Warrant, as adjusted from
time to time pursuant to Section 4 hereof.



     “Expiration Date” means the 5th anniversary of the Original Issue Date.



     “Fair Market Value” means, as to any security, the Twenty Day Average of the average
closing prices of such security’s sales on all domestic securities exchanges on which such security
may at the time be listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the end of such day,
or, if on any day such security is not so listed, the average of the representative bid and asked
prices quoted on The Nasdaq Global Market as of 4:00 P.M., New York City time, on such day, or, if
on any day such security is not quoted on The Nasdaq Global Market, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar or successor organization (and in each such
case excluding any trades that are not bona fide, arm’s length transactions). If at any time such
security is not listed on any domestic securities exchange or quoted on The Nasdaq Global Market or
the domestic over-the-counter market, the Fair Market Value of such security shall be the fair
market value thereof as determined in accordance with the Appraisal Procedure, using any
appropriate valuation method, assuming an arms-length sale to an independent party. Fair Market
Value means, with respect to property other than securities, the fair market value determined in
accordance with the Appraisal Procedure. No amount shall



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be ascribed to Fair Market Value with respect to any non-cash consideration other than a
security or other property, as contemplated above.




     “GAAP” means United States generally accepted accounting principles consistently
applied.



     “Government Entity” means any federal, state, municipal, national or other government,
governmental department, commission, board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to any government or any court, in each
case whether associated with a state of the United States, the United States, or a foreign entity
or government.



     “Holder” means (a) with respect to this Warrant, the Person in whose name the Warrant
set forth herein is registered on the books of the Company maintained for such purpose and (b) with
respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or
Warrant Stock is registered on the books of the Company maintained for such purpose.



     “Irreparable Breach” shall have the meaning assigned to it in Section 11.5 hereof.



     “Law” means any law, order, ruling, rule, regulation, writ, assessment, injunction,
judgment or decree of any Government Entity.



     “Lien” means any pledge, lien, encumbrance, mortgage, hypothecation, charge, security
interest, easement, title defect, conditional sale or other title retention agreement, judgment,
interest, equitable interest, setoff or claim of any kind or nature, whether arising by agreement,
Law or otherwise.



     “Original
Issue Date” means [•], 2008, the date on which the Original Warrants were
issued by the Company pursuant to the Purchase Agreement.



     “Original Warrants” means the Warrants originally issued by the Company pursuant to
the Purchase Agreement.



     “Outstanding” means, when used with reference to Common Stock, at any date as of which
the number of shares thereof is to be determined, all issued shares of Common Stock, except shares
then owned or held by or for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.



     “Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and Government Entity.



     “Purchase Agreement” shall have the meaning assigned to it in the preamble of this
Warrant.



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     “SEC” means the Securities and Exchange Commission.



     “SEC Documents” means Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
and definitive proxy statements filed by the Company with the SEC during the period commencing on
the date hereof and ending on the Closing Date (as such term is defined in the Purchase Agreement).



     “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.



     “Stock Incentive Plans” shall have the meaning assigned to it in Section 4.14 hereof.



     “Subsidiary” means any corporation, association, trust, limited liability company,
partnership, joint venture or other business association or entity (i) at least 50% of the
Outstanding voting securities of which are at the time owned or controlled, directly or indirectly,
by the Company; or (ii) with respect to which the Company possesses, directly or indirectly, the
power to direct or cause the direction of the affairs or management of such Person.



     “Transfer” means any disposition of any Warrant or Warrant Stock or of any interest
therein, which would constitute a “sale” thereof or a transfer of a beneficial interest therein
within the meaning of the Securities Act.



     “Twenty Day Average” means, with respect to any prices and in connection with the
calculation of Fair Market Value, the average of such prices over the twenty Business Days ending
on the Business Day immediately prior to the day as of which Fair Market Value is being determined.



     “Warrant” means the Original Warrants and all Warrants issued upon transfer, division
or combination of, or in substitution for, the Original Warrants, or any other Warrant subsequently
issued to the Holder. All Warrants shall at all times be identical as to terms and conditions,
except as to the number of shares of Warrant Stock for which they may be exercised and their date
of issuance.



     “Warrant Price” means an amount equal to (i) the number of shares of Warrant Stock
being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by
(ii) the Exercise Price.



     “Warrant Stock” means the shares of Common Stock issued, issuable or both (as the
context may require) upon the exercise of Warrants.



2. EXERCISE OF WARRANT




          2.1 Manner of Exercise.




          (a) From and after the Original Issue Date and at any time before 5:00 P.M., New York time, on
the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any
Business Day, for all or any part of the number of shares of Warrant Stock (subject to adjustment
as provided herein) purchasable hereunder. In order to




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exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at its
Designated Office a written notice of the Holder’s election to exercise this Warrant (an
“Exercise Notice”) substantially in the form attached to this Warrant as Annex A,
which Exercise Notice shall be irrevocable and specify the number of shares of Warrant Stock to be
purchased, together with this Warrant and (ii) pay to the Company the Warrant Price in accordance
with Section 2.1(c) hereof. The date on which such delivery and payment shall have taken place
being hereinafter sometimes referred to as the “Exercise Date.”




          (b) Upon receipt by the Company of such Exercise Notice, surrender of this Warrant and payment
of the Warrant Price (in accordance with Section 2.1(c) hereof), the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder (i) a certificate or certificates
representing the shares of Warrant Stock issuable upon such exercise, together with cash in lieu of
any fraction of a share, as hereafter provided, and (ii) a new Warrant, if applicable, pursuant to
Section 2.1(d) hereof. The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as the exercising Holder shall reasonably request
in the Exercise Notice and shall be registered in the name of the Holder or, subject to compliance
with Section 3.3 below, such other name as shall be designated in the Exercise Notice. This
Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant
Stock shall be deemed to have been issued, and the Holder or any other Person so designated to be
named therein shall be deemed to have become a holder of record of such shares of Warrant Stock for
all purposes, as of the Exercise Date.




          (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of
the following methods: (i) by delivery of a certified or official bank check or by wire transfer of
immediately available funds in the amount of such Warrant Price payable to the order of the
Company, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then
issuable upon exercise of this Warrant with an aggregate Fair Market Value equal to such Warrant
Price, (iii) by surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Fair Market Value equal to such Warrant Price or (iv) any combination of
the foregoing. In the event of any withholding of Warrant Stock or surrender of Common Stock
pursuant to clause (ii), (iii) or (iv) above where the number of shares whose Fair Market Value is
equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered
to the Company shall be rounded up to the nearest whole share and the Company shall make a cash
payment to the Holder based on the incremental fraction of a share being so withheld by or
surrendered to the Company in an amount determined in accordance with Section 2.3 hereof.
Notwithstanding the foregoing, the Holder will pay an amount per share of Warrant Stock equal to
the par value, or such other amount as is necessary to have fully paid and nonassessable shares of
the Company, provided that any such election by a Holder shall not relieve the Company of any
liability or obligation it may have under this Warrant.




          (d) If this Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing the shares of Warrant Stock being issued,
deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the




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unpurchased shares of Warrant Stock called for by this Warrant. Such new Warrant shall in all
other respects be identical to this Warrant.




          (e) All Warrants delivered for exercise shall be canceled by the Company.




          2.2 Payment of Taxes. All shares of Warrant Stock issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued
without violation of any preemptive or similar rights of any stockholder of the Company and free
and clear of all Liens. The Company shall pay all expenses in connection with, and all taxes and
other governmental charges that may be imposed with respect to, the issue or delivery thereof.




          2.3 Fractional Shares. The Company shall not be required to issue a fractional share
of Warrant Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of
one or more Warrants, the rights under which are exercised in the same transaction, would otherwise
be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash
equal to such fraction multiplied by the Fair Market Value of one share of Common Stock on the
Exercise Date.




3. TRANSFER, DIVISION AND COMBINATION




          3.1 Compliance with Securities Act. The Holder, by acceptance hereof, agrees to
comply in all respects with the provisions of this Section 3.1 and further agrees that this Warrant
and the Warrant Stock to be issued upon exercise hereof are being acquired for investment for its
own account and that such Holder will not offer, sell or otherwise Transfer this Warrant or any
Warrant Stock to be issued upon exercise hereof, in whole or in part, except under circumstances
that will not result in a violation of the Securities Act. This Warrant and all shares of Warrant
Stock issued upon exercise of this Warrant (unless registered under the Securities Act) shall be
stamped or imprinted with a legend in substantially the following form:





	 	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY IN CONNECTION WITH SUCH A
DISPOSITION PURSUANT TO AN EXEMPTION, UPON DELIVERY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM
SAID ACT. THE SECURITIES REPRESENTED HEREBY MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.





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In addition, in connection with the issuance of this Warrant, the Holder specifically
represents to the Company by acceptance of this Warrant as follows:




          (a) The Holder believes it has received all the information it considers necessary or
appropriate for deciding whether to acquire the Warrant. The Holder further represents that it has
had an opportunity to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant and the business, properties and financial condition of
the Company. The foregoing, however, does not limit or modify the representations and warranties
of the Company in this Warrant or in the Purchase Agreement or the right of the Holder to rely
thereon.




          (b) The Holder understands that the securities it is purchasing are characterized as
“restricted securities” under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under the Securities Act,
only in certain limited circumstances. In addition, the Holder represents that it is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by
the Securities Act.




          (c) The Holder is an investor that can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Warrant and the Warrant Stock.




          3.2 Transfer. Each new certificate evidencing the Warrant and/or Warrant Stock so
transferred shall bear the appropriate restrictive legend set forth in Section 3.1 hereof, except
that such certificate shall not bear such restrictive legend if, in the opinion of counsel for the
Company, such legend is not required in order to establish or assist in compliance with any
provisions of the Securities Act or any applicable state securities laws. Upon compliance with the
provisions of this Section 3.2, each 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 Designated Office and compliance with the terms hereof, together
with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes described in Section 2.2 in
connection with the making of such Transfer. Upon such compliance, surrender and delivery 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 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.




          3.3 Mutilation or Loss. Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and an
indemnity reasonably satisfactory to it (it being understood that the written indemnification
agreement of or affidavit of loss of the Holder shall be a sufficient indemnity)




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and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided,
however, that, in the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.




          3.4 Division and Combination. Subject to compliance with the applicable provisions of
this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof
at the Designated Office, 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 the applicable provisions of this Warrant 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.




          3.5 Expenses. The Company shall prepare, issue and deliver at its own expense any new
Warrant or Warrants required to be issued hereunder.




          3.6 Maintenance of Books. The Company agrees to maintain, at the Designated Office,
books for the registration and Transfer of the Warrants.




4. ANTIDILUTION PROVISIONS




          The number of shares of Warrant Stock for which this Warrant is exercisable and the Exercise
Price shall be subject to adjustment from time to time as set forth in this Section 4.




          4.1 Upon Issuance of Common Stock. If the Company shall, at any time or from time to
time after the Original Issue Date, issue any shares of Common Stock, options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable
securities without consideration or for consideration per share less than the Fair Market Value per
share of the Common Stock immediately prior to such issuance, then such Exercise Price shall
forthwith be lowered to a price equal to the price obtained by multiplying:




          (a) the Exercise Price in effect immediately prior to the issuance of such Common Stock,
options, rights or securities by




          (b) a fraction of which (x) the numerator shall be the sum of (i) the number of shares of
Common Stock Outstanding immediately prior to such issuance and (ii) the number of additional
shares of Common Stock which the aggregate consideration for the number of shares of Common Stock
so offered would purchase at the Fair Market Value per share of Common Stock and (y) the
denominator shall be the number of shares of Common Stock Outstanding immediately after such
issuance.




          4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary shall, at any
time or from time to time after the Original Issue Date, directly or indirectly, redeem, purchase
or otherwise acquire any shares of Common Stock, options to purchase or




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rights to subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities, for a consideration per share (plus, in the case of such options,
rights or securities, the additional consideration required to be paid to the Company upon
exercise, conversion or exchange) greater than the Fair Market Value per share of Common Stock
immediately prior to such event, then the Exercise Price shall forthwith be lowered to a price
equal to the price obtained by multiplying:




          (a) the Exercise Price in effect immediately prior to such event by




          (b) a fraction of which (x) the numerator shall be the result of dividing:





     (i) (1) the product of (a) the number of shares of Common Stock Outstanding and
(b) the Fair Market Value per share of Common Stock, in each case immediately prior
to such event, minus (2) the aggregate consideration paid by the Company in such
event (plus, in the case of such options, rights, or convertible or exchangeable
securities, the aggregate additional consideration required to be paid to the
Company upon exercise, conversion or exchange), by




     (ii) the number of shares of Common Stock Outstanding immediately after such
event, and


(y) the denominator shall be the Fair Market Value per share of Common Stock immediately prior to
such event.




          4.3 Provisions Applicable to Adjustments. For the purposes of any adjustment of the
Exercise Price pursuant to Section 4.1 or 4.2, the following provisions shall be applicable:




          (a) In the case of the issuance of Common Stock, options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such convertible or exchangeable securities for a
consideration in whole or in part other than cash, the consideration other than cash shall be
deemed to be the Fair Market Value of the non-cash consideration.




          (b) In the case of the issuance of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities:





     (i) the aggregate maximum number of shares of Common Stock that potentially may
be deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock at any time during the term thereof shall be deemed to have been issued
at the time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subparagraph (a) above), if any,
received by the Company upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock covered
thereby;



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     (ii) the aggregate maximum number of shares of Common Stock that potentially
may be deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent conversion
or exchange thereof at any time during the term thereof shall be deemed to have been
issued at the time such securities, options or rights were issued and for a
consideration equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional consideration, if any,
to be received by the Company upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in paragraph (a) above);




     (iii) on any increase in the number of shares or decrease in the effective
exercise or conversion price of Common Stock deliverable upon exercise of any such
options, rights or securities or conversions of or exchanges of such securities,
including any change resulting from the anti-dilution provisions thereof, the
Exercise Price shall forthwith be readjusted to such Exercise Price as would have
been obtained had the adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or rights related to such
securities not converted prior to such change been made upon the basis of such
change; and




     (iv) no further adjustment of the Exercise Price adjusted upon the issuance of
any such options, rights, convertible securities or exchangeable securities shall be
made as a result of the actual issuance of Common Stock on the exercise of any such
rights or options or any conversion or exchange of any such securities.



          4.4 Upon Stock Dividends, Subdivisions or Splits. If, at any time after the Original
Issue Date, the number of shares of Common Stock Outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date for the determination of holders of Common Stock entitled to receive such
stock dividend, or to be affected by such subdivision or split-up, the Exercise Price shall be
appropriately decreased by multiplying the Exercise Price by a fraction, the numerator of which is
the number of shares of Common Stock Outstanding immediately prior to such increase and the
denominator of which is the number of shares of Common Stock Outstanding immediately after such
increase in Outstanding shares.




          4.5 Upon Combinations or Reverse Stock Splits. If, at any time after the Original
Issue Date, the number of shares of Common Stock Outstanding is decreased by a combination or
reverse stock split of the Outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by such combination or
reverse stock split, the Exercise Price shall be appropriately increased by multiplying the
Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock
Outstanding immediately prior to such decrease and the denominator of which is




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the number of shares of Common Stock Outstanding immediately after such decrease in
Outstanding shares.




          4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In the event
of any capital reorganization of the Company, any reclassification of the stock of the Company
(other than a change in par value or from par value to no par value or from no par value to par
value or as a result of a stock dividend or subdivision, split-up or combination of shares), or any
consolidation or merger of the Company with or into another Person (where the Company is not the
surviving Person or where there is a change in or distribution with respect to the Common Stock),
each Warrant shall after such reorganization, reclassification, consolidation or merger be
exercisable for the kind and number of shares of stock or other securities or property of the
Company or of the successor Person resulting from such consolidation or surviving such merger, if
any, to which the holder of the number of shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification, consolidation or merger) upon exercise of such
Warrant would have been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers. The Company shall not effect any such
reorganization, reclassification, consolidation or merger unless, prior to the consummation
thereof, the successor Person (if other than the Company) resulting from such reorganization,
reclassification, consolidation or merger, shall assume, by written instrument, the obligation to
deliver to the Holders of the Warrant such shares of stock, securities or assets, which, in
accordance with the foregoing provisions, such Holders shall be entitled to receive upon such
conversion.




          4.7 Deferral in Certain Circumstances. In any case in which the provisions of this
Section 4 shall require that an adjustment shall become effective immediately after a record date
of an event, the Company may defer until the occurrence of such event (a) issuing to the Holder of
any Warrant exercised after such record date and before the occurrence of such event the shares of
capital stock issuable upon such exercise by reason of the adjustment required by such event and
issuing to such Holder only the shares of capital stock issuable upon such exercise before giving
effect to such adjustments, and (b) paying to such Holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 2.3 above; provided, however,
that the Company shall deliver to such Holder an appropriate instrument or due bills evidencing
such Holder’s right to receive such additional shares or such cash.




          4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities of the Company to a financial institution, lender, other credit provider, leasing
company or other lessor in connection with the provisions of any financing or lending agreements,
containing provisions (including, without limitation, any of the terms of pricing, exercise price,
anti-dilution and registration rights) which are more favorable than those set forth herein, the
Company will make such provisions (or any more favorable portion thereof) available to the Holder
at no cost and will enter into amendments necessary to confer such rights on the Holder.




          4.9 Voluntary Reduction. The Company from time to time may reduce the Exercise Price
by any amount for any period of time if the period is at least 20 days and if the reduction is
irrevocable during the period; provided, however, that in no event may the Exercise




12









 







Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is
reduced, the Company shall mail to all Holders a notice of the reduction. The Company shall mail
the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice
shall state the reduced Exercise Price and the period it will be in effect.




          4.10 Appraisal Procedure. In any case in which the provisions of this Section 4 shall
necessitate that the Appraisal Procedure be utilized for purposes of determining an adjustment to
the Exercise Price, the Company may defer until the completion of the Appraisal Procedure and the
determination of the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal Procedure and the
determination of the adjustment, the shares of capital stock issuable upon such exercise by reason
of the adjustment required by such event and issuing to such Holder only the shares of capital
stock issuable upon such exercise before giving effect to such adjustment and (2) paying to such
Holder any amount in cash in lieu of a fractional share of capital stock pursuant to Section 2.3
above; provided, however, that the Company shall deliver to such Holder an
appropriate instrument or due bills evidencing such Holder’s right to receive such additional
shares or such cash.




          4.11 Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise
Price as provided in Section 4.1, 4.2, 4.4, 4.5 and 4.6, the Holders of the Warrants shall
thereafter be entitled to purchase upon the exercise thereof, at the Exercise Price resulting from
such adjustment, the number of shares of Warrant Stock (calculated to the nearest 1/100th of a
share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Warrant Stock issuable on the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.




          4.12 Form of Warrants. Irrespective of any adjustments of the number of shares
purchasable or of the Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement (without impacting the effects of the provisions of this
Section 4).




          4.13 Changes in Securities. Notwithstanding any provision in this Section 4 to the
contrary and without limitation to any other provision contained in this Section 4, in the event
any securities of the Company are amended, modified or otherwise altered by operation of its terms
or otherwise in any manner whatsoever (including through the anti-dilution provisions thereof) that
results in (i) the reduction of the effective exercise, conversion or exchange price of such
securities payable upon the exercise for, or conversion or exchange into, Common Stock or other
securities exercisable for, or convertible or exchangeable into, Common Stock and/or (ii) such
securities becoming exercisable for, or convertible or exchange into (A) more shares or dollar
amount of such securities which are, in turn exercisable for, or convertible or exchangeable into,
Common Stock, or (B) more shares of Common Stock, then such amendment, modification or other
alteration shall be treated for purposes of Section 4 as if the securities which have been amended,
modified or altered have been terminated and new securities have been issued with the amended or
modified terms. The Company shall make all necessary adjustments (including successive adjustments
if required) to the Exercise Price in




13









 







accordance with Section 4, but in no event shall the Exercise Price be greater than it was
immediately prior to the application of this Section 4.13 to the amendment, modification or
alteration in question.




          4.14 Exceptions. Notwithstanding anything to the contrary, Section 4 shall not apply
to (i) the shares of Common Stock, or options to purchase shares of Common Stock, issuable or
issued to the Company’s officers, directors, employees, consultants, or advisors pursuant to the
Amended and Restated Advancis Pharmaceutical Corporation Stock Incentive Plan, or other employee
stock incentive programs, or other arrangements approved by the Company Board (together, the
“Stock Incentive Plans”) for the primary purpose of soliciting or retaining such parties’
services; provided, that if such shares or options are granted after the date hereof with an
exercise price less than the Fair Market Value at the time of the grant, then Section 4 shall apply
with respect to such shares or options, (ii) the shares of Common Stock issuable upon the exercise
of such options, or (iii) the exercise of the warrants issued prior to the effective date of the
Purchase Agreement and disclosed in the SEC Documents.




          4.15 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is adjusted,
or required to be adjusted, as herein provided:




          (a) the Company shall compute the adjusted Exercise Price in accordance with this Section 4
and shall prepare a certificate signed by the treasurer or chief financial officer of the Company
setting forth the adjusted Exercise Price and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall forthwith be filed at the Designated Office;
and




          (b) a notice stating that the Exercise Price has been adjusted and setting forth the adjusted
Exercise Price shall forthwith be prepared by the Company, and as soon as practicable after it is
prepared, and in no event greater than three (3) Business Days after such adjustment, such notice
shall be mailed by the Company at its expense to all Holders at their last addresses as they shall
appear in the warrant register.




5. NO IMPAIRMENT; NO DILUTION; OTHER AGREEMENTS




          5.1 No Impairment. The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other
similar 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 the
Holder against impairment. Without limiting the generality of the foregoing, the Company shall
take all such action as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Warrant Stock upon the exercise of this
Warrant, free and clear of all Liens, and shall use its best 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. The
Company shall not take any action, enter into any transaction or suffer to exist any event, action
or state of facts that would cause the Exercise Price to be adjusted below the then existing par
value of




14









 







Common Stock (unless the Common Stock is changed to capital stock with no par value);
provided, however, that nothing herein will prevent the operation of any other
provision of this Warrant, including the anti-dilution provisions of Section 4.




          5.2 No Dilution. If any event shall occur as to which the provisions of Section 4 are
not strictly applicable but the failure to make any adjustment would adversely affect the purchase
rights represented by the Warrant in accordance with the essential intent and principles of such
Section, then, in each such case, the Company shall appoint an investment banking firm of
recognized national standing, or any other financial expert that does not (or whose directors,
officers, employees, affiliates or stockholders do not) have a direct or material indirect
financial interest in the Company or any of its Subsidiaries, or Affiliates, who has not been, and,
at the time it is called upon to give independent financial advice to the Company, is not (and none
of its directors, officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its Subsidiaries, which shall give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and principles established in
Section 4, necessary to preserve, without dilution, the purchase rights, represented by this
Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the
holders of the Warrants and shall make the adjustments described therein.




          5.3 Other Agreements. The Company is not a party to or bound in any manner under, and
covenants that it will not enter into at any time after the date hereof, any agreement or contract
(whether written or oral) with respect to any of its securities which prevents the Company from
complying in any respect with the rights granted by the Company hereunder.




6. RESERVATION AND AUTHORIZATION OF COMMON STOCK




          6.1 Reservation. The Company shall at all times reserve and keep available for
issuance upon the exercise of the Warrants such number of its authorized but unissued shares of
Common Stock as will be required for issuance of the Warrant Stock. All shares of Warrant Stock
issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment
therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and
nonassessable, not subject to preemptive rights and free and clear of all Liens. Before taking any
action that would result in an adjustment in the number of shares of Warrant Stock for which this
Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction over such action. If any shares of Warrant Stock required to be
reserved for issuance upon exercise of Warrants require registration or qualification with any
Government Entity under any federal or state law (other than under the Securities Act or any state
securities law) before such shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be duly registered.




          6.2 Corporate Action. Before taking any action that would cause an adjustment
reducing the Exercise Price below the then par value (if any) of the shares of Warrant Stock
deliverable upon exercise of the Warrant or that would cause the number of shares of Warrant Stock
issuable upon exercise of the Warrant to exceed (when taken together with all




15









 







other Outstanding shares of Common Stock) the number of shares of Common Stock that the
Company is authorized to issue, the Company will take any corporate action that, in the opinion of
its counsel, is necessary in order that the Company may validly and legally issue the full number
of fully paid and nonassessable shares of Warrant Stock issuable upon exercise of the Warrant at
such adjusted exercise price.




7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS




          7.1 Notices of Corporate Actions.




          In case:




          (a) the Company shall grant to the holders of its Common Stock, or of securities by their
terms convertible into or exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, rights or warrants to subscribe for or
purchase any shares of capital stock of any class; or




          (b) the Company shall declare to the holders of its Common Stock any dividend or distribution;
or




          (c) of any reclassification of the Common Stock (other than a subdivision or combination of
the Outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which
the Company is a party and for which approval of any stockholders of the Company is required, or of
the sale or transfer of all or substantially all of the assets of the Company; or




          (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or




          (e) the Company or any Subsidiary shall commence a tender offer for all or a portion of the
Outstanding shares of Common Stock (or shall amend any such tender offer to change the maximum
number of shares being sought or the amount or type of consideration being offered therefor);



then the Company shall cause to be filed at the Designated Office, and shall cause to be mailed to
all Holders at their last addresses as they shall appear in the warrant register, at least thirty
(30) days prior to the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record who will be entitled to such dividend, distribution,
rights or warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up or (z) the date on which such tender offer
commenced, the date on




16









 







which such tender offer is scheduled to expire unless extended, the consideration offered and the
other material terms thereof (or the material terms of the amendment thereto). Such notice shall
also set forth such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Exercise Price and the number and kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the occurrence of such action
or deliverable upon exercise of the Warrants. Neither the failure to give any such notice nor any
defect therein shall affect the legality or validity of any action described in clauses (a) through
(e) of this Section 7.1.




          7.2 Taking of Record. In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision hereof refers to the
taking of a record of such holders, the Company will in each such case take such a record and will
take such record as of the close of business on a Business Day.




          7.3 Closing of Transfer Books. The Company shall not at any time close its stock
transfer books or warrant transfer books so as to result in preventing or delaying the exercise or
Transfer of any Warrant.




8. OFFICE OF THE COMPANY




          As long as any of the Warrants remain outstanding, the Company shall maintain an office or
agency, which may be the principal executive offices of the Company (the “Designated
Office”), where the Warrants may be presented for exercise, registration of Transfer, division
or combination as provided in this Warrant. Such Designated Office shall initially be the office
of the Company at 20425 Seneca Meadows Parkway, Germantown, Maryland, 20876. The Company may from
time to time change the Designated Office to another office of the Company or its agent within the
United States by written notice given to all registered Holders at least ten (10) Business Days
prior to the effective date of such change.




9. FINANCIAL AND BUSINESS INFORMATION




          9.1 Financial Statements. At any time (A) that the Company is not subject to the
reporting requirements of the Exchange Act or has not timely filed with the SEC any Exchange Act
filings that it is required to make or (B) at the written request of the Holder, which request
shall remain effective until revoked, the Company shall deliver to the Holder:




          (a) as soon as practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, an income statement and a statement of cash flows for such fiscal year
and a balance sheet of the Company as of the end of such year, such year-end financial reports to
be prepared in accordance with GAAP and audited and certified by independent public accountants of
nationally recognized standing selected by the Company;




          (b) within forty-five (45) days of the end of each quarter, an unaudited income statement and
a statement of cash flows and balance sheet for and as of the end of such month or quarter, as
applicable, in reasonable detail;




17









 








          (c) simultaneously with any distribution of any document to the shareholders of the Company
generally, any such document so distributed; and




          (d) so long as the Company or its successor makes periodic filings with the SEC, copies of all
reports, statements or other notices immediately upon making such filings.




          9.2 Access. The Company shall permit reasonable access, upon reasonable advance
notice, to the Holder, the Affiliates of the Holder and each of their respective officers,
employees, advisors, counsel and other authorized representatives, during normal business hours, to
all of the books, records and properties of the Company and its Subsidiaries and all officers and
employees of the Company and such Subsidiaries. It shall be a condition to the Company’s
obligations under this Section 9.2 that the Holder execute and deliver to the Company a
confidentiality agreement that is reasonably acceptable to the Company.




10. DILUTION DISTRIBUTION




          10.1 In the event that any dividends are declared or paid or any other distribution is made on
or with respect to the Common Stock, the Holder of this Warrant as of the record date established
by the Company Board for such dividend or distribution on the Common Stock shall be entitled to
receive a distribution (the “Dilution Distribution”) in an amount (whether in the form of
cash, securities or other property) equal to the amount (and in the form) of the dividend or
distribution that such Holder would have received had the Warrant been exercised as of the date
immediately prior to the record date for such dividend or distribution, such Dilution Distribution
to be payable on the same payment date established by the Company Board for the payment of such
dividend or distribution; provided, however, that if the Company declares and pays
a dividend or distribution on the Common Stock consisting in whole or in part of Common Stock, then
no such Dilution Distribution shall be payable in respect of the Warrant on account of the portion
of such dividend or distribution on the Common Stock payable in Common Stock and in lieu thereof
the adjustment in Section 4 hereof shall apply. The record date for any such Dilution Distribution
shall be the record date for the applicable dividend or distribution on the Common Stock, and any
such Dilution Distribution shall be payable to the Persons in whose name the Warrant is registered
at the close of business on the applicable record date.




          10.2 No dividend shall be paid or declared on any share of Common Stock (other than dividends
payable in Common Stock for which an adjustment was made pursuant to Section 4 hereof) unless the
Dilution Distribution, payable in the same consideration and manner, is simultaneously paid or
provided for, as the case may be, in respect of this Warrant in an amount determined as set forth
above. For purposes hereof, the term “dividends” shall include any pro rata
distribution by the Company, out of funds of the Company legally available therefor, of cash,
property, securities (including, but not limited to, rights, warrants or options) or other property
or assets to the holders of the Common Stock, whether or not paid out of capital, surplus or
earnings other than liquidation.




          10.3 Prior to declaring any dividend or making any distribution on or with respect to shares
of Common Stock, the Company shall take all prior corporate action necessary




18









 







to authorize the issuance of any securities payable as the Dilution Distribution in respect of
the Warrant.




11. MISCELLANEOUS




          11.1 No Implied Waivers. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by law.




          11.2 Notices. All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be hand delivered or mailed postage prepaid by
registered or certified mail or transmitted by facsimile transmission (with immediate telephonic
confirmation thereafter),



(a) If to the Holder:



c/o Equity Group Investments, L.L.C.

Two North Riverside Plaza

Chicago, IL 60606

Attention: General Counsel and William Pate

Facsimile: (312) 454-0335



with a copy to (which shall not constitute notice):



Skadden, Arps, Slate, Meagher & Flom LLP

333 West Wacker Drive

Suite 2100

Chicago, IL 60606

Attn.: Peter C. Krupp

          Susan S. Hassan

Fax: 312-407-0411



(b) or if to the Company:



MiddleBrook Pharmaceuticals, Inc.

20425 Seneca Meadows Parkway

Germantown, Maryland 20876

Attn.: Edward M. Rudnic, Ph.D.

          President and Chief Executive Officer

Fax: 301-944-6700



with a copy to (which shall not constitute notice):



Dewey & LeBoeuf LLP

1301 Avenue of the Americas

New York, New York 10019

Attention: Frederick W. Kanner, Esq.

Fax: 212-259-6333




19









 





or at such other address as the parties each may specify by written notice to the others, and each
such notice, request, consent and other communication shall for all purposes of the Warrant be
treated as being effective or having been given when delivered if delivered personally, upon
receipt of facsimile confirmation if transmitted by facsimile, or, if sent by mail, at the earlier
of its receipt or seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and postage prepaid as
aforesaid.




          11.3 Indemnification. If the Company fails to make, when due, any payments provided
for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on
any amounts due and owing to such Holder and (b) such further amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable attorneys’ fees and expenses
incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save
and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise
hereof from and against any and all liability, loss, cost, damage, reasonable attorneys’ and
accountants’ fees and expenses, court costs and all other out-of-pocket expenses incurred in
connection with or arising from any default hereunder by the Company or the enforcement of its
rights hereunder as against the Company. This indemnification provision shall be in addition to
the rights of such Holder or Holders to bring an action against the Company for breach of contract
based on such default hereunder.




          11.4 Limitation of Liability. No provision hereof, in the absence of affirmative
action by the Holder to purchase shares of Warrant Stock, and no enumeration herein of the rights
or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the
Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted by the Company or by
creditors of the Company. Except as set forth herein, the Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder of the Company and nothing contained in this Warrant shall
be construed as conferring upon the Holder the right to vote or to consent or to receive notice as
a stockholder in respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.




          11.5 Remedies. Each of the parties hereto acknowledges and agrees that damages will
not be an adequate remedy for any material breach or violation of this Warrant if such material
breach or violation would cause immediate and irreparable harm (an “Irreparable Breach”).
Accordingly, in the event of a threatened or ongoing Irreparable Breach, each party hereto shall be
entitled to seek equitable relief of a kind appropriate in light of the nature of the ongoing or
threatened Irreparable Breach, which relief may include, without limitation, specific performance
or injunctive relief; provided, however, that if the party bringing such action is
unsuccessful in obtaining the relief sought, the moving party shall pay the non-moving party’s
reasonable costs, including attorney’s fees, incurred in connection with defending such action.
Such remedies shall not be the parties’ exclusive remedies, but shall be in addition to all other
remedies provided in this Warrant.




20









 








          11.6 Successors and Assigns. This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the successors and assigns
of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and to the extent applicable, all Holders of shares of
Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by
any such Holder.




          11.7 Amendment. This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived only with the written consent of the Company and the Holder.
Notwithstanding the foregoing, without a Holder’s written consent no such modification, amendment
or waiver shall affect adversely such Holder’s rights hereunder in a discriminatory manner
inconsistent with its adverse effects on rights of other Holders hereunder (other than as reflected
by the different number of shares of Warrant Stock held by such Holders). This Warrant cannot be
changed, modified, discharged or terminated by oral agreement.




          11.8 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 provision or the remaining provisions of this Warrant.




          11.9 Headings. The headings and other captions in this Warrant are for the
convenience and reference only and shall not be used in interpreting, construing or enforcing any
provision of this Warrant.




          11.10 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial; Injunctive Relief.




          (a) This Warrant shall be governed by and construed in accordance with the internal and
substantive laws of the State of Delaware, without regard to any conflicts of laws concepts which
would apply the substantive law of some other jurisdiction.




          (b) Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the Court
of Chancery in the State of Delaware and the Federal courts of the United States of America located
in the State of Delaware for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Warrant and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party hereto anywhere in
the world by the same methods as are specified for the giving of notices under this Warrant. Each
of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives
any objection to the laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.




21









 








          11.11 Entire Agreement. This Warrant and the Registration Rights Agreement (as
defined in the Purchase Agreement) constitute the entire agreement between the parties hereto
respecting the subject matter hereof and supersede all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter hereof, whether
written or oral.




[Execution Page Follows]




22









 








          IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Original
Issue Date.




	 	 	 	 	 
	 	MIDDLEBROOK PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Warrant Execution Page]





 









 








ANNEX A


SUBSCRIPTION FORM


[To be executed only upon exercise of Warrant]




          The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the
purchase of
                     shares of Common Stock of MiddleBrook Pharmaceuticals, Inc. and herewith makes
payment therefor in                     , all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name of and delivered to
                                         whose address is
               




     
                                   
                              
       
     
     
     
     
     
                  
and, if
such shares of Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.




	 	 	 	 	 
	 

	 	 

(Name of Registered Owner)
	 	 
	 
	 	 	 	 
	 

	 	 

(Signature of Registered Owner)
	 	 
	 
	 	 	 	 
	 

	 	 

(Street Address)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(City)   (State)    (Zip Code)	 	 






	 	 	 
	NOTICE:

	 	The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.






A-1









 






ANNEX B




ASSIGNMENT FORM




     FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the assignee named below all of the rights of the undersigned under this Warrant,
with respect to the number of shares of Common Stock set forth below:



	 	 	 	 	 
	 

	 	No. of Shares of

	 	 
	Name and Address of Assignee

	 	Common Stock	 	 
	 

	 	 	 	 





and does hereby irrevocably constitute and appoint                                          attorney-in-fact to
register such transfer onto the books of MiddleBrook Pharmaceuticals, Inc. maintained for the
purpose, with full power of substitution in the premises.



	 	 	 	 	 
	Dated:

	 	Print Name:
	 	 
	 
	 	 	 	 
	Signature:

	 	Witness:	 	 






	 	 	 
	NOTICE:

	 	The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.







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