Document:

exv4w10

 

EXHIBIT 4.10

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR ITS OWN ACCOUNT FOR
INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE A PUBLIC DISTRIBUTION OF ALL OR ANY
PORTION THEREOF. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.

			
	 	 	 
	No.                     
	 	February
                    , 2006
	 
	 	San Diego, California

ARTES MEDICAL, INC.

FORM OF WARRANT TO PURCHASE SERIES E PREFERRED STOCK

Void after February                     , 2011

     Artes Medical, Inc., a Delaware corporation (the “Company”), hereby certifies that,
for value received,                      (including any successors and assigns, “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company at any time or from
time to time before 5:00 PM Pacific time, on February ___, 2011 (the “Expiration Date”), fully paid
and nonassessable shares of the Company’s Series E Preferred Stock (the “Warrant Shares”) under the
terms set forth herein:

     1. Number of Warrant Shares; Exercise Price. This Warrant shall evidence the right of
the Holder to purchase up to                      Warrant Shares at an initial exercise price per Warrant
Share of $2.50 per share (the “Exercise Price”), subject to adjustment as provided in Section 7
below. This Warrant is issued pursuant to that certain Series E Preferred Stock and Warrant
Purchase Agreement, dated February 3, 2006.

     2. Definitions. As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

          (a) The term “Common Stock” shall mean the Common Stock of the Company.

          (b) The term “Company” shall include any company which shall succeed to or assume the
obligations of the Company hereunder.

          (c) The term “Corporate Transaction” shall mean (i) a sale, lease transfer or conveyance of
all or substantially all of the assets of the Company; (ii) a consolidation of the Company with, or
merger of the Company with or into, another corporation or other business entity in which the
stockholders of the Company immediately prior to such consolidation or merger own less than 50% of
the voting power of the surviving entity immediately after such
consolidation or merger; or (iii) any transaction or series of related transactions to which
the Company is a party in which in excess of 50% of the Company’s voting power is transferred,

 

 

excluding any consolidation or merger effected exclusively to change the domicile of the Company.

     3. Exercise Date; Expiration. Subject to the terms hereof, this Warrant may be
exercised by the Holder at any time or from time to time before the Expiration Date (the “Exercise
Period”).

     4. Exercise of Warrant; Partial Exercise. This Warrant may be exercised in full by
the Holder by surrender of this Warrant, together with the Holder’s duly executed form of
subscription attached hereto as Exhibit A, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable to the order of the
Company, of the aggregate exercise price (as determined above) of the number of Warrant Shares to
be purchased hereunder. The exercise of this Warrant pursuant to this Section 4 shall be deemed to
have been effected immediately prior to the close of business on the business day on which this
Warrant is surrendered to the Company as provided in this Section 4, and at such time the person in
whose name any certificate for Warrant Shares shall be issuable upon such exercise shall be deemed
to be the record holder of such Warrant Shares for all purposes. As soon as practicable after the
exercise of this Warrant, the Company at its expense will cause to be issued in the name of and
delivered to the Holder, or as the Holder may direct, a certificate or certificates for the number
of fully paid and nonassessable full shares of Warrant Shares to which the Holder shall be entitled
on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of
the current fair market value of one full Warrant Share as determined in good faith by the Board of
Directors, and, if applicable, a new warrant evidencing the balance of the shares remaining subject
to the Warrant.

     5. Net Issuance.

     (a) Right to Convert. In addition to and without limiting the rights of the Holder
under the terms of this Warrant, the Holder shall have the right to convert this Warrant (the
“Conversion Right”) into Warrant Shares as provided in this Section 5 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with respect to shares
subject to the Warrant (the “Converted Warrant Shares”), the Company shall deliver to the Holder
(without payment by the Holder of any exercise price or any cash or other consideration) that
number of fully paid and nonassessable Warrant Shares computed using the following formula:

	 	 	 	 	 	 	 
	 

	 	X =
	 	Y (A — B)	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	A	 	 

	 	 	 
	Where:

	 	X =      the number of shares of Warrant Shares to be delivered to the Holder;
	 
	 	 
	 

	 	Y =      the number of Converted Warrant Shares;
	 
	 	 
	 

	 	A =      the fair market value of one Warrant Share on the Conversion Date (as defined below); and
	 
	 	 
	 

	 	B =      the Exercise Price (as adjusted to the Conversion Date).

 

 

     No fractional shares shall be issuable upon exercise of the Conversion Right, and if the
number of shares to be issued determined in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the Holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as defined below). Shares issued
pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of the
Warrant.

          (b) Method of Exercise. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and indicating the
total number of shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the Warrant together with
the aforesaid written statement, or on such later date as is specified therein (the “Conversion
Date”). Certificates for the shares issuable upon exercise of the Conversion Right shall be
delivered to the Holder promptly following the Conversion Date.

          (c) Determination of Fair Market Value. For purposes of this Section 5, fair market
value of a Warrant Share on the Conversion Date shall be determined as follows:

               (i) If this Warrant is to be exercised contingent upon and effective immediately prior to the
initial public offering of the Company’s Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (an “Initial Public Offering”), the fair
market value of a Warrant Share shall be deemed to be equal to the product of (x) the number of
shares of Common Stock into which such Warrant Share is then convertible and (y) the price to the
public of the shares of Common Stock sold in the Initial Public Offering as set forth on the front
cover of the final prospectus relating to the Initial Public Offering;

               (ii) If the Common Stock is traded on a stock exchange or the Nasdaq Stock Market (or a
similar national quotation system), the fair market value of a Warrant Share shall be deemed to be
the product of (x) the average of the closing selling prices of the Common Stock on the stock
exchange or system determined by the Board to be the primary market for the Common Stock over the
ten (10) trading day period ending on the date prior to the Conversion Date, as such prices are
officially quoted in the composite tape of transactions on such exchange or system and (y) the
number of shares of Common Stock into which such Warrant Share is convertible at the date of
calculation;

               (iii) If the Common Stock is traded over-the-counter, the fair market value of a Warrant Share
shall be deemed to be the product of (x) the average of the closing bid prices (or, if such
information is available, the closing selling prices) of the Common Stock over the ten (10) trading
day period ending on the date prior to the Conversion Date, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ system or any successor system and
(y) the number of shares of Common Stock into which such Warrant Share is convertible at the date
of calculation; and

               (iv) If there is no public market for the Common Stock, then the fair market value of a
Warrant Share shall be determined by the Board of Directors of the Company
in good faith, and, upon request of the Holder, the Board (or a representative thereof) shall,
as

 

 

promptly as reasonably practicable but in any event not later than 15 days after such request,
notify the Holder of the Fair Market Value per share of Common Stock.

     6. Market Stand-Off Agreement. If requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holder shall not sell (including, without
limitation, any short sale) or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the registration)
during the one hundred eighty (180) day period (subject to such extension or extensions as may be
required by the underwriters in order to publish research reports while complying with the Rule
2711 of the National Association of Securities Dealers, Inc.) following the effective date of a
registration statement of the Company filed under the Securities Act, provided that:

          (a) such one hundred eighty (180) day “market stand-off” agreement shall only apply in the
context of the Company’s Initial Public Offering; and

          (b) all officers and directors and five percent (5%) stockholders of the Company enter into
similar agreements.

     The obligations described in this Section 6 shall not apply to a registration relating solely
to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing restriction until
the end of such applicable one hundred eighty (180) day period.

     7. Adjustments to Conversion Price. The number and kind of Warrant Shares (or any
shares of stock or other securities which may be) issuable upon the exercise of this Warrant and
the exercise price hereunder shall be subject to adjustment from time to time upon the happening of
certain events, as follows:

          (a) Splits and Subdivisions. In the event the Company should at any time or from time
to time fix a record date for the effectuation of a split or subdivision of the outstanding shares
of Series E Preferred Stock or the determination of the holders of Series E Preferred Stock
entitled to receive a dividend or other distribution payable in additional shares of Series E
Preferred Stock or other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Series E Preferred Stock (hereinafter referred
to as the “Series E Preferred Stock Equivalents”) without payment of any consideration by such
holder for the additional shares of Series E Preferred Stock or Series E Preferred Stock
Equivalents, then, as of such record date (or the date of such distribution, split or subdivision
if no record date is fixed), the Exercise Price shall be appropriately decreased and the number of
Warrant Shares for which this Warrant is exercisable shall be appropriately increased in proportion
to such increase of outstanding shares.

          (b) Combination of Shares. If the number of shares of Series E Preferred Stock
outstanding at any time after the date hereof is decreased by a combination of the outstanding
shares of Series E Preferred Stock, the Exercise Price shall be appropriately

 

 

increased and the number of Warrant Shares for which this Warrant is exercisable shall be
appropriately decreased in proportion to such decrease in outstanding shares.

          (c) Reclassification or Reorganization. If the Warrant Shares issuable upon the
exercise of this Warrant shall be changed into the same or different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a
split, subdivision or stock dividend provided for in Section 7(a) above or a combination of shares
provided for in Section 7(b) above, or a reorganization, merger or consolidation provided for in
Section 7(d) below, then and in each such event the Holder shall be entitled to receive upon the
exercise of this Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which a holder of the
number of Warrant Shares issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization, reclassification or other
change, all subject to further adjustment as provided herein.

          (d) Merger or Consolidation. If at any time or from time to time there shall be a
capital reclassification or reorganization of the Warrant Shares or a Corporate Transaction (other
than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in
this Section 7) of the Company, then as a part of such reorganization or Corporate Transaction,
adequate provision shall be made so that the Holder shall thereafter be entitled to receive upon
the exercise of this Warrant, the number of shares of stock or other securities or property of the
Company, resulting from such reorganization, recapitalization or Corporate Transaction to which a
holder of the number of Warrant Shares issuable upon the exercise of this Warrant would have
received if this Warrant had been exercised immediately prior to such reorganization or Corporate
Transaction. In any such case, the Company will make appropriate provision to insure that the
provisions of this Section 7 (d) hereof will thereafter be applicable as nearly as may be in
relation to any shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such Corporate Transaction unless prior to or
simultaneously with the consummation thereof the successor corporation (if other than the Company)
resulting from such Corporate Transaction or the corporation purchasing or acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at
the last address of the Holder appearing on the books of the Company, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this paragraph 7(d)
shall similarly apply to successive reorganizations, reclassifications, or Corporate Transactions.

          (e) Notice of Record Dates; Adjustments. In the event of an Initial Public Offering
or a Corporate Transaction, the Company shall provide to the Holder twenty (20) days advance
written notice of such Initial Public Offering or Corporate Transaction. The Company shall
promptly notify the Holder in writing of each adjustment or readjustment of the Exercise Price
hereunder and the number of Warrant Shares issuable upon the exercise of this Warrant. Such notice
shall state the adjustment or readjustment and show in reasonable detail the facts on which that
adjustment or readjustment is based.

     8. Registration Rights. The Company hereby agrees that the Holder shall be entitled,
with respect to all shares of Common Stock issuable upon conversion of the Warrant Shares issued
upon the exercise of this Warrant, to the registration rights set forth in Section 1 of

 

 

the Series E Investors’ Rights Agreement, dated February 3, 2006, as may be amended or
supplemented from time to time, the terms of which are hereby incorporated by this reference, with
the same force and effect as if specifically set forth herein.

     9. Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute
and deliver to the Holder, in lieu thereof, a new Warrant of like tenor.

     10. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company. No provisions hereof,
in the absence of affirmative action by the Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder as
a stockholder of the Company.

     11. Miscellaneous.

          (a) Transfer of Warrant. The Holder agrees not to make any disposition of this
Warrant, the Warrant Shares or any rights hereunder without the prior written consent of the
Company. Any such permitted transfer must be made by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached hereto as Exhibit
B to any such permitted transferee. As a condition precedent to such transfer, the transferee
shall sign an investment letter in form and substance satisfactory to the Company. Subject to the
foregoing, the provisions of this Warrant shall inure to the benefit of and be binding upon any
successor to the Company and shall extend to any holder hereof.

          (b) Titles and Subtitles. The titles and subtitles used in this Warrant are for
convenience only and are not to be considered in construing or interpreting this Warrant.

          (c) Notices. Any notice required or permitted to be given to a party pursuant to the
provisions of this Warrant shall be in writing and shall be effective and deemed given to such
party under this Warrant on the earliest of the following: (a) the date of personal delivery; (b)
two (2) business days after transmission by facsimile, addressed to the other party at its
facsimile number, with confirmation of transmission; (c) four (4) business days after deposit with
a return receipt express courier for United States deliveries; or (d) five (5) business days after
deposit in the United States mail by registered or certified mail (return receipt requested) for
United States deliveries. All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to such party at the address set forth
on the signature page hereto, or at such other address as such party may designate by ten (10) days
advance written notice to the other party hereto. Notices to the Company will be marked
“Attention: Chief Financial Officer.”

          (d) Attorneys’ Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be
entitled.

 

 

          (e) Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent of the Holder and the Company.
Any amendment or waiver effected in accordance with this Section 11(e) shall be binding upon the
Holder of this Warrant (and of any securities into which this Warrant is convertible), each future
holder of all such securities, and the Company.

          (f) Severability. If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provision shall be excluded from this Warrant and the
balance of the Warrant shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.

          (g) Governing Law. This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of California, without giving effect to its conflicts of laws
principles.

          (h) Counterparts. This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

     In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of the date first written above.

	 	 	 	 	 	 	 
	 	 	 	 	ARTES MEDICAL, INC.,
	 	 	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Peter C. Wulff
	 

	 	 	 	Title:
	 	Chief Financial Officer
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:
	 	5870 Pacific Center Blvd.
	 

	 	 	 	 	 	San Diego, CA 92121
	 
	 	 	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 	 	 
	 
	 	 	 	 	 	 
	[Holder]	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

To: ARTES MEDICAL, INC.

     The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby
irrevocably elects to (a) purchase
                    shares of the Series E Preferred Stock covered by such
Warrant and herewith makes payment of $                     , representing the full purchase price for such
shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for
                    
shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 5 of such Warrant.

     Please
issue a certificate or certificates representing
                     shares in the name of the
undersigned or in such other name or names as are specified below:

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Name)	 	 
	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Address)	 	 

     The undersigned represents that the aforesaid shares are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.

	 	 	 
	 

	 	 
	 

	 	(Signature must conform in all respects to name of
the Holder as specified on the face of the Warrant)
	 
	 	 
	 

	 	 
	 

	 	(Print Name)
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 

	 	(Address)

Dated:                                         

 

 

EXHIBIT B

FORM OF ASSIGNMENT

(To assign the foregoing Warrant, execute this form

and supply required information. Do not use this

form to purchase shares.)

     For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to:

	 	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Please Print)
	Address:
	 	 
	 

	 	 
	 

	 	(Please Print)

Dated:                                         , 20                    

	 	 	 	 	 
	Holder’s
	 	 	 	 
	Signature:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Holder’s
	 	 	 	 
	Address:
	 	 	 	 
	 

	 	 	 	 

NOTE: The signature to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.exv4w11

 

EXHIBIT 4.11

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR ITS OWN ACCOUNT FOR
INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE A PUBLIC DISTRIBUTION OF ALL OR ANY
PORTION THEREOF. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.

			
	 	 	 
	No.                     
	 	December                     , 2005
	 
	 	San Diego, California

ARTES MEDICAL, INC.

WARRANT TO PURCHASE SERIES E PREFERRED STOCK

Void after January ___, 2011

     Artes Medical, Inc., a Delaware corporation (the “Company”), hereby certifies that,
for value received, National Securities Corporation (including any successors and assigns,
“Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any
time or from time to time before 5:00 PM Pacific time, on January ___, 2011; (the “Expiration
Date”), fully paid and nonassessable shares of the Company’s Series E Preferred Stock (the “Warrant
Shares”) under the terms set forth herein:

     1. Number of Warrant Shares; Exercise Price. This Warrant shall evidence the right of
the Holder to purchase up to                                          Warrant Shares at an initial exercise price per
Warrant Share of $2.50 per share (the “Exercise Price”), subject to adjustment as provided in
Section 7 below.

     2. Definitions. As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

          (a) The term “Common Stock” shall mean the Common Stock of the Company.

          (b) The term “Company” shall include any company which shall succeed to or assume the
obligations of the Company hereunder.

          (c) The term “Corporate Transaction” shall mean (i) a sale, lease transfer or conveyance of
all or substantially all of the assets of the Company; (ii) a consolidation of the Company with, or
merger of the Company with or into, another corporation or other business entity in which the
stockholders of the Company immediately prior to such consolidation or merger own less than 50% of
the voting power of the surviving entity immediately after such consolidation or merger; or (iii)
any transaction or series of related transactions to which the
Company is a party in which in excess of 50% of the Company’s voting power is transferred,

 

 

excluding any consolidation or merger effected exclusively to change the domicile of the Company.

     3. Exercise Date; Expiration. Subject to the terms hereof, this Warrant may be
exercised by the Holder at any time or from time to time before the Expiration Date (the “Exercise
Period”).

     4. Exercise of Warrant; Partial Exercise. This Warrant may be exercised in full by
the Holder by surrender of this Warrant, together with the Holder’s duly executed form of
subscription attached hereto as Exhibit A, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable to the order of the
Company, of the aggregate exercise price (as determined above) of the number of Warrant Shares to
be purchased hereunder. The exercise of this Warrant pursuant to this Section 4 shall be deemed to
have been effected immediately prior to the close of business on the business day on which this
Warrant is surrendered to the Company as provided in this Section 4, and at such time the person in
whose name any certificate for Warrant Shares shall be issuable upon such exercise shall be deemed
to be the record holder of such Warrant Shares for all purposes. As soon as practicable after the
exercise of this Warrant, the Company at its expense will cause to be issued in the name of and
delivered to the Holder, or as the Holder may direct, a certificate or certificates for the number
of fully paid and nonassessable full shares of Warrant Shares to which the Holder shall be entitled
on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of
the current fair market value of one full Warrant Share as determined in good faith by the Board of
Directors, and, if applicable, a new warrant evidencing the balance of the shares remaining subject
to the Warrant.

     5. Net Issuance.

          (a) Right to Convert. In addition to and without limiting the rights of the Holder
under the terms of this Warrant, the Holder shall have the right to convert this Warrant (the
“Conversion Right”) into Warrant Shares as provided in this Section 5 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with respect to shares
subject to the Warrant (the “Converted Warrant Shares”), the Company shall deliver to the Holder
(without payment by the Holder of any exercise price or any cash or other consideration) that
number of fully paid and nonassessable Warrant Shares computed using the following formula:

	 	 	 	 	 	 	 
	 

	 	X =
	 	Y (A — B)	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	A	 	 

	 	 	 
	Where:

	 	X =      the number of shares of Warrant Shares to be delivered to the Holder;
	 
	 	 
	 

	 	Y =      the number of Converted Warrant Shares;
	 
	 	 
	 

	 	A =      the fair market value of one Warrant Share on the Conversion Date (as defined below); and
	 
	 	 
	 

	 	B =      the Exercise Price (as adjusted to the Conversion Date).

 

 

     No fractional shares shall be issuable upon exercise of the Conversion Right, and if the
number of shares to be issued determined in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the Holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as defined below). Shares issued
pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of the
Warrant.

          (b) Method of Exercise. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and indicating the
total number of shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the Warrant together with
the aforesaid written statement, or on such later date as is specified therein (the “Conversion
Date”). Certificates for the shares issuable upon exercise of the Conversion Right shall be
delivered to the Holder promptly following the Conversion Date.

          (c) Determination of Fair Market Value. For purposes of this Section 5, fair market
value of a Warrant Share on the Conversion Date shall be determined as follows:

               (i) If this Warrant is to be exercised contingent upon and effective immediately prior to the
initial public offering of the Company’s Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (an “Initial Public Offering”), the fair
market value of a Warrant Share shall be deemed to be equal to the product of (x) the number of
shares of Common Stock into which such Warrant Share is then convertible and (y) the price to the
public of the shares of Common Stock sold in the Initial Public Offering as set forth on the front
cover of the final prospectus relating to the Initial Public Offering;

               (ii) If the Common Stock is traded on a stock exchange or the Nasdaq Stock Market (or a
similar national quotation system), the fair market value of a Warrant Share shall be deemed to be
the product of (x) the average of the closing selling prices of the Common Stock on the stock
exchange or system determined by the Board to be the primary market for the Common Stock over the
ten (10) trading day period ending on the date prior to the Conversion Date, as such prices are
officially quoted in the composite tape of transactions on such exchange or system and (y) the
number of shares of Common Stock into which such Warrant Share is convertible at the date of
calculation;

               (iii) If the Common Stock is traded over-the-counter, the fair market value of a Warrant Share
shall be deemed to be the product of (x) the average of the closing bid prices (or, if such
information is available, the closing selling prices) of the Common Stock over the ten (10) trading
day period ending on the date prior to the Conversion Date, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ system or any successor system and
(y) the number of shares of Common Stock into which such Warrant Share is convertible at the date
of calculation; and

               (iv) If there is no public market for the Common Stock, then the fair market value of a
Warrant Share shall be determined by the Board of Directors of the Company in good faith and, upon
request of the Holder, the Board (or a representative thereof) shall, as

 

 

promptly as reasonably practicable but in any event not later than 15 days after such request,
notify the Holder of the Fair Market Value per share of Common Stock.

     6. Market Stand-Off Agreement. If requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holder shall not sell (including, without
limitation, any short sale) or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the registration)
during the one hundred eighty (180) day period (subject to such extension or extensions as may be
required by the underwriters in order to publish research reports while complying with the Rule
2711 of the National Association of Securities Dealers, Inc.) following the effective date of a
registration statement of the Company filed under the Securities Act, provided that:

          (a) such one hundred eighty (180) day “market stand-off” agreement shall only apply in the
context of the Company’s Initial Public Offering; and

          (b) all officers and directors and five percent (5%) stockholders of the Company enter into
similar agreements.

     The Company may impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of such applicable one hundred eighty (180) day
period.

     7. Adjustments to Conversion Price. The number and kind of Warrant Shares (or any
shares of stock or other securities which may be) issuable upon the exercise of this Warrant and
the exercise price hereunder shall be subject to adjustment from time to time upon the happening of
certain events, as follows:

          (a) Splits and Subdivisions. In the event the Company should at any time or from time
to time fix a record date for the effectuation of a split or subdivision of the outstanding shares
of Series E Preferred Stock or the determination of the holders of Series E Preferred Stock
entitled to receive a dividend or other distribution payable in additional shares of Series E
Preferred Stock or other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Series E Preferred Stock (hereinafter referred
to as the “Series E Preferred Stock Equivalents”) without payment of any consideration by such
holder for the additional shares of Series E Preferred Stock or Series E Preferred Stock
Equivalents, then, as of such record date (or the date of such distribution, split or subdivision
if no record date is fixed), the Exercise Price shall be appropriately decreased and the number of
Warrant Shares for which this Warrant is exercisable shall be appropriately increased in proportion
to such increase of outstanding shares.

          (b) Combination of Shares. If the number of shares of Series E Preferred Stock
outstanding at any time after the date hereof is decreased by a combination of the outstanding
shares of Series E Preferred Stock, the Exercise Price shall be appropriately increased and the
number of Warrant Shares for which this Warrant is exercisable shall be appropriately decreased in
proportion to such decrease in outstanding shares.

 

 

          (c) Reclassification or Reorganization. If the Warrant Shares issuable upon the
exercise of this Warrant shall be changed into the same or different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a
split, subdivision or stock dividend provided for in Section 7(a) above or a combination of shares
provided for in Section 7(b) above, or a reorganization, merger or consolidation provided for in
Section 7(d) below, then and in each such event the Holder shall be entitled to receive upon the
exercise of this Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which a holder of the
number of Warrant Shares issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization, reclassification or other
change, all subject to further adjustment as provided herein.

          (d) Merger or Consolidation. If at any time or from time to time there shall be a
capital reclassification or reorganization of the Warrant Shares or a Corporate Transaction (other
than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in
this Section 7) of the Company, then as a part of such reorganization or Corporate Transaction,
adequate provision shall be made so that the Holder shall thereafter be entitled to receive upon
the exercise of this Warrant, the number of shares of stock or other securities or property of the
Company, resulting from such reorganization, recapitalization or Corporate Transaction to which a
holder of the number of Warrant Shares issuable upon the exercise of this Warrant would have
received if this Warrant had been exercised immediately prior to such reorganization or Corporate
Transaction. In any such case, the Company will make appropriate provision to insure that the
provisions of this Section 7 (d) hereof will thereafter be applicable as nearly as may be in
relation to any shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such Corporate Transaction unless prior to or
simultaneously with the consummation thereof the successor corporation (if other than the Company)
resulting from such Corporate Transaction or the corporation purchasing or acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at
the last address of the Holder appearing on the books of the Company, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this paragraph 7(d)
shall similarly apply to successive reorganizations, reclassifications, or Corporate Transactions.

          (e) Notice of Record Dates; Adjustments. In the event of an Initial Public Offering
or a Corporate Transaction, the Company shall provide to the Holder twenty (20) days advance
written notice of such Initial Public Offering or Corporate Transaction. The Company shall
promptly notify the Holder in writing of each adjustment or readjustment of the Exercise Price
hereunder and the number of Warrant Shares issuable upon the exercise of this Warrant. Such notice
shall state the adjustment or readjustment and show in reasonable detail the facts on which that
adjustment or readjustment is based.

     8. Registration Rights. The Company hereby agrees that the Holder shall be entitled,
with respect to all shares of Common Stock issuable upon conversion of the Warrant Shares issued
upon the exercise of this Warrant, to the registration rights set forth in Section 1 of the Series
E Investors’ Rights Agreement dated December 30, 2005, as may be amended or supplemented from time
to time, the terms of which are hereby incorporated by this reference, with the same force and
effect as if specifically set forth herein.

 

 

     9. Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute
and deliver to the Holder, in lieu thereof, a new Warrant of like tenor.

     10. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company. No provisions hereof,
in the absence of affirmative action by the Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder as
a stockholder of the Company.

     11. Miscellaneous.

          (a) Transfer of Warrant; Permitted Designee Transfer. The Holder agrees not to make
any disposition of this Warrant, the Warrant Shares or any rights hereunder without the prior
written consent of the Company. Any such permitted transfer must be made by the Holder in person
or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached
hereto as Exhibit B to any such permitted transferee. As a condition precedent to such
transfer, the transferee shall sign an investment letter in form and substance satisfactory to the
Company. Subject to the foregoing, the provisions of this Warrant shall inure to the benefit of
and be binding upon any successor to the Company and shall extend to any holder hereof.
Notwithstanding anything contained herein, the Company shall, upon written instructions to be
delivered to the Company within fifteen (15) business days following the date hereof, transfer all
or a portion of this Warrant to officers, directors, employees and other registered agents or
associated persons of the Holder (collectively, “Permitted Designees”) in accordance with this
Section 11; provided, however, the Company shall not be required to issue such Warrants to any
person who is not an “accredited investor” within the meaning of Regulation D promulgated under the
Securities Act of 1933, as amended, and provided, further, such transfer must be in compliance with
applicable Federal and state securities laws. Each Permitted Designee shall be required to execute
fully and completely the Investor Representation Letter in the form attached hereto as Exhibit
C prior to the issuance of the Warrant to such person.

          (b) Titles and Subtitles. The titles and subtitles used in this Warrant are for
convenience only and are not to be considered in construing or interpreting this Warrant.

          (c) Notices. Any notice required or permitted to be given to a party pursuant to the
provisions of this Warrant shall be in writing and shall be effective and deemed given to such
party under this Warrant on the earliest of the following: (a) the date of personal delivery; (b)
two (2) business days after transmission by facsimile, addressed to the other party at its
facsimile number, with confirmation of transmission; (c) four (4) business days after deposit with
a return receipt express courier for United States deliveries; or (d) five (5) business days after
deposit in the United States mail by registered or certified mail (return receipt requested) for
United States deliveries. All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to such party at the address set forth

 

 

on the signature page hereto, or at such other address as such party may designate by ten (10)
days advance written notice to the other party hereto. Notices to the Company will be marked
“Attention: Chief Financial Officer.”

          (d) Attorneys’ Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be
entitled.

          (e) Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent of the Holder and the Company.
Any amendment or waiver effected in accordance with this Section 10(e) shall be binding upon the
Holder of this Warrant (and of any securities into which this Warrant is convertible), each future
holder of all such securities, and the Company.

          (f) Severability. If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provision shall be excluded from this Warrant and the
balance of the Warrant shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.

          (g) Governing Law. This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of California, without giving effect to its conflicts of laws
principles.

          (h) Counterparts. This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

     In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of the date first written above.

	 	 	 	 	 	 	 
	 	 	 	 	ARTES MEDICAL, INC.,
	 	 	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Peter C. Wulff
	 

	 	 	 	Title:
	 	Chief Financial Officer
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:
	 	5870 Pacific Center Blvd.
	 

	 	 	 	 	 	San Diego, CA 92121
	 
	 	 	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 	 	 
	 
	 	 	 	 	 	 
	National Securities Corporation	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Address:

	 	875 N. Michigan Avenue, Suite	 	 	 	 
	 

	 	1560 Chicago, IL 60611	 	 	 	 

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

To: ARTES MEDICAL, INC.

     The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby
irrevocably elects to (a) purchase
                     shares of the Series E Preferred Stock covered by such
Warrant and herewith makes payment of $                     , representing the full purchase price for such
shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for
                    
shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 5 of such Warrant.

     Please
issue a certificate or certificates representing                      shares in the name of the
undersigned or in such other name or names as are specified below:

	 	 	 	 	 
	 

	 	 

	 	 
	 

	 	(Name)	 	 
	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Address)	 	 

     The undersigned represents that the aforesaid shares are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.

	 	 	 
	 

	 	 
	 

	 	(Signature must conform in all respects to name of
the Holder as specified on the face of the Warrant)
	 
	 	 
	 

	 	 
	 

	 	(Print Name)
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 

	 	(Address)

Dated:                                        

 

 

EXHIBIT B

FORM OF ASSIGNMENT

(To assign the foregoing Warrant, execute this form

and supply required information. Do not use this

form to purchase shares.)

     For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to:

	 	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Please Print)
	Address:
	 	 
	 

	 	 
	 

	 	(Please Print)

Dated:                                         , 20                    

	 	 	 	 	 
	Holder’s
	 	 	 	 
	Signature:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Holder’s
	 	 	 	 
	Address:
	 	 	 	 
	 

	 	 	 	 

NOTE: The signature to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.

 

 

EXHIBIT C

FORM OF INVESTOR REPRESENTATION LETTER

DATE

Artes Medical, Inc.

5870 Pacific Center Boulevard

San Diego, Ca 92121

Gentlemen:

     In connection with my receipt of warrants (“Warrants”) to purchase the number of shares of
common stock referred to below, I hereby represent, warrant and covenant as follows:

	1.	 	Check each one which is applicable:
	 
	 	 	                     I am an “accredited investor” within the meaning of Regulation D promulgated
under the Securities Act of 1933 (the “Act”);
	 
	 	 	                     I have such knowledge and experience in financial, tax, and business matters
so as to utilize information made available to me in order to evaluate the merits and risks of an
investment decision with respect thereto;
	 
	2.	 	                     I am affiliated with National Securities Corporation (“Placement Agent”) and
have had the opportunity to ask questions and receive and review such answers and information
concerning Artes Medical, Inc. (the “Issuer”) as I have deemed pertinent;
	 
	3.	 	                     I am not relying on the Issuer or the Placement Agent respecting the tax and
other economic considerations of an investment in the Issuer;
	 
	4.	 	                     I am acquiring the Warrants and the underlying securities related thereto
solely for my own account for investment and not with a view to resale or distribution. I
acknowledge that neither the Warrants nor the underlying securities have been registered under
the Act and may not be resold except pursuant to an effective registration statement
thereunder or an exemption therefrom;

	 	 	 
	 

	 	 
	 

	 	Name:
	 
	 	 
	 

	 	Holder of Warrants to purchase                     
shares of Series E Preferred Stock
of Artes Medical, Inc. pursuant to the terms
of the Series E Preferred Warrant of even date
herewith

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