Document:

Exhibit 4.24

 

- Execution Copy

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION.  THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.

 

LUCID, INC.

8% CONVERTIBLE PROMISSORY NOTE

DUE NOVEMBER 15, 2012

 

Rochester, NY

	
$
    	
, 2011
    

 

1.                                       Principal and Interest.

 

FOR VALUE RECEIVED, LUCID, INC. (the “Company”), a New York corporation, for value received, hereby promises to pay to the order of [Insert Name of Holder] or his, her or its assigns (“Holder”), in lawful money of the United States of America at the address for notices to Holder set forth in the applicable Purchase Agreement (as defined below) (or such other address as Holder shall provide to the Company in writing pursuant hereto), the principal amount of                                                      dollars ($                      ), lawful money of the United States of America, together with interest thereon at the rate set forth below.

 

The Company promises to pay interest on the unpaid principal amount from the date hereof until such principal amount is paid in full at the rate of eight percent (8%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable law.  Interest from the date hereof shall be computed on the basis of a 360-day year of twelve 30-day months, shall compound annually and shall be accrued and added to principal on an annual basis.  Unless converted, accelerated or otherwise, all unpaid principal and unpaid accrued interest on this Note shall be due and payable on November 15, 2012 or such earlier date as may be required hereby, whether by acceleration, conversion or otherwise; provided, however, that upon an Event of Default (as defined in Section 10), the interest rate on this Note shall be increased to fourteen percent (14%) per annum during the term of the default.

 

This Note is being issued pursuant to that certain Subscription Agreement between the Company and the Holder, dated as of the date hereof (the “Purchase Agreement”), and is subject to its terms.  Capitalized terms used herein but not defined shall have the meanings given to such terms in the Purchase Agreement.  The Company has heretofore issued and may hereafter issue notes containing the same terms and conditions set forth herein and such notes are collectively referred to as the “Bridge Notes.”

 

 

2.                                       Rank.  The Note ranks pari passu in right of payment with all other existing unsecured indebtedness of the Company and no new indebtedness (with the exception of bank debt) which is secured or senior in right of payment to the Note may be issued by the Company without the consent of the holders of Bridge Notes representing at least fifty-one percent (51%) of the aggregate principal amount of all outstanding Bridge Notes.  No consent of the holders of Bridge Notes will be required for issuances by the Company of unsecured indebtedness that ranks pari passu in right of payment with, or junior in right of payment to, the Bridge Notes.

 

3.                                       Conversion Provisions.

 

3.1                                 Automatic Conversion.  All unpaid principal and any unpaid accrued interest on this Note shall be automatically converted into shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”) upon the consummation of an underwritten initial public offering by the Company (made in connection with the listing by the Company of the Common Stock on a registered national stock exchange or the quotation of Common Stock on the OTC Bulletin Board or similar quotation service) of shares of Common Stock and/or units consisting of Common Stock and warrants to purchase Common Stock resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Company of at least $10,000,000, inclusive of the converted principal and interest value of these and any other converted promissory notes (a “Qualified IPO”), at a conversion price equal to 70% of the price at which shares of Common Stock, or shares of Common Stock underlying units (for the sake of clarity, allocating no value to any warrants underlying such units), as applicable, are sold in a Qualified IPO, and upon such other terms, conditions and agreements as may be applicable in such Qualified IPO (determined on a fully diluted basis) (the “Conversion Price”).

 

3.2                                 Conversion Securities.  Upon conversion of this Note in accordance with the terms of Section 3.1, the outstanding unpaid principal and unpaid accrued interest of the Note shall be converted without any further action by the Holder and whether or not the Note is surrendered to the Company or its transfer agent, and the indebtedness evidenced by this Note shall be satisfied in full and no interest shall continue to accrue on this Note and all rights of the Holder hereunder shall terminate.  The Company shall not be obligated to issue certificates evidencing the shares of the securities issuable upon such conversion unless the Note is either delivered to the Company or its transfer agent, or the Holder notifies the Company or its transfer agent that such Note has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such Note.  The Company shall, as soon as practicable after such delivery, or such agreement and indemnification, issue and deliver to such Holder of such Note, a certificate or certificates for the securities to which the Holder shall be entitled.  Such conversion shall be deemed to have been made concurrently with the close of the Qualified IPO.  The Person or Persons entitled to receive securities issuable upon such conversion shall be treated for all purposes as the record holder or holders of such securities on such date.

 

3.3                                 Optional Conversion.

 

(a)                                  In the event that, prior to the Maturity Date, the Company consummates a public offering of Common Stock, other than a Qualified IPO, which requires the

 

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filing by the Company of a registration statement declared effective under the Securities Act or the Exchange Act and is made in connection with the listing by the Company of the Common Stock on a registered national stock exchange or the quotation of Common Stock on the OTC Bulletin Board or similar quotation service (a “Non-Qualified Financing”), then, at the option of the Holder, all unpaid principal and any accrued interest on this Note shall be converted into shares of Common Stock issued by the Company in such Non-Qualified Financing.  The number of shares to be issued upon such conversion of this Note shall be equal to the quotient obtained by dividing (i) the outstanding principal balance plus any accrued but unpaid interest under this Note as of such date by (ii) the Optional Conversion Price. For purposes hereof, “Optional Conversion Price” means the lesser of (i) 70% of the lowest price per share at which the equity securities are issued in the Non-Qualified Financing or (ii) $4.61.

 

(b)                                 In the event that, prior to the Maturity Date, the Company consummates a transaction described in clause (i), (iii) or (iv) (whether or not the Voting Stock of the Company is exchanged for Voting Stock of the surviving Person) in the definition of Change of Control (a “Fundamental Transaction”) in which the Successor Entity (defined below) is a Non-Public Entity (defined below), then, at the option of the Holder, such Holder shall have the right to receive from the Company or Successor Entity in exchange for this Note an amount equal to the sum of (i) the aggregate principal amount of this Note plus the accrued and unpaid interest hereon plus (ii) the product of (x) the aggregate principal amount of this Note plus the accrued and unpaid interest hereon multiplied by (y) a fraction, the numerator of which is the difference (but not less than zero) obtained by subtracting the Non-Public Conversion Price (defined below) from the Equity Value Per Share (defined below), and the denominator of which is the Non-Public Conversion Price (as such Equity Value Per Share and Non-Public Conversion Price may be adjusted pursuant to Section 3.9).  An election by the Holder to convert this Note as provided in this Section 3.3(b) shall be exercised by written notice to the Successor Entity.  The Successor Entity shall pay, or cause to be paid, the amount due the Holder under this Section 3.3(b) in immediately available funds to an account designated by the Holder.

 

(c)                                  For the purposes of this Note, the following terms shall have the respective meanings listed below:

 

“Equity Value” means the value of the Company’s fully-diluted common equity as determined in the Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived, as agreed by the Successor Entity and the holders of a majority in aggregate principal amount of the outstanding Notes and the holders of a majority of the outstanding Warrants (such holders of Notes and Warrants being referred to as the “Majority Holders”).  In the event that the determination of the Equity Value requires the appraisal or evaluation of non-cash components and the Successor Entity and the Majority Holders shall fail to agree regarding the results of such evaluation or appraisal within 15 days of a notice by any holder of a Note or Warrant requesting such agreement, then the value of the Company’s fully-diluted common equity based upon the Fundamental Transaction shall be determined by an independent investment bank having experience in the valuation of companies similar to the Company, selected by the Successor Entity and reasonably acceptable to the Majority Holders.  The Successor Entity shall select such investment bank within fifteen (15) days of notice from a Holder of the need to determine the Equity Value.  If the investment bank selected by the

 

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Successor Entity is not reasonably acceptable to the Majority Holders, and the Successor Entity and such Majority Holders cannot agree on a mutually acceptable investment bank within fifteen (15) days of its selection by the Successor Entity, then the Successor Entity and the Majority Holders shall each choose one such investment bank within fifteen (15) days and the respective chosen firms (or, if only one firm is chosen because the other party fails to choose, then such one chosen firm) shall jointly select within fifteen (15) days of their selection a third investment bank, which shall make the determination within thirty (30) days of its selection.  The Successor Entity shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Holders), and the decision of the investment bank making such determination of Equity Value shall be final and binding on the Successor Entity and all affected Holders.

 

“Equity Value Per Share” means the result obtained by dividing the Equity Value by the number of fully-diluted shares of Common Stock outstanding immediately prior to the consummation of the Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived.

 

“Non-Public Conversion Price” means the lesser of (i) the result obtained by multiplying the Equity Value Per Share by 0.70 and (ii) $4.61.

 

“Non-Public Entity” means a Successor Entity whose outstanding common stock is not registered under the Exchange Act and listed on a registered national securities exchange.

 

“Successor Entity” means the Person (or, if so elected by the Holder, the parent entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the parent entity) with which such Fundamental Transaction shall have been entered into.

 

3.4                                 Exercise of Right of Optional Conversion.  In order to exercise the Optional Conversion right set forth in Section 3.3, the Holder shall surrender this Note at the principal office of the Company set forth in the Purchase Agreement and shall give written notice of such exercise, substantially in the form of Exhibit A attached hereto (the “Optional Conversion Notice”), to the Company at such office.  Such Optional Conversion shall be deemed to have been effected at the close of business on the date on which such Optional Conversion Notice, duly completed and executed, shall have been given.

 

3.5                                 Reservation of Shares of Common Stock.   The Company covenants that it will, on or before the Closing Date, either reserve and keep available out of its authorized capital, or amend its authorized capital, as required in order to be able to issue, such number of shares of its Common Stock as shall then be deliverable upon the conversion of this Note.

 

3.6                                 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of this Note.  Instead of any fractional shares which would otherwise be issuable upon conversion of this Note, the Company shall pay to the Holder of this Note a cash adjustment with respect to such fractional interest.

 

3.7                                 Termination of Automatic Conversion and Mandatory Redemption.    In the event the Company does not close on a Qualified IPO on or before November 15, 2012, then

 

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the Automatic Conversion described herein shall have no force or effect and the Company or Successor Entity shall redeem this Note at 140% of the face value of this Note plus any accrued and unpaid interest.

 

3.8                                 Successors and Assigns.  In the event the Company completes (in one or a series of related transactions) a merger, consolidation, sale or transfer of more than fifty percent (50%) of the Company’s capital stock or all or substantially all of the Company’s assets determined on a consolidated basis, then the term “Securities” as used herein shall thereafter refer to the equity securities or securities convertible into or exchangeable for equity securities of the surviving, resulting, combined or acquiring entity in such merger, consolidation, sale or transfer.

 

3.9                                 Subdivision, Dividends or Combination of Stock.  In the event the outstanding shares of the Company’s Common Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction occurring after the date hereof into a greater number of shares of Common Stock, the Conversion Price and Optional Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares Common Stock issuable upon conversion hereunder proportionately increased.  Conversely, in the event the outstanding shares of the Company’s Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar transaction occurring after the date hereof into a lesser number of shares of Common Stock, the Conversion Price and Optional Conversion Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock issuable upon conversion hereunder proportionately decreased.

 

4.                                       Prepayment.  This Note may not be prepaid at any time, in whole or in part, prior to its maturity.

 

5.                                       Change of Control.

 

(a)                                  Upon the occurrence of a Change of Control, the Company or Successor Entity will make an offer to purchase all of the Notes pursuant to the offer set forth below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 140% of the outstanding aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase.  Within 30 days following any Change of Control, the Company or Successor Entity shall send notice of such Change of Control Offer to each Holder by first-class mail to the address of such Holder, stating: (i) that a Change of Control Offer is being made pursuant to the Note provision entitled “Change of Control” and the circumstances and relevant facts regarding such Change of Control; (ii) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date of such notice (the “Change of Control Payment Date”); (iii) that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer, that any Note not properly tendered will remain outstanding and continue to accrue interest, and that unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date; and (iv) the instructions, as determined by the Company or Successor Entity, consistent with this Section 5, that a Holder must follow in connection with the Change of Control Offer.

 

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(b)                                 The Company or Successor Entity shall comply, to the extent applicable, with the requirements of Rule 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 5.  To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 5, the Company or Successor Entity shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described under this Section 5 by virtue of its compliance with such securities laws or regulations.

 

(c)                                  On the Change of Control Payment Date, the Company or Successor Entity shall, to the extent permitted by law, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer (the “Tendered Notes”) and (ii) pay to the Holder of each such Tendered Note an amount equal to the aggregate Change of Control Payment in respect of such Tendered Note, which payment shall be made in immediately available funds to an account designated by such Holder.

 

(d)                                 The Company shall not be required to make a Change of Control Offer following a Change of Control if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Note applicable to a Change of Control Offer made by the Company, and purchases all Notes validly tendered and not withdrawn under such offer.

 

(e)                                  For the purposes of this Section 5, the following terms shall have the respective meanings listed below:

 

“Capital Stock” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Change of Control” means the occurrence of any of the following:

 

(i)                                     the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company taken as a whole to any “person” (as such term is used in Section 13(d)(3) of the Exchange Act) other than in the ordinary course of business;

 

(ii)                                  the adoption of a plan relating to the liquidation or dissolution of the Company;

 

(iii)                               any “person” (as defined above) is or becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have “beneficial ownership” of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); or

 

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(iv)                              the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock (defined below) of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance).

 

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that (i) if such Person is a corporation, is at the time entitled to vote in the election of such corporation’s board of directors or any committee thereof duly authorized to act on behalf of such board or (ii) if such Person is an entity other than a corporation, is at the time entitled to vote in the election of the group or individual exercising the authority with respect to such Person generally vested in a board of directors of a corporation.

 

6.                                       S-1 Filing Requirement.  The Company has caused an S-1 Registration Statement (an “S-1”) to be filed with the Commission and agrees to use its reasonable best efforts to respond promptly to all Commission comments to facilitate the launch of a Qualified IPO.

 

7.                                       Attorney’s Fees.  If the indebtedness represented by this Note or any part thereof is collected in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after default, the Company agrees to pay, in addition to the principal and interest payable hereunder, reasonable attorneys’ fees and costs incurred by Holder.

 

8.                                       Notices.  Any notice, other communication or payment required or permitted hereunder shall be in writing and shall be deemed to have been given upon delivery to the address provided pursuant to the Purchase Agreement.  In the case of notice to either party, copies should be sent to Harris Beach PLLC, 99 Garnsey Road Pittsford, NY 14534, Facsimile: (585) 419-8817, Attn: Thomas E. Willett, Esq.

 

9.                                       Notice of Proposed Transfers.  Prior to any proposed transfer of this Note or the Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Holder shall give written notice to the Company of such Holder’s intention to effect such transfer.  Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail, and shall, if the Company so requests, be accompanied (except in transactions in compliance with Rule 144) by an unqualified written opinion of legal counsel, who shall be reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to the Company’s counsel, to the effect that the proposed transfer of the Note or Securities may be effected without registration under the Securities Act; provided, however, no such opinion of counsel shall be necessary for a transfer without consideration by a Holder to any affiliate of such Holder, or a transfer by a Holder which is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his spouse or lineal descendants or ancestors, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if such transferee were the original Holder hereunder.  Each certificate evidencing Securities or the Note transferred as above provided shall bear an appropriate restrictive legend, except that

 

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the Note or 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 compliance with any provisions of the Securities Act.

 

10.                                 Event of Default.  If any of the following events (an “Event of Default”) shall occur and be continuing:

 

(a)                                  the Company shall fail to pay the principal of, or shall fail to pay any interest on, this Note when due, and the same has not been cured within five (5) business days of receipt by the Company of written notice thereof;

 

(b)                                 the Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator, custodian or similar official for itself or any of its properties or assets; (ii) make a general assignment for the benefit of creditors; (iii) become bankrupt or insolvent; (iv) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code or under any analogous provision of applicable United States or foreign law or file a petition or an answer seeking reorganization, an arrangement with creditors or to take advantage of any other present or future applicable United States or foreign law respecting bankruptcy, reorganization, insolvency, readjustment of debts, dissolution, liquidation or relief of debtors; (v) file any answer admitting the material allegations of a petition under such law; (vi) be unable to pay or admit in writing its inability to pay its debts generally as they become due; or (vii) take any action for the purpose of effecting any of the foregoing;

 

(c)                                  (i) any case, proceeding or other action shall be commenced against the Company, or a substantial part of the Company’s properties or assets, under the United States Bankruptcy Code or under any analogous provision of United States or foreign law, and such case, proceeding or other action shall remain undismissed for any period of sixty (60) days; or (ii) an order, judgment or decree shall be entered without the application, approval or consent of the Company by any court of competent jurisdiction, approving a petition seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief with respect to the Company or all or a substantial part of the Company’s properties or assets, or appointing a receiver, trustee, liquidator, custodian or other official of the Company or all or a substantial part of the Company’s properties or assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;

 

(d)                                 one or more judgments for the payment of money in excess of an aggregate of One Hundred Thousand Dollars ($100,000) shall be rendered against the Company and the same shall remain undischarged for a period of sixty (60) days during which execution shall not be effectively stayed or contested in good faith, and the same has not been cured within five (5) business days of receipt by the Company of written notice thereof;

 

(e)                                  there is any material breach of any material covenant, warranty, representation or other term or condition of this Note or the Purchase Agreement at any time which is not cured within the time periods permitted therein, or if no cure period is provided therein, within thirty (30) days after the date on which the Company receives written notice of such breach; or

 

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(f)                                    the Company shall be dissolved or liquidated, or shall submit any application or other document to any authority for the purpose of dissolving or liquidating the Company or of commencing the dissolution or liquidation of the Company, or an action or administrative proceeding is commenced against the Company for its dissolution or liquidation which shall remain undismissed for any period of sixty (60) days, or the Company shall state in writing its intention to dissolve or liquidate;

 

then, or at any time thereafter during the continuance of any such Event of Default, this Note shall automatically be accelerated and declare the same to be forthwith due and payable as to both principal and interest, in all cases without presentation, demand, protest or other notice of any kind, all of which hereby are expressly waived by the Company, anything contained herein to the contrary notwithstanding.

 

11.                                 No Dilution or Impairment.  The Company will not, by amendment of its certificate of incorporation or bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against dilution or other impairment.

 

12.                                 Waivers; Construction.  The Company hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor.  No delay on the part of Holder in exercising any right hereunder shall operate as a waiver of such right or any other right.  This Note is being delivered in and shall be construed in accordance with the laws of the State of New York, without regard to the conflicts of laws provisions thereof.

 

13.                                 No Stockholder Rights.  Nothing contained in this Note shall be construed as conferring upon the Holder or any other Person the right to vote or to consent or to receive notice as a stockholder of the Company prior to the effectiveness of any conversion of this Note.  For the avoidance of doubt, upon the effectiveness of any conversion of this Note, the Holder shall have all rights as a stockholder of the Company with respect to such shares.

 

14.                                 Amendment.  Any term of this Note may be amended with the written consent of the Company and the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the then outstanding aggregate principal amount of the Bridge Notes, even without the consent of the Holder hereof.  Any amendment effected in accordance with this Section 14 shall be binding upon each holder of any Bridge Note, each future holder of all such Bridge Notes and the Company; provided, however, that no special consideration or inducement may be given to any such Holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders ratably in accordance with the principal amount of their then outstanding Bridge Notes.  Pursuant to Section 1 of the Bridge Notes, the Company may incur additional indebtedness that ranks in priority junior to, or pari passu with, the Bridge Notes without obtaining the consent of any holder of Bridge Notes, provided, that the holder of the Bridge Notes are provided written notice at least five (5) business days prior to the issuance

 

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thereof.  The Company shall promptly give notice to all holders of outstanding Bridge Notes of any amendment effected in accordance with this Section 14.

 

*  *  *  *  *

 

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ISSUED as of the date first above written.

 

 

	
 
    	
LUCID, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jay M. Eastman
    
	
 
    	
Name:
    	
Jay M. Eastman, Ph.D.
    
	
 
    	
Title:
    	
Chief   Executive Officer
    

 

 

Exhibit A

 

CONVERSION NOTICE

 

To:   Lucid, Inc.

 

The undersigned Holder of the attached Convertible Promissory Note, dated as of                             , 2011, executed by Lucid, Inc., a Delaware corporation (the “Company”), in favor of                                  (the “Holder”) hereby irrevocably exercises the option to convert the Convertible Promissory Note in accordance with Section 3.3 of the Convertible Promissory Note, and directs that the stock certificates representing shares of stock issuable and deliverable upon such conversion be issued and delivered to the registered Holder hereof.

 

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Signature
    	
 
    

 

12Exhibit 4.25

 

- Execution Copy

 

Warrant No. 2011-

Date of Issuance:                     , 2011

LUCID, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION.  THIS WARRANT AND SUCH SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED

 

THIS CERTIFIES THAT, for value received, [Insert Name of Holder] (the “Holder”), its designees or permitted assigns, subject to the terms and conditions set forth herein, at any time prior to the Expiration Date (as defined below), is entitled to purchase from Lucid, Inc., a New York corporation (the “Company”), that number of fully paid and nonassessable shares, as adjusted from time to time pursuant to the provisions of this Warrant (the “Warrant Shares”), of the Company’s common stock, $0.01 par value per share (the “Common Stock”), equal to (i) seventy percent (70%) of the principal amount of that certain Convertible Promissory Note dated the date hereof in the principal amount of $                               , issued by the Company to the Holder (the “Note”) pursuant to that certain Subscription Agreement dated the date hereof between the Company and the Holder (the “Purchase Agreement”), divided by (ii) the IPO Price (if a Qualified IPO is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), the price at which shares of Common Stock are sold in a Non-Qualified Financing (if a Non-Qualified Financing is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur) or the Equity Value Per Share (defined below) (if a Fundamental Transaction is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), upon surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with the Notice of Exercise attached hereto duly completed and signed and upon payment of the aggregate Exercise Price (as defined below) for the number of Warrant Shares for which this Warrant is being exercised determined in accordance with the provisions hereof.  For purposes hereof, “IPO Price” means the price at which shares of Common Stock, or shares of Common Stock underlying units (for the sake of clarity, allocating no value to any warrants underlying such units), as applicable, are sold in a Qualified IPO.  For purposes hereof, “Qualified IPO” means the consummation of an underwritten initial public offering by the Company of shares of Common Stock and/or units consisting of Common Stock and warrants to purchase Common Stock resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Company of at least $10,000,000 and made in connection with the listing by the Company of the Common Stock on a registered national stock exchange or the quotation of Common Stock on the OTC Bulletin Board or similar quotation service.  For purposes hereof, “Non-Registered Fundamental Transaction” means a Fundamental Transaction in which the Successor Entity is an entity whose outstanding common stock is not registered under the Exchange Act and listed on a registered national securities exchange.  The exercise price per Warrant Share issuable pursuant to this Common Stock Warrant shall be equal to $4.61 (the “Exercise Price”).  Terms used

 

 

herein but not otherwise defined shall have the meaning set forth in Purchase Agreement.  In the event that the Company does not consummate a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction prior to November 15, 2012, the denominator set forth above shall be equal to $4.61.

 

This Warrant is issued subject to the following terms and conditions:

 

1.             Exercise; Payment.

 

(a)           Exercise.  Subject to Section 5 hereof, the Holder may exercise this Warrant, at any time or from time to time, during the period (a) commencing on the earliest to occur of (i) the consummation of a Qualified IPO, (ii) the consummation of a Non-Qualified Financing, (iii) the consummation of a Fundamental Transaction in which the Successor Entity is a Non-Public Entity or (iv) November 15, 2012, and (b) expiring on November 15, 2015 at 5:00 p.m. (Eastern Time) (the “Expiration Date”).  The Holder may exercise this Warrant on or prior to the Expiration Date for all or any part of the Warrant Shares (but not for a fraction of a share) that may be purchased hereunder, as that number may be adjusted pursuant to Section 3 of this Warrant.  The Company agrees that the Warrant Shares purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered, properly endorsed, the completed and executed Notice of Exercise delivered, and payment made for such Warrant Shares (such date, a “Date of Exercise”).

 

In the event that the Holder elects to exercise this Warrant during such time as the issuer hereof is a Non-Public Entity, then, in lieu of receiving Warrant Shares, the Holder shall receive an amount equal to the product of (i) the number of Warrant Shares as to which the Warrant has been exercised by such Holder multiplied by (ii) the difference (but not less than zero) between the Equity Value Per Share and $4.61 (as such amounts may be adjusted pursuant to Section 4 of this Warrant).

 

(b)           Issuance of Certificates.

 

(i)            Certificates for the Warrant Shares so purchased, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense as soon as practicable after the rights represented by this Warrant have been so exercised, but in any event not later than ten (10) business days following the Date of Exercise.  In case of a purchase of less than all the Warrant Shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver to the Holder hereof within a reasonable time a new Warrant or Warrants of like tenor for the balance of the Warrant Shares purchasable under the Warrant surrendered upon such purchase.  Each stock certificate so delivered shall be registered in the name of such Holder and issued with a legend in substantially the form of the legend placed on the front of this Warrant.

 

(ii)           The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

(c)           Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder for any issue tax (other than any applicable

 

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income taxes) in respect thereof; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Holder of the Warrant being exercised.

 

(d)           Payment of Exercise Price.  The Holder shall pay the Exercise Price by delivering immediately available funds to the Company.

 

For the purposes hereof, “Equity Value Per Share” means the result obtained by dividing the Equity Value by the number of fully-diluted shares of Common Stock outstanding immediately prior to the consummation of the Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived.

 

For the purposes hereof, “Equity Value” means the value of the Company’s fully-diluted common equity as determined in the Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived, as agreed by the Successor Entity and the holders of a majority in aggregate principal amount of the outstanding Notes and the holders of a majority of the outstanding Warrants (such holders of Notes and Warrants being referred to as the “Majority Holders”).  In the event that the determination of the Equity Value requires the appraisal or evaluation of non-cash components and the Successor Entity and the Majority Holders shall fail to agree regarding the results of such evaluation or appraisal within 15 days of a notice by any holder of a Note or Warrant requesting such agreement, then the value of the Company’s fully-diluted common equity based upon the Fundamental Transaction shall be determined by an independent investment bank having experience in the valuation of companies similar to the Company, selected by the Successor Entity and reasonably acceptable to the Majority Holders.  The Successor Entity shall select such investment bank within fifteen (15) days of notice from a Holder of the need to determine the Equity Value.  If the investment bank selected by the Successor Entity is not reasonably acceptable to the Majority Holders, and the Successor Entity and such Majority Holders cannot agree on a mutually acceptable investment bank within fifteen (15) days of its selection by the Successor Entity, then the Successor Entity and the Majority Holders shall each choose one such investment bank within fifteen (15) days and the respective chosen firms (or, if only one firm is chosen because the other party fails to choose, then such one chosen firm) shall jointly select within fifteen (15) days of their selection a third investment bank, which shall make the determination within thirty (30) days of its selection.  The Successor Entity shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Holders), and the decision of the investment bank making such determination of Equity Value shall be final and binding on the Successor Entity and all affected Holders.

 

2.             Shares to be Fully Paid; Reservation of Shares.  The Company covenants and agrees that all Warrant Shares, will, upon issuance and payment of the applicable Exercise Price, be duly authorized, validly issued, fully paid and nonassessable, and free of all preemptive rights, liens and encumbrances, except for restrictions on transfer provided for herein.  The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to this Warrant, such number of shares of Common Stock as shall, from time to time, be sufficient therefor.

 

3.             Closing of Books.  The Company will at no time close its transfer books against the transfer of any warrant or of any Warrant Shares issued or issuable upon the exercise of any warrant in any manner that interferes with the timely exercise of this Warrant, subject to compliance with any applicable securities laws

 

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4.             Adjustment of Exercise Price and Number of Shares.  The Exercise Price and the total number of Warrant Shares shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 4.

 

(a)           Reclassification.  If any reclassification of the capital stock of the Company or any reorganization, consolidation, merger, or any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the business and/or assets of the Company (the “Reclassification Events”) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property, then, as a condition of such Reclassification Event, lawful and adequate provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities, or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby.  In any Reclassification Event, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, or assets thereafter deliverable upon the exercise hereof.  For the sake of clarity, in the event that adjustments are made in accordance with Section 5 hereof, no adjustments shall be required under this Section 4(a).

 

(b)           Subdivision, Dividends or Combination of Stock.  In the event the outstanding shares of the Company’s Common Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction occurring after the date hereof into a greater number of shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares issuable hereunder proportionately increased.  Conversely, in the event the outstanding shares of the Company’s Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar transaction occurring after the date hereof into a lesser number of shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable hereunder proportionately decreased.

 

(c)           Weighted Average Adjustment.  Other than in the case of the issuance of Permitted Additional Stock (defined below), if the Company issues additional shares of Common Stock, including shares of Common Stock ultimately issuable upon exercise or conversion of a security convertible or exercisable into Common Stock, after the date of this Warrant and the consideration per additional common share is less than the Exercise Price in effect immediately before such issue, the Exercise Price shall be reduced, concurrently with such issue, to a price determined by multiplying the Exercise Price by a fraction:

 

(i)            the numerator of which is the number of shares of Common Stock outstanding immediately before such issue plus the number of shares of Common Stock that the aggregate consideration received by the Company for the additional common shares would purchase at the Exercise Price in effect immediately before such issue, and

 

(ii)           the denominator of which is the number of shares of Common Stock outstanding immediately before such issue plus the number of such additional common shares.

 

Upon each adjustment of the Exercise Price, the number of Warrant Shares issuable upon exercise of this Warrant shall be increased to equal the quotient obtained by dividing (a) the product

 

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resulting from multiplying (i) the number of Warrant Shares issuable upon exercise of this Warrant and (ii) the Exercise Price, in each case as in effect immediately before such adjustment, by (b) the adjusted Exercise Price.

 

For purposes hereof, “Permitted Additional Stock” means (i) shares of Common Stock and options therefor, issued to directors, officers, employees or consultants of the Company pursuant to a stock option plan, stock purchase plan, or other equity incentive plan or agreement  approved by the Board of Directors of the Company (the “Board”), (ii) Common Stock issued or issuable upon conversion or exercise of the Notes and Warrants issued pursuant to the Transaction Documents, (iii) Common Stock issuable upon conversion or exercise of any commitments, warrants, options, notes or other agreements to issue capital stock outstanding as of the date hereof, (iv) Common Stock issued pursuant to a Qualified IPO, (v) Common Stock issuable in respect of any shares, options, warrants, or convertible securities as a result of the application of anti-dilution provisions, similar to the provisions hereunder, contained in the original terms of such securities and (vi) shares of Common Stock issued as a stock dividend or upon any subdivision or split described in Section 4(b).

 

(d)           Certain Events. If any change in the outstanding Warrant Shares of the Company occurs as to which the other provisions of this Section 4 are not strictly applicable, the Board shall make an adjustment in the number and class of shares available under the Warrant, the Exercise Price or the application of such provisions, so as to protect such purchase rights as aforesaid.  The adjustment shall be such as will give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as it would have owned had the Warrant been exercised prior to the event and had it continued to hold such shares until after the event requiring adjustment.

 

(e)           Issuance Adjustment.  In addition to any other adjustments contemplated hereunder, in the event that (i) a Qualified IPO or (ii) Non-Qualified Financing does not occur within six months after the Issuance Cut Off Date of January 1, 2012, the Exercise Price as in effect on the Issuance Cut Off Date shall automatically be reduced by 5% and shall be reduced by an additional 5% on each monthly anniversary thereof until the Company completes a Qualified IPO or Non-Qualified Financing, provided however, that the Exercise Price shall not be reduced to an amount lower than $1.00 (as adjusted to reflect any stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction).

 

5.             Fundamental Transactions.

 

(a)           Consent Required. The Company shall not enter into or be party to a Fundamental Transaction (as defined below) unless the Successor Entity (as defined below) assumes in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 5 pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders.  Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall

 

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assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.

 

(b)           Confirmation.  Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been exercised immediately prior to such Fundamental Transaction.  Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders.  The provisions of this Section 5 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

 

(c)           Certain Definitions.  For purposes of this Warrant, the following terms have the following meanings:

 

(i)            “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person(s) making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person(s) making or party to, or associated or affiliated with the other Person(s) making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

 

(ii)           “Successor Entity” means the Person (or, if so elected by the Holder, the parent entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the parent entity) with which such Fundamental Transaction shall have been entered into.

 

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(iii)          “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof, as applicable.

 

6.             No Stockholder Rights.  No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

 

7.             Compliance with the Act.  The Holder of this Warrant, by acceptance hereof, agrees that this Warrant is being acquired for its own account and not for any other person or persons, for investment purposes and that it will not offer, sell, or otherwise dispose of this Warrant except under circumstances which will not result in a violation of the Act or any applicable state securities laws.

 

8.             Restriction Upon Transfer.

 

(a)           Unregistered Security. The Holder represents that by accepting this Warrant it understands that this Warrant and any securities obtainable upon exercise of this Warrant have not been registered for sale under Federal or state securities laws and are being offered and sold to the Holder pursuant to one or more exemptions from the registration requirements of such securities laws.  In the absence of an effective registration of such securities or an exemption therefrom, any certificates for such securities shall bear the legend set forth on the first page hereof.  The Holder understands that it must bear the economic risk of its investment in this Warrant and any securities obtainable upon exercise of this Warrant for an indefinite period of time, as this Warrant and such securities have not been registered under Federal or state securities laws and therefore cannot be sold unless subsequently registered under such laws, unless an exemption from such registration is available.

 

(b)           Transferability.  Subject to restriction set forth in Section 8(a),  neither this Warrant nor the Warrant Shares shall be transferable by the Holder without the prior written consent of the Company; provided, however, that Holder may transfer this Warrant to a parent or subsidiary of the Holder without the prior written consent of the Company, subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant.  Prior to the consummation of any such permitted transfer under this Section 8(b), Holder shall provide the Company with notice of such transfer.

 

9.             Amendment, Waiver, etc.  Except as expressly provided herein, neither this Warrant nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought.

 

10.           Notices.  All notices and other communications from the Company to the Holder and from the Holder to the Company as required pursuant to this Section 10 or otherwise shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at

 

7

 

such party’s address as set forth below or as subsequently modified by written notice. The Company shall be required to provide notice to the Holder hereunder as a result of the following:

 

(a)           Adjustment.  Upon any adjustment of the Exercise Price or any increase or decrease in the number of Warrant Shares pursuant to Section 4 hereof, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown on the books of the Company.  The notice shall be prepared and signed by the Company’s Chief Financial Officer and shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

 

(b)           Qualified IPO.  In the event that the Company shall propose at any time to effect a Qualified IPO, the Company shall send to the Holder at least twenty (20) days’ prior written notice of the date on which such offering is expected to occur.

 

(c)           Fundamental Transaction.  In the event that the Company shall propose to consummate a Fundamental Transaction after the issuance of this Warrant, in addition to the requirements set forth in Section 5 hereof, the Company shall send to the Holder at least ten (10) days’ prior written notice of the date on which such Fundamental Transaction is expected to occur.

 

11.           Governing Law, Headings.  This Warrant is being delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State, without reference to the conflicts of law provisions thereof.  The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

 

12.           Lost or Stolen Warrant.  Upon receipt 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, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.

 

13.           Fractional Shares.  No fractional shares shall be issued upon exercise of this Warrant.  The Company shall, in lieu of issuing any fractional share, pay the Holder entitled to such fraction a sum in cash equal to such fraction (calculated to the nearest 1/100th of a share) multiplied by the then effective Exercise Price on the date the Notice of Exercise is received by the Company.

 

14.           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.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder.

 

15.           Severability of Provisions.  In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired hereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

Remainder of Page Intentionally Left Blank; Signature Page Follows

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer, thereunto duly authorized as of this            day of                       , 2011.

 

 

	
 
    	
 
    	
LUCID, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Jay M. Eastman, Ph.D.
    
	
 
    	
 
    	
Title:
    	
Chief   Executive Officer
    

 

 

Signature Page—Common Stock Warrant

 

 

NOTICE OF EXERCISE

 

(To be signed only upon exercise of Warrant)

 

To: Lucid, Inc.

 

The undersigned, the holder of the attached Common Stock Warrant, hereby elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder,                                        shares of Common Stock of Lucid, Inc. and such holder herewith makes payment of $                        therefor.

 

 

The undersigned requests that certificates for such shares be issued in the name of, and delivered to:                                                                                                                   whose address is:                                                                                                                .

 

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

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