Document:

Exhibit 4.3

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND, EXCEPT AS OTHERWISE NOT REQUIRED PURSUANT TO THE TERMS OF THIS WARRANT, DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY OF SUCH COMPLIANCE.

 

WARRANT TO PURCHASE STOCK

 

	
Corporation:
    	
EMMAUS   LIFE SCIENCES, INC.
    
	
Number   of Shares:
    	
See   below
    
	
Class   of Stock:
    	
See   below
    
	
Initial   Exercise Price:
    	
See   below
    
	
Issue   Date:
    	
                
    
	
Expiration   Date:
    	
June   30, 2021
    

 

THIS WARRANT CERTIFIES THAT, for good and valuable consideration , AGILITY CAPITAL II, LLC or its registered assignee (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”) of EMMAUS LIFE SCIENCES, INC., a Delaware corporation (the “Company”) at the initial exercise prices per Share set forth herein, and as adjusted pursuant to Article 2 of this Warrant (the initial exercise price with respect to each tranche of warrants as so adjusted , the “Warrant Price”).

 

This Warrant is being issued to Holder in connection with that certain Loan Agreement by and between Agility Capital II, LLC (“Agility”) and the Company dated as of even date herewith and as amended from time to time (the “Loan Agreement”). The initial number of Shares issuable upon exercise of this Warrant as of June 30, 2016 is                     , with an exercise price per Share equal to the lowest of the FMV (as defined below) on March 31, 2016 or on June 30, 2016 or the lowest Public Sale Price between March 31, 2016 and June 30, 2016. In addition, if the Advances (defined in the Loan Agreement) have remained outstanding for at least thirty days during the ninety day period ending on each of the following dates (a “Measurement Date”), then the number of Shares issuable upon exercise of this Warrant shall automatically increase on such date by the number of shares listed below, with the applicable exercise price for such additional Shares set forth opposite the respective Measurement Dates listed below:

 

	
Measurement Date
    	
 
    	
Number of Additional Shares
    	
 
    	
Exercise Price
    
	
June 30, 2016
    	
 
    	
          
    	
 
    	
The lowest of the FMV   on 3/31/2016 or 6/30/16 or the lowest Public Sale Price in the quarter ending   June 30, 2016
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
September 30, 2016
    	
 
    	
          
    	
 
    	
The lowest of the FMV   on 6/30/ 16 or 9130116 or the lowest Public Sale Price in the quarter ending   on September 30, 2016
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
December   31, 2016
    	
 
    	
          
    	
 
    	
The lowest of the FMV   on 9/30/ 16 or 12/31/16 or the lowest Public Sale Price in the quarter ending   on December 31, 2016
    

 

For purposes of the foregoing, the “FMV” or “Fair Market Value” shall be (i) if the Shares are traded regularly in a national public market, the closing price of the Shares reported on the last business day of such calendar quarter, or (ii) if the Shares are not traded regularly in a national public market, the Fair Market Value shall be the per share value as of such date as reasonably determined by an independent appraiser as approved by the Board of Directors of the Company in good faith.

 

For purposes of the foregoing, “Public Sale Price” means the price per share paid by third party investors in cash purchases of the Common Stock other than Exempted Securities during the quarter ended on the applicable Measurement Date. “Exempted Securities” means (a) shares of Common Stock issued by reason of a dividend, stock split , split-up or other distribution on shares of Common Stock, (b) shares of Common Stock issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a plan, agreement or

 

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arrangement approved by the Board of Directors of the Company, (c) shares of Common Stock actually issued upon the exercise, conversion or exchange of options, warrants or other convertible securities, in each case provided such issuance is pursuant to the terms of such options, warrants or other convertible securities, (d) shares of Common Stock issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Company, (e) shares of Common Stock issued pursuant to the acquisition of another entity by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by Agility to the extent required under the Loan Agreement, and (f) shares of Common Stock issued in connection with sponsored research, collaboration, technology license, development , OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company.

 

In addition to the foregoing, upon the occurrence of an Event of Default (as defined in and pursuant to Section 5(a) of the Loan Agreement), the number of Shares that may be acquired hereunder shall increase by an additional number of Shares equal to                , and the exercise price for such additional Shares shall be: if the Shares are traded regularly in a national public market, the closing price of the Shares on the date of such Event of Default, otherwise, the exercise price shall be the fair market value in the most recent valuation (which shall be no more than 90 days prior to the date of the Event of Default) as reasonably determined by an independent appraiser as approved by the Board of Directors of the Company in good faith. Only one increase of             Shares upon the occurrence of an Event of Default shall apply under this Warrant notwithstanding that multiple Events of Default have occurred under the Loan Agreement.

 

1.                                      EXERCISE

 

1.1                               Method of Exercise. Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix I to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company immediately available funds for the aggregate Warrant Price for the Shares being purchased, unless the Holder elects cashless exercise as provided below.

 

1.2                               Cashless Exercise Right. In lieu of paying the Warrant Price for the Shares as specified in Section 1.1, Holder may satisfy its obligation to pay the Warrant Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share as of the exercise date. The fair market value of the Shares shall be determined pursuant to Section 1.3.

 

1.3                               Fair Market Value. For the purposes of Section 1.2, if the Shares are traded regularly in a national public market, the fair market value of the Shares shall be the closing price of the Shares on the date immediately preceding the date when Holder delivers its Notice of Exercise to the Company; otherwise, the fair market value shall be the most recent valuation (which shall be no more than 90 days prior to the date of exercise) as reasonably determined by an independent appraiser as approved by the Board of Directors of the Company in good faith.

 

1.4                               Delivery of Certificate and New Warrant. Promptly after Holder exercises this Warrant against consideration duly delivered (whether in cash or by cashless exercise), the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new warrant representing the Shares not so acquired.

 

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

 

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2.                                      ADJUSTMENTS TO THE SHARES.

 

2.1                               Dividends. If the Company declares or pays a dividend on its capital stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the property to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred.

 

2.2                               Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. Upon the closing of any Acquisition the successor entity shall assume the obligations of this Warrant, and then this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

 

2.3                               Adjustments for Combinations, Etc. If at any time while this Warrant, or any portion thereof, remains outstanding and unexpired, the outstanding Shares are reverse-split, combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares issuable upon exercise or conversion of this Warrant shall be proportionately decreased. If the outstanding Shares are split, combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased and the number of Shares issuable upon exercise of or conversion of this Warrant shall be proportionately increased.

 

2.4                               No Impairment. The Company shall not, by amendment of its Articles/Certificate of Incorporation or through a 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 to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment. If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder’s rights under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.

 

2.5                               Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the Shares, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer or other authorized officer setting forth such adjustment and the facts upon which such adjustment is base and the Warrant Price in effect upon the date thereof and the type and number of Shares issuable under the Warrant on the date hereof.

 

3.                                      REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1                               Representations and Warranties. The Company represents and warrants to the Holder that all Shares that may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances.

 

3.2                               Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional

 

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shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of common stock; or (d) effectuate an Acquisition or otherwise merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up, then, in connection with each such event, the Company shall give Holder (1) at least 7 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; or (2) in the case of the matters referred to in (c) and (d) above at least 7 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event).

 

3.3                               Information Rights. So long as the Holder holds this Warrant , the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiques to the shareholders of the Company (or notice to Holder that such communique is publicly available), (b) quarterly and annual financial statements of the Company when such statements are available, provided however that Company need not provide such information for any period in which Company has filed Form 10Q or Form 10K (as applicable) with the Securities and Exchange Commission.

 

4.                                      MISCELLANEOUS.

 

4.1                               Term. This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above.

 

4.2                               Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT’), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH APPLICABLE LAW AND, EXCEPT AS OTHERWISE NOT REQUIRED PURSUANT TO THE TERMS OF THIS WARRANT, DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY OF SUCH COMPLIANCE.

 

4.3                               Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall have no obligation to effect, or cause its transfer agent to effect, any transfer of this Warrant or the Shares unless Holder provides the Company an opinion of counsel reasonably acceptable to the Company that such transfer is complies with applicable federal and state securities laws; provided , however that, unless otherwise required by the transfer agent in respect of the Company’s Common Stock, the Company agrees that it will not require an opinion of counsel with respect to (i) transactions under Rule 144 of the Act so long as the Holder delivers to the Company such representations and warranties sufficient to establish that such Shares may be transferred without restriction under Rule 144, or (ii) transfers or assignments to any affiliate of Holder, including any current and former limited or general partner or member of Holder.

 

4.4                               Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly , upon conversion of the Shares, if any) by giving the Company written notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable), provided that no such notice shall be required for a transfer to an affiliate of Holder.

 

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4.5                               Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

4.6                               Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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4.7                               Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

 

	
 
    	
EMMAUS   LIFE SCIENCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title
    	
 
    

 

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APPENDIX 1

 

NOTICE OF EXERCISE

 

1.                                      The undersigned hereby elects to purchase                                     shares of the Common Stock, par value $.00 I per share, of EMMAUS LIFE SCIENCES, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.

 

1.                                      The undersigned hereby elects to exercise the attached Warrant into Shares on a cashless basis in the manner specified in Section 1.2 of the Warrant. This conversion is exercised with respect to                         of the Shares covered by the Warrant. 

 

[Strike paragraph that does not apply.]

 

2.                                      Please issue a certificate or certificates representing said shares m the name of the undersigned or in such other name as is specified below:

 

Agility Capital II, LLC 

Or Registered Assignee

 

3.                                      The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws. The undersigned represents that it is an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

 

	
Agility   Capital II , LLC or Registered Assignee
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Signature)   
    	
 
    
	
Name:   
    	
 
    
	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Date)
    	
 
    

 

 

[INFORMATION FOR PURPOSES OF FILING WITH THE SECURITIES AND EXCHANGE COMMISSION]

 

SCHEDULE A

 

Warrants schedule - Agility Capital II, LLC

 

	
 
    	
 
    	
Number of Additional Shares
    	
 
    	
 
    	
 
    
	
Measurement Date
    	
 
    	
4/18/2016
   Loan
    	
 
    	
5/13/2016
   Loan
    	
 
    	
Exercise Price
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Initial Warrants
    	
 
    	
50,000
    	
 
    	
12,500
    	
 
    	
The lowest of the FMV   on 3/31/16 or 6/30/16 or the lowest Public Sale Price between March 31, 2016   and June 30, 2016
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
June 30, 2016
    	
 
    	
30,000
    	
 
    	
7,500
    	
 
    	
The lowest of the FMV   on 3/31/16 or 6/30/16 or the lowest Public Sale Price in the quarter ending   June 30, 2016
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
September 30,   2016
    	
 
    	
15,000
    	
 
    	
3,750
    	
 
    	
The lowest of the FMV   on 6/30/16 or 9/30/16 or the lowest Public Sale Price in the quarter ending   on September 30, 2016
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
December 3I ,   2016
    	
 
    	
15,000
    	
 
    	
3,750
    	
 
    	
The lowest of the FMV   on 9/30/16 or 12/31/16 or the lowest Public Sale Price in the quarter ending   on December 31, 2016
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Event of Default
    	
 
    	
25,000
    	
 
    	
6,250
    	
 
    	
If the Shares are   traded regularly in a national public market, the closing price of the Shares   on the date of such Event of Default, otherwise, the exercise price shall be   the fair market value in the most recent valuationExhibit 4.4

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

 

	
Date   of Issuance:
    	
Void after:
    
	
 
    	
 
    
	
May   1, 2016
    	
May 1, 2021
    

 

EMMAUS LIFE SCIENCES, INC.

 

WARRANT TO PURCHASE SHARES OF

COMMON STOCK

 

FOR VALUE RECEIVED, Paul and Hisako Terasaki Trust (“Holder”), is entitled to purchase from the Company, subject to the provisions of this Warrant (“Warrant”), from Emmaus Life Sciences, Inc., a Delaware corporation (“Company”) , at any time not later than 5:00 P.M., Pacific Time on May 1, 2021 (the “Expiration Date”), 75,000 shares (the “Warrant Shares”) of the Company’s Common Stock, par value $0.001 per share (“Common Stock”) at a price per share equal to $4.70 (the “Exercise Price”). The Exercise Price and the number of Warrant Shares purchasable upon exercise of this Warrant shall be subject to adjustment from time to time as described herein.

 

1.                                      Method of Exercise.

 

(a)           Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by the delivery (including, without limitation, delivery by facsimile) of the form of Notice of Exercise attached hereto as Exhibit A (the “Notice of Exercise”), duly executed by the Holder, at the principal office of the Company, and as soon as practicable after such date, surrendering:

 

(i)            this Warrant at the principal office of the Company, and

 

(ii)           payment , (i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder; or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by multiplying the number of shares of Common Stock being purchased upon such exercise by the then effective Exercise Price (the “Exercise Amount”):

 

(b)           Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant is surrendered to the Company as provided above.  The person or persons entitled to receive the Warrant Shares

 

 

issuable upon exercise of this Warrant shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on the date the Holder is deemed to have exercised this Warrant.

 

(c)           As soon as practicable after the exercise of this Warrant in whole or in part, the Company at its expense will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:

 

(i)            a certificate or certificates for the number of Warrant Shares to which such Holder shall be entitled, and

 

(ii)           in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Shares equal to the number of such Warrant Shares described in this Warrant minus the number of such Warrant Shares purchased by the Holder upon all exercises made in accordance with this Section 1.

 

2.             Representations and Warranties of the Company.

 

In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder that:

 

(a)           Organization, Good Standing, and Qualification. The Company is a corporation duly organized , validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted . The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties .

 

(b)           Authorization. Except as may be limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights, all corporate action has been taken on the part of the Company, its officers and directors necessary for the authorization, execution and delivery of this Warrant. The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions of this Warrant the valid and enforceable obligations they purport to be. The issuance of this Warrant will not be subject to preemptive rights of any stockholders of the Company. The Company has authorized sufficient shares of Common Stock to allow for the exercise of this Warrant.

 

3.             Representations and Warranties of the Holder.  In connection with the transactions provided for herein, the Holder hereby represents and warrants to the Company that:

 

(a)           Authorization. Holder represents that it has full power and authority to enter into this Warrant. This Warrant constitutes the Holder’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization , or similar laws relating to or affecting the enforcement

 

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of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

(b)           Purchase Entirely for Own Account. The Holder acknowledges that this Warrant is entered into by the Holder in reliance upon such Holder’s representation to the Company that the Warrant and the Warrant Shares (collectively, the “Securities”) will be acquired for investment for the Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in or otherwise distributing the same. By acknowledging this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Securities.

 

(c)           Disclosure of Information. The Holder acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Holder further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities.

 

(d)           Investment Experience. The Holder is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. If other than an individual, the Holder also represents it has not been organized solely for the purpose of acquiring the Securities.

 

(e)           Accredited Investor. The Holder is an “accredited investor” within the meaning of Rule 501 of Regulation D, as presently in effect, as promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”).

 

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

 

(g)           Further Limitations on Disposition. The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the SEC under the Act covering the disposition or sale of this Warrant or the Warrant Shares issued or issuable upon exercise hereof, as the case may be, and registration or qualification under applicable state securities laws, such Holder will not sell, transfer, pledge, or hypothecate any or all of this Warrant or such Warrant Shares, as the case may be, unless either (i) the Company has received an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such

 

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registration is not required in connection with such disposition or (ii) the sale of such Securities is made pursuant to SEC Rule 144.

 

(h)           Legends. It is understood that the Securities may bear the following or a similar legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.”

 

4.             Valid Issuance; Taxes. All Warrant Shares issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for Warrant Shares in any name other than that of the Holder of this Warrant, and in such case the Company shall not be required to issue or deliver any stock certificate or security until such tax or other charge has been paid, or it has been established to the Company ‘s reasonable satisfaction that no tax or other charge is due.

 

5.             Adjustment of Exercise Price and Number and Kind of Warrant Shares. The number and kind of Warrant Shares purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

 

(a)           Subdivisions, Combinations and Other Issuances. If the Company shall at any time after the issuance but prior to the expiration of this Warrant subdivide its Common Stock, by split-up or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend with respect to any shares of its Common Stock, the Exercise Price shall be proportionally decreased and the number of Warrant Shares issuable on the exercise of this Warrant shall be proportionately increased in the case of a subdivision or stock dividend. The Exercise Price shall be proportionally increased and the number of Warrant Shares issuable on the exercise of this Warrant shall be proportionately decreased in the case of a combination. Any adjustment under this Section 5(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

(b)           Reclassification, Reorganization and Consolidation. In case of any reclassification , capital reorganization or change in the capital stock of the Company (other than as a result of a subdivision, combination or stock dividend provided for in Section 5(a) above),

 

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then, as a condition of such reclassification , reorganization or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities or property receivable in connection with such reclassification, reorganization or change by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Holder immediately prior to such reclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriate adjustments shall be made to the per-share Exercise Price payable hereunder, provided the aggregate Exercise Price shall remain the same.

 

(c)           Notice of Adjustment. When any adjustment is required to be made in the number or kind of Warrant Shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the Holder of such event and of the new Exercise Price and number of Warrant Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

6.             No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

 

7.             No Stockholder Rights. Prior to exercise of this Warrant , the Holder shall not be entitled to any rights of a stockholder with respect to the Warrant Shares, including (without limitation) the right to vote such Warrant Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder meetings, and, except as otherwise provided in this Warrant, such Holder shall not be entitled to any stockholder notice or other communication concerning the business or affairs of the Company.

 

8.             Restrictions on Transfer. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Act, or an exemption from such registration. Subject to such restrictions , the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company.

 

9.             Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California. The Company and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of California located in Los Angeles

 

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County and the United States District Court for the Central District of California for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

10.          Successors and Assigns. The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns.

 

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

 

12.          Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (a) if given by personal delivery, then such notice shall be deemed given upon such delivery, (b) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (c) if given by mail, then such notice shall be deemed given upon the earlier of (i) receipt of such notice by the recipient or (ii) three days after such notice is deposited in first class mail, postage prepaid, and (d) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Holder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Holder or the Company may designate by ten days’ advance written notice to the other:

 

If to the Company:

Emmaus Life Sciences, Inc.

21250 Hawthorne Blvd., Suite 800

Torrance, CA 90503

Attn : Peter Ludlum, Chief Financial Officer 

Fax: (310) 214-0075

 

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With a copy to:

Nixon Peabody

555 West 5th St. 46th Floor

Los Angeles, CA 90013 

Attn: Matthew Grazier 

Fax: (866) 216-9523

 

13.          Expenses. 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 necessary disbursements in addition to any other relief to which such party may be entitled.

 

14.          Entire Agreement; Amendments and Waivers. This Warrant and any other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Nonetheless, any term of this Warrant may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder; or if this Warrant has been assigned in part, by the holders or rights to purchase a majority of the shares originally issuable pursuant to this Warrant.

 

15.          Severability. If any provision of this Warrant is 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.

 

IN WITNESS WHEREOF, the parties have executed this Warrant as of the date above written.

 

	
 
    	
EMMAUS LIFE SCIENCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

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EXHIBIT A

 

NOTICE OF EXERCISE

 

EMMAUS LIFE SCIENCES, INC.

 

Attention: Chief Financial Officer

 

The undersigned hereby elects to purchase, pursuant to the provisions of the Warrant, as follows:

 

              shares of Common Stock pursuant to the terms of the attached Warrant at $               per share (the applicable Exercise Price as of the date of this Notice of Exercise) , and tenders herewith payment in cash of the Exercise Price of such Warrant Shares in full, together with all applicable transfer taxes, if any.

 

The undersigned hereby represents and warrants that Representations and Warranties in Section 3 of the Warrant are true and correct as of the date hereof.

 

HOLDER:

 

 

	
Date:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
							

 

Name in which shares should be registered:

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