1
EXHIBIT 4.11
================================================================================
WARRANT AGREEMENT
Between
INTEGRATED ORTHOPAEDICS, INC.
And
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Dated as of December 19, 2000
================================================================================
2
SECTION 1. Definitions; Accounting Terms and Determinations...............................................1
1.01. Definitions....................................................................................1
1.02. Accounting Terms and Determinations............................................................4
SECTION 2. Appointment of Warrant Agent...................................................................4
2.01. Appointment of Warrant Agent...................................................................4
SECTION 3. Issuance of Warrants...........................................................................4
3.01. Warrant Certificates...........................................................................4
3.02. Registration and Countersignature..............................................................4
SECTION 4. Execution of Warrant Certificates..............................................................5
SECTION 5. Registration of Transfers and Exchanges........................................................5
5.01. Transfer and Exchange of Warrants..............................................................5
5.02. Legends........................................................................................6
5.03. Obligations with Respect to Transfers and Exchanges of Warrants................................6
SECTION 6. Adjustments....................................................................................7
6.01. Dividends, Distributions and Purchases.........................................................7
6.02. Subdivisions and Combinations..................................................................7
6.03. Issuance of Common Stock.......................................................................8
6.04. Issuance of other Securities, Rights or Obligation.............................................8
6.05. Superseding Adjustment.........................................................................9
6.06. Other Provisions Applicable to Adjustments under this Section 6...............................10
6.07. Merger, Consolidation or Disposition of Assets................................................10
6.08. Other Action Affecting Common Stock...........................................................11
6.09. Notices of Adjustments........................................................................11
6.10. Notice of Certain Corporate Action............................................................11
SECTION 7. Holder's Rights...............................................................................12
7.01. Taxes.........................................................................................12
7.02. Mutilated or Missing Warrant Certificates.....................................................12
SECTION 8. Other Covenants of Issuer.....................................................................13
8.01. Conflicting Agreements........................................................................13
8.02. Reservation of Shares.........................................................................13
SECTION 9. Warrant Agent.................................................................................13
9.01. Merger, Consolidation or Change of Name of Warrant Agent......................................13
9.02. Warrant Agent's Right and Responsibilities....................................................13
3
9.03. Resignation and Removal of Warrant Agent; Appointment of Successor............................15
SECTION 10. Miscellaneous.................................................................................16
10.01. Notices to Issuer and Warrant Agent...........................................................16
10.02. Supplements and Amendments....................................................................16
10.03. Successors....................................................................................17
10.04. Termination...................................................................................17
10.05. Governing Law.................................................................................17
10.06. Benefits of This Agreement....................................................................17
ii
4
WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") is made and entered into as
of December 19, 2000, by and between Integrated Orthopaedics, Inc., a
corporation duly organized and validly existing under the laws of the State of
Texas (the "Issuer"), and Continental Stock Transfer & Trust Company, a New York
corporation, as warrant agent (together with any and all successors appointed in
accordance with this Agreement, the "Warrant Agent").
WHEREAS, on November 21, 2000 the Board (hereinafter defined) of the
Issuer declared a dividend of warrants to the holders of its Common Stock
(hereinafter defined), whereby each holder of the Common Stock would receive a
warrant to purchase one Stock Unit for each share of Common Stock such holder
owned on December 1, 2000 (the "Record Date"; and each holder of Common Stock on
such date, a "Record Shareholder") on terms more fully set forth in this
Agreement;
WHEREAS, the Issuer desires the Warrant Agent to act on behalf of the
Issuer, and the Warrant Agent is willing so to act, in connection with the
issuance of the Warrant Certificates (hereinafter defined) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for the purposes of defining the relative rights
and obligations of the Issuer, the Warrant Agent and the Holders, the parties
hereto, agree as follows:
SECTION 1. Definitions; Accounting Terms and Determinations.
1.01. Definitions. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1 or in other provisions
of this Agreement in the singular to have the same meanings when used in the
plural and vice versa):
"Affiliate" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Board" shall mean the Board of Directors of Issuer.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
"Common Stock" shall mean the Common Stock of the Issuer, par value
$0.001 per share, or any other common stock or other securities receivable
thereon, or into which the Common Stock is convertible or exchangeable, as a
result of any recapitalization, reclassification, merger or consolidation of, or
disposition of assets by, the Issuer.
5
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controls" and "Controlled" shall have meanings correlative thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Excluded Securities" shall mean, collectively, (i) shares of Common
Stock to be issued to the stockholders of PowerBrief in the Merger pursuant to
the terms of the Merger Agreement, (ii) the Merger Warrants, (iii) shares of
Common Stock to be issued upon the exercise of the Merger Warrants, (iv) shares
of Common Stock issued pursuant to Section 2.1(a)(iii) of the Merger Agreement
to adjust the percentage ownership of the Issuer after the Merger among the
pre-Merger shareholders of the Issuer, on the one hand, and the pre-Merger
stockholders of PowerBrief, on the other hand, (v) shares of Common Stock
issuable upon the exercise of any outstanding options or warrants to purchase
Common Stock outstanding on the date of this Agreement, (vi) any shares of
Common Stock issuable upon the exercise of any options or warrants to purchase
common stock of PowerBrief, the obligations of which are assumed by the Issuer
in the Merger pursuant to the Merger Agreement, (vii) the grant of warrants,
options or other rights to purchase, or the sale or issuance of, shares of
Common Stock under any compensatory equity incentive plan, employee benefit plan
or other compensatory plan or agreement (including any such plan or agreement
entered into with any director or consultant) that is approved by the Board,
provided that, such warrants, options or rights to purchase, or the sale or
issuance of, shares of Common Stock, granted or issued within one year after
the effective date of the Merger to Persons that were employees of PowerBrief on
July 31, 2000 shall require unanimous approval of the Board, (viii) any Common
Stock issued upon the exercise or conversion of options, rights or securities
(A) for which an adjustment has already been made pursuant to Section 6.04 or
(B) that otherwise satisfy this definition of Excluded Securities, (ix) a
combination of shares of Common Stock and/or options, rights or securities
convertible into, or exercisable for shares of Common Stock up to an aggregate
amount equal to five percent (5%) of the shares of Common Stock outstanding
immediately after the effective time of the Merger (as adjusted for any stock
split, reverse stock split or other combination resulting in a larger or smaller
number of shares of Common Stock), excluding any shares held in escrow pursuant
to Section 2.17 of the Merger Agreement, issued to Persons with which the Issuer
has business relationships, provided that such issuances described in this
clause (ix) are (A) for strategic purposes, such as advertising, outsourcing or
licensing arrangements with any customer, supplier or other provider of products
or services; (B) not primarily for equity financing purposes and (C) approved by
the Board, (x) Common Stock and/or options, rights or securities convertible
into, or exercisable for, Common Stock, provided that the Board unanimously
approves the issuance of such securities and resolves that such issuance is to
be made without any adjustment in Section 6, and provided that the Board, at the
time of such approval, consists of (A) at least one member of the Board as
constituted immediately before the Merger or (B) at least one member who is an
Affiliate of FW integrated Orthopaedics Investors, L.P. or Integrated
Orthopaedics Investors II, L.P., and (xi) any issuance, to holders of Common
Stock, of Common Stock, or securities that are exercisable or convertible into
or exchangeable for Common Stock, without consideration (a "Without
Consideration Issuance"), if the Holders of the Warrants also receive a number
of shares of Common Stock or a number or amount of such exercisable, convertible
or exchangeable securities that are equal to the number or amount thereof they
would have received had they exercised all of their Warrants for Common Stock
immediately prior to the record date for such Without Consideration Issuance.
"Exercise Price" shall have the meaning assigned to such term in the
form of Warrant Certificate attached as Annex 1 hereto.
"Expiration Date" shall have the meaning assigned to such term in the
form of the Warrant Certificate attached as Annex 1 hereto.
2
6
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period.
"Governmental Authority" shall mean the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory, monetary or administrative powers or functions of or
pertaining to government.
"Holder" shall have the meaning assigned to such term in Section
5.03(c).
"include" and "including" shall be construed as if followed by the
phrase "without being limited to".
"Issuer" shall have the meaning assigned to such term in the preamble
of this Agreement.
"Issue Date" shall mean December 19, 2000.
"Merger" shall mean the merger of PowerBrief with and into the Issuer
pursuant to the Merger Agreement.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated September 15, 2000 between the Issuer and PowerBrief, as the same may be
amended from time to time.
"Merger Warrants" shall mean the Issuer's Series A Warrants and Series
B Warrants to be issued to the stockholders and warrant holders of PowerBrief in
the Merger pursuant to the Merger Agreement.
"Person" shall mean any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"PowerBrief" shall mean PowerBrief, Inc., a Delaware corporation.
"Record Date" shall have the meaning assigned to such term in the
recitals of this Agreement.
"Record Shareholders" shall have the meaning assigned to such term in
the recitals of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Stock Unit" shall mean one-half (1/2) of a share of Common Stock, as
such Common Stock is constituted on the date hereof, and thereafter shall mean
such number of shares (including any fractional shares) of Common Stock and
other securities, cash or other property as shall result from the adjustments
specified in Section 6.
3
7
"Transfer Restricted Securities" shall mean Warrants issued as a
dividend on Common Stock that constitutes "restricted securities" as defined
under Rule 144 promulgated under the Securities Act.
"Warrant Agent" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Warrant Certificates" shall have the meaning assigned such term in
Section 3.01.
"Warrant Stock" shall mean all shares of Common Stock issuable from
time to time upon exercise of a Warrant.
"Warrants" shall mean the Warrants issued by the Issuer pursuant to
this Agreement, each evidencing a right to purchase one Stock Unit, and all
Warrants issued upon transfer, division or combination of, or in substitution
for, any thereof.
"Whole Unit" shall mean the aggregate of Stock Units, or portion
thereof, constituting one (1) share of Common Stock.
1.02. Accounting Terms and Determinations. Except as otherwise may be expressly
provided herein, all accounting terms used herein shall be interpreted in
accordance with GAAP. All calculations made for the purposes of determining
compliance with the terms of this Agreement shall (except as otherwise may be
expressly provided herein) be made by application of GAAP.
SECTION 2. Appointment of Warrant Agent.
2.01. Appointment of Warrant Agent. The Issuer hereby appoints the
Warrant Agent to act as agent for the Issuer in accordance with the instructions
set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts
such appointment.
SECTION 3. Issuance of Warrants.
3.01. Warrant Certificates. Upon request a Holder may receive from the
Warrant Agent a certificate evidencing its Warrants (the "Warrant
Certificates"), substantially in the form of Annex 1 as set forth in Section 5
below.
3.02. Registration and Countersignature. The Warrant Agent, on behalf
of the Issuer, shall number and register the Warrant Certificates in a register
as they are issued by the Issuer.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board, the
President, the Chief Financial Officer, any Vice President, the Treasurer, or
the Secretary of the Issuer, initially countersign, issue and deliver to each
Record Shareholder one Warrant to purchase one Stock Unit for each share of
Common Stock that such Record Shareholder owned on the Record Date.
4
8
The Issuer and the Warrant Agent may deem and treat the Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Issuer nor the Warrant Agent shall be affected by any
notice to the contrary.
SECTION 4. Execution of Warrant Certificates. The Warrant Certificates
to be delivered pursuant hereto shall be signed on behalf of the Issuer by its
Chairman of the Board, President, Chief Executive Officer, Chief Financial
Officer, any Vice President, Secretary, an Assistant Secretary, Treasurer or an
Assistant Treasurer. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Financial Officer, any Vice
President, Secretary, an Assistant Secretary, Treasurer or an Assistant
Treasurer and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Issuer may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Chief Executive Officer, Chief Financial Officer, any Vice President, Secretary,
an Assistant Secretary, Treasurer or an Assistant Treasurer, notwithstanding the
fact that at the time the Warrant Certificates shall be countersigned and
delivered or disposed of such person shall have ceased to hold such office.
In case any officer of the Issuer who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Issuer, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Issuer; and any Warrant Certificate may be signed on
behalf of the Issuer by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Issuer to sign such
Warrant Certificate, although at the date of the execution of this Agreement any
such person was not such officer.
Warrant Certificates shall be dated the date of countersignature.
SECTION 5. Registration of Transfers and Exchanges.
5.01. Transfer and Exchange of Warrants.
When Warrant Certificates are presented to the Warrant Agent with a
request:
(a) to register the transfer of the Warrants represented by such
Warrant Certificates; or
(b) to exchange such Warrant Certificates for Warrant Certificates
representing an equal number of Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested;
provided, however, that the Warrant Certificates presented or surrendered for
registration of transfer or exchange:
5
9
(x) shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the
Warrant Agent, duly executed by the Holder thereof or by his
attorney, duly authorized in writing; and
(y) in the case of Transfer Restricted Securities,
such request shall be accompanied by the following additional
information and documents, as applicable:
(i) if such Transfer Restricted Security is
being transferred (1) pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act (and based on an opinion of counsel if
the Issuer so requests) or (2) pursuant to an
effective registration statement under the Securities
Act, a certification to that effect (in substantially
the form of Annex 2 hereto); or
(ii) if such Transfer Restricted Security is
being transferred in reliance on another exemption
from the registration requirements of the Securities
Act (and based on an opinion of counsel if the Issuer
so requests), a certification to that effect (in
substantially the form of Annex 2 hereto).
5.02. Legends.
(a) Each Warrant Certificate evidencing a Transfer Restricted Security
(and all Warrant Certificates issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THE WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUE WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS."
(b) Upon any sale or transfer of a Transfer Restricted Security
pursuant to an effective registration statement under the Securities Act,
pursuant to Rule 144 under the Securities Act or pursuant to an opinion of
counsel reasonably satisfactory to the Company that no legend is required, the
Warrant Agent shall permit the Holder thereof to exchange the Warrant
Certificate representing such Transfer Restricted Security for a Warrant
Certificate that does not bear the legend set forth in clause (a) above and
rescind any restriction on the transfer of such Transfer Restricted Securities.
5.03. Obligations with Respect to Transfers and Exchanges of Warrants.
6
10
(a) To permit registrations of transfers and exchanges, the Issuer
shall execute and the Warrant Agent is hereby authorized to countersign, in
accordance with the provisions of Sections 3 and 4, Warrant Certificates as
required pursuant to the provisions of this Section 5.
(b) All Warrant Certificates issued upon any registration of transfer
or exchange of Warrant Certificates shall be the valid obligations of the
Issuer, entitled to the same benefits under this Agreement as the Warrant
Certificates surrendered upon such registration of transfer or exchange.
(c) Prior to due presentment for registration of transfer or exchange
of any Warrant Certificate, the Warrant Agent and the Issuer may deem and treat
the Person in whose name any Warrant Certificate is registered (the "Holder") as
the absolute owner of the Warrants represented by such Warrant Certificate and
neither the Warrant Agent, nor the Issuer shall be affected by notice to the
contrary.
(d) No service charge shall be made to a Holder for any registration,
transfer or exchange.
SECTION 6. Adjustments.
6.01. Dividends, Distributions and Purchases.
(a) If the Issuer shall pay or distribute during any calendar quarter
any cash dividend to holders of its Common Stock in excess of 0.75 % of the
market price of its Common Stock immediately prior to the declaration of such
dividend, then the aggregate Exercise Price for a Whole Unit shall be adjusted
downward by the per share amount of such dividend; and
(b) If at any time the Issuer shall pay any dividend or make any other
distribution to holders of its Common Stock of any evidence of indebtedness or
other property of any nature whatsoever (other than as provided in Sections
6.01(a), 6.02, 6.03(i)(A) and 6.04(i)(A) (which such Section 6.04 (i)(A) shall
include any dividend by the Issuer of rights to purchase its equity
securities)), the Issuer shall at the same time pay or distribute to each Holder
of Warrants that is by their terms then exercisable (whether or not such Holder
exercises such Warrants) the evidence of indebtedness or other property such
Holder would have been entitled to receive if, such Holder had exercised such
Warrants immediately prior to the record date for such dividend or distribution.
6.02. Subdivisions and Combinations. If at any time the Issuer shall:
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other distribution of Common Stock;
(b) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
7
11
then immediately after the occurrence of any such event the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted so that each Holder
would receive upon exercise of its Warrants the number of shares of Warrant
Stock that such Holder would have been entitled to receive if such Holder had
exercised its Warrants immediately prior to the occurrence of such event.
6.03. Issuance of Common Stock. In case at any time the Issuer (i)(A)
shall take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) shall otherwise sell or issue such securities and (ii) the
consideration per share of Common Stock to be paid upon such issuance or
subscription is less than aggregate Exercise Price for a Whole Unit on such
record date, then the Exercise Price shall be adjusted to be that price
determined by dividing (i) an amount equal to the sum of (A) the product of (1)
the number of shares of Common Stock outstanding immediately before such
issuance, distribution, subscription or purchase and (2) the then existing
aggregate Exercise Price for a Whole Unit plus (B) the aggregate consideration,
if any, received by the Issuer upon such issuance for the total number of shares
of Common Stock to be issued, distributed, subscribed for or purchased, by (ii)
the total number of shares of Common Stock outstanding immediately after such
issuance, distribution, subscription or purchase; provided, however, this
Section 6.03 shall not apply to the issuance of Excluded Securities.
Aggregate consideration for purposes of this Section 6.03 shall be determined as
follows: In case any shares of Common Stock shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount payable to
the Issuer therefor, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case of a
private placement thereof, finders' fees or commissions paid or allowed by the
Issuer in connection therewith. In case any shares of Common Stock shall be
issued or sold for a consideration other than cash payable to the Issuer, the
consideration received therefor shall be deemed to be the fair value of such
consideration as determined by the Board, after deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Issuer in connection therewith. In case any shares of
Common Stock shall be issued in connection with any merger of another
corporation into the Issuer, the amount of consideration therefor shall be
deemed to be the fair value as determined by the Board of such portion of the
assets of such merged corporation as the Board shall determine to be
attributable to such shares of Common Stock.
6.04. Issuance of other Securities, Rights or Obligation. In case at
any time the Issuer (i)(A) shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase options to
purchase or rights to subscribe for Common Stock or securities directly or
indirectly convertible into or exchangeable for Common Stock (or options or
rights with respect to such securities) or (B) shall otherwise issue or sell any
such options, rights or securities and (ii) the consideration per share for
which Common Stock is deliverable upon exercise of such options or rights or
conversion or exchange of such securities (determined by dividing (x) the total
amount received or receivable by the Issuer in consideration of the issuance of
or subscription for such options, rights or securities, plus the minimum
aggregate amount of premiums (if any) payable to the Issuer upon such exercise,
conversion or exchange, by (y) the total maximum number of shares of Common
Stock necessary to effect the exercise,
8
12
conversion or exchange of all such options, rights or securities) shall be less
than the aggregate Exercise Price for a Whole Unit on such record date or sale
or issuance date, as the case may be, then the number of shares of Warrant Stock
comprising a Stock Unit shall be adjusted to be that number determined by
multiplying the number of shares of Warrant Stock comprising a Stock Unit
immediately prior to such date by a fraction (not to be less than one) (i) the
numerator of which shall be equal to the product of (A) the total maximum number
of shares of Common Stock outstanding after giving effect to the assumed
exercise or conversion of all such options, rights or securities and (B) the
aggregate Exercise Price for a Whole Unit determined immediately before such
date and (ii) the denominator of which shall be equal to the sum of (A) the
product of (1) the number of shares of Common Stock outstanding immediately
before such date and (2) the aggregate Exercise Price for a Whole Unit
determined immediately before such date and (B) the aggregate consideration
(determined as set forth in subsection (ii)(x) and (y) above) for which Common
Stock is deliverable upon exercise, conversion or exchange of such options,
rights or securities; provided, however, that this Section 6.04 shall not apply
to the issuance of Excluded Securities. Aggregate consideration for purposes of
the immediately preceding clause (B) shall be determined as follows: In case any
options, rights or convertible or exchangeable securities (or options or rights
with respect thereto) shall be issued or sold, or exercisable, convertible or
exchangeable for cash, the consideration received therefor shall be deemed to be
the amount payable to the Issuer (determined as set forth in subsection (ii)(x)
and (y) above) therefor, after deduction therefrom of any expense incurred or
any underwriting commissions or concessions or discounts or, in the case of a
private placement thereof, finders' fees or commissions paid or allowed by the
Issuer in connection therewith. In case any such options, rights or securities
shall be issued or sold, or exercisable, convertible or exchangeable for a
consideration other than cash payable to the Issuer, the consideration received
therefor (determined as set forth in subsection (ii)(x) and (y) above) shall be
deemed to be the fair value of such consideration as determined by the Board,
after deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the Issuer in
connection therewith. In case any such options, rights or securities shall be
issued or sold, or exercisable, convertible or exchangeable in connection with
any merger of another corporation into the Issuer, the amount of consideration
therefor shall be deemed to be the fair value as determined by the Board of such
portion of the assets of such merged corporation as the Board shall determine to
be attributable to such options, rights or securities.
6.05. Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Warrant Stock comprising a Stock Unit shall have been
made on the basis of the issuance of any options or rights, or convertible or
exchangeable securities (or options or rights with respect to such securities)
pursuant to Section 6.04 hereof:
(a) the options or rights shall expire prior to exercise or the
right to convert or exchange any such securities shall terminate; or
(b) the consideration per share for which shares of Common Stock
are issuable pursuant to the terms of such options or rights or convertible or
exchangeable securities shall be increased or decreased, other than under or by
reason of provisions designed to protect against dilution;
9
13
such previous adjustment shall be rescinded and annulled. Thereupon, a
recomputation shall be made of the effect of such options or rights or
convertible or exchangeable securities with respect to shares of Common Stock on
the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the previous
exercise, conversion or exchange of such options, rights or
securities as having been issued on the date or dates of such
exercise, conversion or exchange and for the consideration
actually received and receivable therefore, and
(B) treating any such options, rights or securities which then remain
outstanding as having been granted or issued immediately after
the time of such increase or decrease for the consideration per
share for which shares of Common Stock are issuable upon
exercise, conversion or exchange of such options, rights or
securities.
To the extent called for by the foregoing provisions of this Section 6.05 on the
basis aforesaid, a new adjustment in the number of shares of Warrant Stock
comprising a Stock Unit shall be made, determined using the Exercise Price used
at the time of the original determination, which new adjustment shall supersede
the previous adjustment so rescinded and annulled. If the exercise, conversion
or exchange price provided for in any such option, right or security shall
decrease at any time under or by reason of provisions designed to protect
against dilution, then in the case of the delivery of shares of Common Stock
upon the exercise, conversion or exchange of any such option, right or security,
the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be
adjusted in the manner which would have obtained had the adjustment made upon
issuance of such option, right or security been made upon the basis of the
issuance of (and the aggregate consideration received for) the shares of Common
Stock delivered as aforesaid.
6.06. Other Provisions Applicable to Adjustments under this Section 6.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Warrant Stock comprising a Stock Unit:
(a) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Issuer shall be deemed to be an
issuance thereof for purpose of this Section 6.
(b) In computing adjustments under this Section 6, fractional
interest in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(c) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded, and annulled.
6.07. Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge or consolidate with another corporation, or shall sell, transfer or
otherwise dispose of all or
10
14
substantially all of its assets to another corporation and pursuant to the terms
of such merger, consolidation or disposition of assets, cash, shares of common
stock or other securities of the successor or acquiring corporation, or property
of any nature is to be received by or distributed to the holders of Common Stock
of the Issuer, then each Holder of Warrants that are by their terms then
exercisable shall, at such Holder's election, have the right to receive (whether
or not such Holder exercises such Warrants) the amount it would have been
entitled to receive if the Holder had exercised such Warrants immediately prior
to the occurrence of such merger, consolidation or disposition of assets, net of
the Exercise Price of such Warrants, and shall thereupon be deemed to have
exercised such Warrants. In case of any such merger, consolidation or
disposition of assets in which the foregoing election is not made, the successor
or acquiring corporation (and any affiliate thereof issuing securities) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of the Warrants to be performed and observed by the
Issuer and all of the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board) in order to provide for adjustments of Stock Units which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section. The foregoing provisions shall similarly apply to successive mergers,
consolidations and dispositions of assets.
6.08. Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
an action described in any of the foregoing subsections of this Section 6 or an
action taken in the ordinary course of the Issuer's business and consistent with
past practice, then, unless in the reasonable opinion of the Board such action
will not have a material adverse effect upon the rights of the Holder of the
Warrants, the terms of the Warrants shall be adjusted in such manner and at such
time as the Board shall in good faith determine to be equitable in the
circumstances, but no such adjustment shall decrease the number of shares of
Warrant Stock comprising a Stock Unit.
6.09. Notices of Adjustments. Upon any adjustment of the Exercise Price
pursuant to this Section 6, the Issuer shall promptly thereafter (i) cause to be
filed with the Warrant Agent a certificate of the chief accounting officer of
the Issuer setting forth the Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and setting forth the number of shares of Warrant
Stock (or portion thereof) comprising a Stock Unit and issuable after such
adjustment in the Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered Holders of the Warrant Certificates at his address appearing
on the Warrant register written notice of such adjustments by first-class mail,
postage prepaid. The Warrant Agent shall be entitled to rely on the
above-referenced officer's certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any Holder desiring an inspection thereof during reasonable
business hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that may
require any adjustment of the number of shares of Common Stock or other stock or
property issuable on exercise of the Warrants or the Exercise Price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment or the validity or
value (or the kind or amount) of any shares of Common Stock or other stock or
property which may be issuable on
11
15
exercise of the Warrants. The Warrant Agent shall not be responsible for any
failure of the Issuer to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other common stock or
property upon the exercise of any Warrant.
6.10. Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional shares of
Common Stock (or options or rights with respect thereto); (iii) to effect any
reclassification of its Common Stock; (iv) to otherwise issue any Common Stock
or other securities, excluding the issuance, conversion, exercise or exchange of
Excluded Securities; (v) to effect any capital reorganization, excluding the
issuance, conversion, exercise or exchange of Excluded Securities; (vi) to
effect any consolidation, merger or sale, transfer or other disposition of all
or substantially all of its assets; or (vii) to effect the liquidation,
dissolution or winding up of the Issuer, then, in each such case, the Issuer
shall cause to be filed with the Warrant Agent and shall cause to be given to
each Holder of the Warrant Certificates at such Holder's address appearing on
the Warrant register by first-class mail, postage prepaid a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such dividend, distribution or right offer, or the date on
which such reclassification, issuance, reorganization, consolidation, merger,
sale, transfer, disposition, liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Common Stock, and the number of shares of Warrant Stock which will
comprise a Stock Unit after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be so mailed in the case
of any action covered by clause (i) or (ii) above at least 10 days prior to the
record date for determining holders of the Common Stock for purposes of such
action, and in the case of any other such action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of Common Stock, whichever shall be the earlier.
SECTION 7. Holder's Rights.
7.01. Taxes. The Issuer shall pay all taxes (other than Federal, state
or local income taxes) which may be payable in connection with the execution and
delivery of this Agreement or the issuance of the Warrants and Warrant Stock
hereunder or in connection with any modification of this Agreement or the
Warrant and shall hold the Holder harmless without limitation as to time against
any and all liabilities with respect to all such taxes. The obligations of the
Issuer under this Section 7.01 shall survive any redemption, repurchase or
acquisition of any Warrant or Warrant Stock by the Issuer, any termination of
this Agreement, and any cancellation or termination of any Warrant.
7.02. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Issuer
may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence reasonably
satisfactory to the Issuer and
12
16
the Warrant Agent of such loss, theft or destruction of such Warrant Certificate
and indemnity, if requested, also reasonably satisfactory to them. Applicants
for such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Issuer or
the Warrant Agent may prescribe.
SECTION 8. Other Covenants of Issuer.
8.01. Conflicting Agreements. So long as any of the Warrants shall be
outstanding, the Issuer shall not at any time enter into an agreement or other
instrument limiting in any manner its ability to perform its obligations under
this Agreement or the Warrants, or making such performance or the issuance of
Warrant Stock upon the exercise of any Warrant a default under any such
agreement or instrument.
8.02. Reservation of Shares. The Issuer shall at times that any
Warrants are outstanding, maintain a reserve of a sufficient number of shares of
Warrant Stock for issuance upon the exercise of such Warrants.
SECTION 9. Warrant Agent.
9.01. Merger, Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 9.03. Any such successor Warrant Agent shall promptly cause notice of
its succession as Warrant Agent to be mailed (by first class mail, postage
prepaid) to each Holder at such Holder's last address as shown on the register
maintained by the Warrant Agent pursuant to this Agreement. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
13
17
9.02. Warrant Agent's Right and Responsibilities. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Issuer and the Holders of
Warrants, by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Issuer and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of
the Issuer to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Issuer.
The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Issuer) and the Warrant Agent shall incur no
liability or responsibility to the Issuer or to any Holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
The Warrant Agent shall incur no liability or responsibility to the
Issuer or to any Holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
The Issuer agrees to pay to the Warrant Agent such compensation for all
services rendered by the Warrant Agent in the execution of this Agreement as the
parties shall agree from time to time, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature reasonably incurred by the Warrant Agent in the execution of this
Agreement and to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and counsel fees, for anything
done or omitted by the Warrant Agent in the execution of this Agreement except
as a result of its gross negligence or willful misconduct.
The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Issuer or one or more Holders of Warrant Certificates shall furnish
the Warrant Agent with security and indemnity satisfactory to the Warrant Agent
for any costs and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as it may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent and any recovery of judgment shall be for the
ratable benefit of the Holders of the Warrants, as their respective rights or
interests may
14
18
appear. No provision of this Agreement shall require the Warrant Agent to expend
or risk its own funds.
The Warrant Agent, and any stockholder, director, officer or employee
of it, may buy, sell or deal in any of the Warrants or other securities of the
Issuer or become pecuniarily interested in any transaction in which the Issuer
may be interested, or contract with or lend money to the Issuer or otherwise act
as fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Issuer or for any other legal entity.
The Warrant Agent shall act hereunder solely as agent for the Issuer,
and its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own gross negligence or willful
misconduct.
The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable and makes no representation with respect
thereto.
9.03. Resignation and Removal of Warrant Agent; Appointment of
Successor. No resignation or removal of the Warrant Agent and no appointment of
a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own gross
negligence or willful misconduct) after giving written notice to the Issuer. The
Issuer may remove the Warrant Agent upon written notice, and the Warrant Agent
shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall, at the
Issuer's expense, cause to be mailed (by first class mail, postage prepaid) to
each Holder of a Warrant at such Holder's last address as shown on the register
of the Issuer maintained by the Warrant Agent a copy of said notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal, the Issuer shall appoint in writing a new warrant agent. If the Issuer
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation by the resigning Warrant Agent or after
such removal, then the resigning Warrant Agent or the Holder of any Warrant may
apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Issuer or by such
a court, shall be a corporation doing business under the laws of the United
States or any state thereof, in good standing and having a combined capital and
surplus of not less than $50,000,000. The combined capital and surplus of any
such new warrant agent shall be deemed to be the combined capital and surplus as
set forth in the
15
19
most recent annual report of its condition published by such warrant agent prior
to its appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment by the new
warrant agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Issuer and
shall be legally and validly executed and delivered by the resigning or removed
Warrant Agent. Not later than the effective date of any such appointment, the
Issuer shall give notice thereof to the resigning or removed Warrant Agent.
Failure to give any notice provided for in this Section 9.03, however, or any
defect therein, shall not affect the legality or validity of the resignation of
the Warrant Agent or the appointment of a new warrant agent, as the case may be.
SECTION 10. Miscellaneous.
10.01. Notices to Issuer and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
Holder of any Warrant Certificate to or on the Issuer shall be sufficiently
given or made when and if deposited in the mail, first class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Issuer with the Warrant Agent), as follows:
Integrated Orthopedics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
16
20
In case the Issuer shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Issuer or by
the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Issuer) to the Warrant Agent as follows:
Continental Stock Transfer & Trust Company
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Compliance Department
10.02. Supplements and Amendments. The Issuer and the Warrant Agent may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Issuer and the Warrant Agent
may deem necessary or desirable and which shall not in any way adversely affect
the interests of the Holders of Warrant Certificates. Any amendment or
supplement to this Agreement that has a material adverse effect on the interests
of Holders shall require the written consent of Holders representing a majority
of the then outstanding Warrants. The consent of each Holder of a Warrant
affected shall be required for any amendment pursuant to which the Exercise
Price would be increased or the number of Warrant Shares purchasable upon
exercise of Warrants would be decreased (other than pursuant to adjustments
provided for in Section 6 hereof or amendments to Section 6 which can be made by
the written consent of Holders representing a majority of the then outstanding
Warrants). The Warrant Agent shall be entitled to receive and, subject to
Section 9.02, shall be fully protected in relying upon, an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Issuer in accordance
with its terms.
10.03. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Issuer or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
10.04. Termination. This Agreement (other than any party's obligations
with respect to Warrants previously exercised and with respect to
indemnification under Section 9.02) shall terminate at 5:00 p.m., New York City
time on the Expiration Date.
17
21
10.05. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF TEXAS AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
10.06. Benefits of This Agreement.
(a) Nothing in this Agreement shall be construed to give to any
Person other than the Issuer, the Warrant Agent and the Holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Issuer,
the Warrant Agent and the Holders of the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Issuer, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Issuer or any other matter or to receive any notice of any
proceedings of the Issuer, except as may be specifically provided for herein.
The Holders of the Warrants are not entitled to share in the assets of the
Issuer in the event of the liquidation, dissolution or winding up of the
Issuer's affairs.
(c) All rights of action in respect of this Agreement are vested
in the Holders of the Warrants, and any Holder of any Warrant, without the
consent of the Warrant Agent or the Holder of any other Warrant, may, on such
Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Issuer
suitable to enforce, or otherwise in respect of, such Holder's rights hereunder,
including the right to exercise, exchange or surrender for purchase such
Holder's Warrants in the manner provided in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
22
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
ISSUER:
INTEGRATED ORTHOPAEDICS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
WARRANT AGENT:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
23
Annex 1
to
Warrant Agreement
[FORM OF WARRANT CERTIFICATE]
[FACE]
[CUSIP] NO. NUMBER OF
----------------------- WARRANTS:
----------------------
CERTIFICATE NO.
------------------
Number of
shares of
Common Stock:
-----------------
WARRANT
TO PURCHASE COMMON STOCK OF
INTEGRATED ORTHOPAEDICS, INC.
THIS IS TO CERTIFY THAT _______________ (the "Holder"), is the owner of
____ Warrants, each of which represents a right to purchase one (1) Stock Unit
at the Exercise Price (as defined below), in whole or in part, from time to time
from Integrated Orthopaedics, Inc., a Texas corporation (the "Issuer"), at any
time of any Business Day on and after either one year after the date of the
merger of PowerBrief, Inc., a Delaware corporation ("PowerBrief"), with and into
the Issuer (the "PowerBrief Merger"), or the date of termination of the
Agreement and Plan of Merger dated September 15, 2000 between PowerBrief and the
Issuer, as amended from time to time, governing the PowerBrief Merger (such date
of the effective time of the PowerBrief Merger or the termination date being
"Benchmark Date"), other than each period commencing one calendar day prior to
the end of a fiscal quarter and extending through the announcement of the
Issuer's operating results for such fiscal quarter, but not later than 5:00
p.m., New York City time, on the Expiration Date (as defined below), subject to
the terms and conditions hereinbelow; provided, however, that no Holder shall be
entitled to exercise such Holder's Warrants at any time, unless, at the time of
exercise, (i) a registration statement under the Securities Act relating to the
Warrant Stock has been filed with, and declared effective by, the Commission,
and no stop order suspending the effectiveness of such registration statement
has been issued by the Commission or (ii) the issuance of the issuance of
Warrant Stock is permitted pursuant to an exemption from the registration
requirements of the Securities Act. "Exercise Price" per Whole Unit shall mean
1.25 times the lesser of (i) $0.2963 and (ii) the lowest average closing price
of the Common Stock over any consecutive 20 calendar days during the 90 calendar
days after the Benchmark Date, provided that if the amount in clause (ii) cannot
be determined by a publication by the AMEX or the National Quotations Bureau
LLP, the lowest average closing price for such period shall be determined in
good faith by the Board of Directors. An inverse adjustment in the Exercise
Price for a Whole Unit shall be made each time an adjustment is made in the
number of Stock Units that make up a Whole Unit pursuant to Section 6 of the
Warrant Agreement. Within 120 days after the Benchmark Date, the Issuer shall
cause to be filed with the Warrant Agent and shall cause to be mailed to the
Holder of this Warrant Certificate at such Holder's address appearing on the
Warrant Register by first class mail, postage prepaid a notice setting forth the
Exercise Price as determined 90 days after the Benchmark Date. "Expiration Date"
shall mean the fifth anniversary of the Benchmark Date; provided, however, that
the Issuer shall cause to be filed with the Warrant Agent and shall cause to be
mailed the Holder of this Warrant Certificate at such Holder's address appearing
on
24
the Warrant Register by first class mail, postage prepaid at least ten days
before the Expiration Date (but no more than 30 days before the Expiration Date)
a written notice that his Warrants are subject to this expiration provision;
provided further that if no such notice is provided as contemplated by the
immediately preceding proviso, the Expiration Date shall mean the date which is
ten days after such notice is mailed.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated December 19, 2000 (the "Warrant Agreement"), between the
Issuer and Continental Stock Transfer & Trust Company, as Warrant Agent, and is
subject to the Articles of Incorporation and Bylaws of the Issuer and to the
terms and provisions contained therein, all of which terms and provisions the
Holder of this Warrant Certificate consents to by acceptance hereof. The terms
of the Warrant Agreement are hereby incorporated herein by reference and made a
part hereof. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Issuer and the Holders of the Warrants. The summary
of the terms of the Warrant Agreement contained in this Warrant Certificate is
qualified in its entirety by express reference to the Warrant Agreement. All
terms used in this Warrant Certificate that are defined in the Warrant Agreement
shall have the meanings assigned to them in such agreement.
Notwithstanding any other provision herein, except the requirement that
the Warrant Stock is registered under the Securities Act or that the issuance
thereof is exempted from the registration requirements of the Act upon a Change
of Control (as defined below), other than as a result of the consummation of the
PowerBrief Merger, the Warrants shall immediately become exercisable, in whole
or in part, from time to time, at any time prior to the Expiration Date. "Change
of Control" is defined as (i) the acquisition by another person or group of
persons of 35% or more of the outstanding shares of Common Stock of the Issuer,
(ii) a majority change in the Board of Directors over a twelve-month period,
(iii) a merger, consolidation, or other similar transaction with another entity
in which the Issuer is not the surviving entity or in which the Issuer's
shareholders do not own a majority of the shares in the combined entity or (iv)
a sale of all or substantially all of the Issuer's assets.
A Warrant may be exercised upon surrender hereof at the principal
office of the Warrant Agent with the form of exercise on the reverse hereto (the
"Exercise Notice") duly completed and signed and upon payment to the Exercise
Price as adjusted as herein provided for each of share of Warrant Stock in
respect of which such Warrant is then exercised.
This Exercise Price shall be payable (a) by Federal wire transfer to
the account designated by the Issuer or by certified or official bank check
payable to the order of the Issuer or (b) by presentment of Warrants to the
Issuer for cancellation in accordance with the following formula: in exchange
for each share of Warrant Stock issuable on exercise of each Warrant represented
by this Warrant Certificate that is being exercised, the Holder shall receive
such number of shares of Warrant Stock as is equal to the product of (i) the
number of shares of Warrant Stock issuable upon exercise of the Warrants being
exercised at such time multiplied by (ii) a fraction, the numerator of which is
the fair market value per share of Warrant Stock at such time minus the Exercise
Price per share of Warrant Stock at such time, and the denominator of which is
the fair market value per share of Warrant Stock at such time. The fair market
value of Warrant Stock shall be the fair market value as confirmed in writing to
the Warrant Agent by the Issuer. Upon receipt hereof, the Issuer shall, as
promptly as practicable, execute or cause to be executed and deliver or cause to
25
be delivered to the Holder a certificate or certificates representing the
aggregate number of shares of Warrant Stock and other securities issuable upon
such exercise and any other property to which such Holder is entitled.
This Warrant Certificate and all rights hereunder are transferable by
the registered Holder hereof, in whole or in part, on the register of the Issuer
maintained by the Warrant Agent for such purpose at the Warrant Agent's office
in New York, New York, upon surrender of this Warrant Certificate duly endorsed,
or accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Warrant Agent duly executed, with signatures guaranteed as
specified in the attached Form of Assignment, by the registered Holder hereof or
such Holder's attorney duly authorized in writing and by such other
documentation required pursuant to the Warrant Agreement and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Upon any partial transfer, the Issuer will sign and issue and the Warrant Agent
will countersign and deliver to such Holder a new Warrant Certificate or
Certificates with respect to any portion not so transferred. Each taker and
Holder of this Warrant Certificate, by taking and holding the same, consents and
agrees that prior to the registration of transfer as provided in the Warrant
Agreement, the Issuer and the Warrant Agent may treat the Person in whose name
the Warrants are registered as the absolute owner hereof for any purpose and as
the Person entitled to exercise the rights represented hereby, any notice to the
contrary notwithstanding. Accordingly, the Issuer and/or the Warrant Agent shall
not, except as ordered by a court of competent jurisdiction as required by law,
be bound to recognize any equitable or other claim to or interest in the
Warrants on the part of any Person other than such registered Holder, whether or
not it shall have express or other notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder of
this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the Issuer, including, without limitation, the right to vote or
to consent to any action of the shareholders, to receive any distributions, to
exercise any preemptive right or to receive any notice of meetings of
shareholders, and shall not be entitled to receive any notice of any proceedings
of the Issuer except as provided in the Warrant Agreement.
The Issuer shall not be required to issue a fractional amount of
Warrant Stock upon exercise of Warrants. As to any fraction of a share of
Warrant Stock which the Holder would otherwise be entitled to purchase upon such
exercise the Issuer shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the fair market value per
share of Warrant Stock on the date of exercise. The fair market value of Warrant
Stock shall be the fair market value as confirmed in writing to the Warrant
Agent by the Issuer.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
26
INTEGRATED ORTHOPAEDICS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Dated:
Countersigned:
CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY,
as Warrant Agent
By:
--------------------------------------
Authorized Officer
27
FORM OF EXERCISE NOTICE
(To be executed only upon exercise of Warrant)
To: Continental Stock Transfer & Trust Company,
as Warrant Agent
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Compliance Department
The undersigned irrevocably exercises _________ Warrants and herewith
makes payment of $ _________ (such payment being by Federal wire transfer to the
account designated by Integrated Orthopedics, Inc. or by certified or official
bank check payable to the order or at the direction of Integrated Orthopedics,
Inc.), or exercise its right to receive shares of Warrant Stock without payment
of the Exercise Price in cash on the terms and conditions specified in this
Warrant Certificate and in the Warrant Agreement and surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
Common Stock, par value $0.001 per share, of Integrated Orthopedics, Inc.
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Dated:
-------------------
------------------------------------------
(Signature of Owner)
-----------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
---------------------------
Name:
---------------------------------------------------
Street Address:
-----------------------------------------
City, State and Zip Code:
-------------------------------
28
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s):
--------------------------------------------------------
Address:
-----------------------------------------------------------------------
No. of Warrants:
---------------------------------------------------------------
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint _________________________ the
undersigned's attorney to make such transfer on the books of___________________
maintained for the purposes, with full power of substitution in the premises.
Dated:
-----------------------------
-----------------------------------------------
(Signature of Owner)
-----------------------------------------------
(Street Address)
-----------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-----------------------------------------------
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Warrant Agent, which requirements
include membership or participation in the
Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee
program" as may be determined by the Warrant
Agent in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
29
ANNEX 2
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "WARRANTS") of INTEGRATED
ORTHOPEDICS, INC.
This Certificate relates to ____ Warrants held in certificated form by
_____________ (the "TRANSFEROR").
The Transferor has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 5 of such Warrant Agreement, and that:
(i) [ ] Such Warrant is begin transferred pursuant to an effective registration
statement under the Securities Act; or
(ii) the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT") because:
[ ] Such Warrant is being transferred pursuant to an exemption from
registration in accordance with Rule 144 under the Securities Act; or
[ ] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act other
than Rule 144 under the Securities Act.
An opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.
-----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Date:
-------------------------
